(Bloomberg) — Jamie Dimon’s five-year retirement joke has now gotten serious.
The billionaire CEO of JPMorgan Chase & Co. received a special gift to convince him to run America’s largest lender for “considerable number of years.” He was awarded 1.5 million share valuation rights, which are comparable to options and which allow him to make a profit if the share price rises in the coming years.
At 65, Dimon is the only incumbent bank CEO to lead a major company through the financial crisis. He acquired JPMorgan in 2005 and built it into the largest and most profitable bank in the country.
Dimon’s tenure, and the question of who will ultimately succeed him, has long been a topic of interest in the financial sector and beyond. It came into increased focus last year when Dimon was sidelined for four weeks after undergoing emergency heart surgery. And the company is also fresh off its biggest leadership change in years, which puts Marianne Lake and Jennifer Piepszak at the forefront of the race to potentially take over the top position.
Dimon himself has found ways to be noncommittal about when he’ll stop. His favorite joke: The date is in five years, no matter when asked.
“This special award reflects the board of directors’ desire for Mr. Dimon to continue leading the company for a significant number of years to come,” JPMorgan’s board of directors said in a regulatory filing Tuesday.
According to Terry Adamson, a stock valuation specialist and general manager of Technical Compensation Advisors, Dimon’s options are worth about $50 million on paper. JPMorgan has not disclosed its own valuation of it.
If JPMorgan’s stock price rises 50%, Dimon’s options will yield $112 million pre-tax, according to Bloomberg News calculations. If it doubles, they will bring in about $224 million. Conversely, if it falls below the current level once Dimon can exercise the options, they are worthless.
The board said it presented the award to motivate Dimon, who already has a fortune of $2.1 billion, to continue to do his job well. Dimon, who received $31.5 million in compensation for 2020, will not be able to exercise the options for at least five years and must hold all net shares acquired with the grant until mid-2031.
The board can remove up to half of its options over the next five years if the bank’s performance is “unsatisfactory for an extended period”, if the bank’s annual profit excluding certain items becomes negative, or if the bank’s business units do not fail to meet certain financial thresholds.
The bank’s share price has nearly quadrupled over the past decade and is up 18% this year.
It’s not uncommon for companies to award large one-time awards to senior executives when they sign new employment contracts or as part of succession planning. Some compensation experts say such awards have become more common since Tesla Inc. awarded a huge moonshot prize to founder Elon Musk in 2018.
But Wall Street banks have largely bounced back from such subsidies since the financial crisis and have instead largely maintained unified and predictable executive compensation programs.
In May, the company named Lake and Piepszak the co-heads of JPMorgan’s sprawling consumer and community banking business, effectively elevating them in the race for the financial world’s most prized throne. Daniel Pinto, the bank’s president, is still widely seen as the obvious replacement for Dimon in an emergency, albeit a less likely candidate in a slow and orderly transfer.
(Updates with possible payouts in the eighth paragraph.)
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