Worlds apart on pay scale

JPMorgan Chase pays Jamie Dimon US$1.21 million for every US$1 billion of profit at the biggest American bank. Industrial & Commercial Bank of China, the world's most profitable, gives its top executive US$9,400.

That pay-to-performance gap is set to widen this year. The state-controlled Chinese lender, led by chairman Jiang Jianqing, may post second-quarter net income of US$9.63 billion next Thursday, while Bank of China will probably report US$5.44 billion today, according to analysts' estimates. New York-based JPMorgan last month reported a 9 per cent decline to US$4.96 billion following its trading loss in London.

Pay has not kept pace with earnings in China, where government-appointed bankers have escaped the ire directed at overseas rivals for losing money on complex derivatives, money laundering or rigging rates. Still, the banks' shares remain weighed down by concern that slowing economic growth will trigger defaults by developers and local governments.

"Chinese banks are risk averse due to culture, a different executive compensation structure" and the profitability of their lending operations, said Himanshu Shah, chief investment officer of Shah Capital Management in North Carolina. However, the banks are changing and will "resemble their Western counterparts to a great extent over the next five years".

Jiang's 1.96 million yuan (HK$2.40 million) in compensation for last year included 589,500 yuan that will be distributed over three years starting this year, depending on his performance, according to an exchange filing by ICBC in May. His total pay has increased by about half since the bank's initial public offering in 2006, when ICBC did not have a deferred-compensation programme. The lender's net income soared more than fourfold to a record 208.3 billion yuan in that period.

Jiang, 59, became president of ICBC in 2000 and chairman in 2005. The son of a Shanghai doctor, he joined the lender in 1984 after stints working at farms and in a coal mine during the Cultural Revolution. Like other key party and government posts, the top jobs at ICBC and other large state-owned banks and companies are assigned by the Communist Party's central organisation unit. The executives, who are also party members, are under the oversight of its disciplinary committee.

Dimon, who is both chairman and chief executive of JPMorgan, was awarded total compensation last year of US$23 million, including a salary, bonus and stock options. He was the highest-paid banker among 50 chief executives at the largest US-based financial firms, according to the Finance 50 ranking by Bloomberg Markets. Dimon, who is struggling to contain damage from a botched derivatives trade that has cost the bank at least US$5.8 billion, has said any impact on his pay would be decided by the board. JPMorgan shares had fallen 9.2 per cent by the end of last week since he disclosed the "egregious" failure on May 10.