The Director Compensation Project: J.P. Morgan Chase (JPM)

This post is part of an ongoing series that examines the way stock exchange independence rules relate to director compensation. We are for the most part including companies from 2016’s Fortune 500 and using information found in their 2016 proxy statements.

NASDAQ and the NYSE have similar rules with respect to director independence. NYSE Rule 303A.01 requires that each listed company’s board of directors be comprised of a majority of independent directors. A director does not qualify as “independent” if he or she has a “material relationship with the company.” NYSE Rule 303A.02(a). In addition, the director is not considered independent under NYSE Rule 303A.02(b)(ii) if the director received more than $120,000 in direct compensation, other than director’s fees, during any of the previous three years. The NYSE imposes a higher independence standard for directors serving on the company’s audit committee by requiring them to comport with Rule 10A-3 (C.F.R. §240.10A-3) (see Rule 303A.06) and requires consideration by the board of directors of certain specified factors in designating directors for the Compensation Committee. See NYSE Rule 303A.02(a)(ii).

Finally, as the Commission has noted with respect to director independence:

All compensation committee members must meet the general independence standards under NYSE’s rules in addition to the two new criteria being adopted herein. The Commission therefore expects that boards, in fulfilling their obligations, will apply this standard to each such director’s individual responsibilities as a board member, including specific committee memberships such as the compensation committee. Although personal and business relationships, related party transactions, and other matters suggested by commenters are not specified either as bright-line disqualifications or explicit factors that must be considered in evaluating a director’s independence, the Commission believes that compliance with NYSE’s rules and the provision noted above would demand consideration of such factors with respect to compensation committee members, as well as to all Independent Directors on the board.

Exchange Act Release No. 68639 (Jan. 11, 2013); see also Exchange Act Release No. 68641 (Jan. 11, 2013).

Independent directors are compensated for their service on the board. The amount of “total compensation” can be seen from examining the director compensation table from J.P. Morgan Chase’s 2016 proxy statement. According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Linda B. Bammann	90,000	225,000	0	30,000	345,000
James A. Bell	90,000	225,000	0	25,000	340,000
Crandall C. Bowles	105,000	225,000	0	30,000	360,000
Stephen B. Burke	75,000	225,000	0	-	300,000
James S. Crown	115,000	225,000	0	42,500	382,500
Timothy P. Flynn	90,000	225,000	0	30,000	345,000
Laban P. Jackson, Jr.	115,000	225,000	0	222,500	562,500
Michael A. Neal	90,000	225,000	0	-	315,000
Lee R. Raymond	120,000	225,000	0	37,500	382,500
William C. Weldon	90,000	225,000	0	105,000	420,000

Director Compensation. In 2015, the board met eleven times. Each director attended 75% or more of the total meetings of the board and the committees on which he or she served. All 2015 nominees were present at the annual meeting of shareholders held on May 19, 2015. For 2015, each non-management director received an annual cash retainer of $75,000 and an annual grant, made when annual employee incentive compensation was paid, of deferred stock units valued at $225,000, on the date of the grant. Additional cash compensation was paid for certain committees and other services. Directors were reimbursed for their expenses in connection with their board service or paid such expenses directly. The firm also paid the premiums on directors’ and officers’ liability insurance policies and on travel accident insurance policies covering directors as well as employees of the firm.

Director Tenure. All but four of the directors hold directorships with other organizations. Mr. Raymond is the longest serving director, having served since 2001. Mr. Neal is the shortest serving director having joined the board in 2014. Mr. Bell serves as a director for Dow Chemical Company and Apple Inc. Ms. Bowles serves as a director for Deere & Company. Mr. Burke serves as a director for Berkshire Hathaway Inc. Mr. Crown serves as a director for General Dynamics Corporation and J.P. Morgan Chase Bank, N.A. Mr. Flynn serves as a director for Wal-Mart Stores, Inc. and International Integrated Reporting Council. Mr. Weldon serves as a director for CVS Health Corporation, Exxon Mobil Corporation, and J.P. Morgan Chase Bank, N.A.

CEO Compensation. James Dimon serves as Chairman, Chief Executive Officer, Director, and President and has been at J.P. Morgan Chase since 2004. Mr. Dimon also serves as a director for Harvard Business School and Catalyst but does not serve on the board of any publicly traded company other than J.P. Morgan Chase. Previously, he was President and Chief Operating Officer following J.P. Morgan Chase’s merger with Bank One Corporation in July 2004. At Bank One, he was Chairman and Chief Executive Officer from March 2000 to July 2004. In 2015, Mr. Dimon earned a total of $18,230,313. He received a base salary of $1,500,000, a cash bonus of $5,000,000, stock awards of $11,100,000, deferred compensation of $9,253, and other compensation totaling $621,060. Other compensation for Mr. Dimon included personal use of corporate aircraft ($123,873) and cars ($34,828), cost of residential and related security paid by the firm ($462,264), and cost of life insurance premiums paid by the firm ($95). Mr. Matthew Zames, Chief Operating Officer, was the second highest compensated J.P. Morgan Chase executive. In 2015, he earned a total of $17,600,842. He received a base salary of $750,000, a cash bonus of $7,100,000, stock awards of $9,750,000, and deferred compensation of $842.