Compensation clawbacks are in store for JPMorgan's (JPM) executives at the center of the bank's 'London Whale' trading losses, reports The Wall Street Journal. The bank plans to revoke millions in pay in the form of unvested stock awarded to members of the Chief Investment Office (CIO), where the risky bet was made.
Ina Drew, former head of JPMorgan's CIO, will likely face the financial penalties as will Bruno Iksil, the London trader who oversaw the trades that are estimated to have lost $5 billion (and counting). Iksil's direct bosses are also said to face forfeiture of pay.
Clawbacks are certainly a step in the right direction as recourse for the huge trading loss. But as The Daily Ticker's Aaron Task and Henry Blodget discuss in the accompanying video, revoking unvested stock certainly does not go far enough to penalize the individuals responsible for the loss, which has cost the bank nearly $25 billion in market capitalization since May.
"We still have to have a system in place for both for individuals and for the banks where there is real recognition that the downside is not going to hurt so you just don't go to Vegas and roll the dice every day and if you lose $5 billion 'so what'?" says Henry.
Last year, Drew earned more than $15 million, half of which included compensation in the form of stock. But what really shocks The Daily Ticker team is how much her contract awards her for her termination from the bank. Proxy filings show Drew is set to receive almost as much as her total compensation in all of 2011 after resigning over the trading losses, reports WSJ.
Even if she wasn't technically fired, this kind of "golden parachute" is impossible to justify given the circumstances surrounding Drew's departure, even if was part of her employment contract, Aaron says.
The news of clawbacks comes ahead of JPMorgan's second-quarter earnings call Friday when more details are to be released about the details and size of the loss, which recent reports signal have grown to $5 billion from the original $2 billion estimates.
Stay tuned for more coverage and tell us what you think: Do you believe the clawbacks go far enough to penalize the JPMorgan executives?
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