Dimon's $23 Million Payday isn't the Problem
By Ingo Walter, Seymour Milstein Professor of Finance, Corporate Governance and Ethics, and Jennifer Carpenter, Associate Professor of Finance
The real concern for everyone -- including regulators and taxpayers -- is not the level of pay handed out to executives, nor how profits in a company are divided between employees and shareholders, but rather, the incentives for risk-taking that bank pay apparently continues to create.
Here we go again. The perennial question of: "Would you rather own shares in a major financial conglomerate or manage one?" comes up as JPMorgan Chase loses more than $2 billion in trading bets.
The answer seems clear. If you're an executive who manages the money, you're likely to get a large paycheck and bonus even if you're responsible for the loss, directly or indirectly. Jamie Dimon is still getting his $23 million.
Shares of the major banks continue to trade well below book value and generate miserable performance metrics -- and have over the years been very poor investments -- while senior executives and key employees continue to walk away with vastly outsize earnings, even when they oversee massive losses.
Read full article as published on CNN.com