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JPM » Topics » Elements of executive compensation

This excerpt taken from the JPM DEF 14A filed Mar 31, 2009.

Elements of executive compensation

The key components of our executive compensation program provide a holistic approach to deliver the appropriate level of total compensation. Annual compensation includes base salary and the cash portion of annual incentives. Long-term compensation includes the deferred equity portion of annual incentives and any periodic equity awards. A list of the compensation and benefits elements as they relate to senior executives of the Firm is found in the following table.

 

Compensation element

  

Description

  

Other features

Base salary  

Typically the smallest component of total compensation for members of the Operating Committee and other members of senior management.

 

Provides a measure of certainty and predictability to meet certain living and other financial commitments.

   Reviewed periodically and subject to increase if, among other reasons, the executive acquires material additional responsibilities, or the market changes substantially.
Annual variable compensation  

Performance based incentive which can vary significantly from year to year.

 

The cash portion is paid and the equity portion is awarded in January following the performance year.

 

The equity portion is awarded in the form of RSUs determined by a formula representing a portion of the entire incentive award. For 2008, RSUs for the Operating Committee members who received an incentive represented 50% of their incentive award.

  

50% of the RSU portion of the award vests on the second anniversary of the grant date and 50% vests on the third anniversary of the grant date.

 

Shares received upon vesting are subject to the 75% retention policy applicable to senior management described at page 19.

 

Equity-related compensation for Operating Committee members is now subject to further restriction. See Compensation of the Named Executive Officers on page 10.

Periodic equity awards   Periodically the Firm grants special equity awards to select senior officers to reward and encourage leadership, including awards made in the form of SARs settled in shares only.  

The awards become exercisable ratably on each of the first five anniversaries of the grant date and shares received upon exercise must be held for at least 5 years after the grant date.

 

Shares received upon exercise are subject to the 75% retention policy applicable to senior management described at page 19.

Deferred compensation   Eligible employees can voluntarily defer up to the lesser of 90% of their annual cash incentive or $1,000,000.  

Beginning in 2005 a lifetime $10,000,000 cap on future cash deferrals was instituted.

 

Deferred amounts are credited to various unfunded hypothetical investment options, generally index funds, at the executive’s election.

Pension and retirement  

Firm-wide qualified cash balance pension plan based on first $230,000 of base salary only.

 

Non-qualified excess pension plan based on base salary in excess of $230,000 up to $1,000,000.

 

Voluntary 401(k) Savings Plan.

  

Incentive awards not eligible for pension credits.

 

Officers with a base salary and cash incentives equal to or greater than $250,000, including all Operating Committee members, receive no Firm matching contribution in the 401(k) Savings Plan.

 

Paid in lump sum or annuity following retirement.

Health and welfare benefits   Firm-wide benefits such as life insurance, medical and dental coverage, and disability insurance.  

No special programs for senior executives.

 

In medical and dental plans, the higher the employee’s compensation, the higher the employee’s portion of the premium.

Severance plan  

Firm-wide severance pay plan providing, effective April 2009, up to 52 weeks of base salary, based on years of service.

 

Benefits paid in a lump sum payment following termination of employment, contingent on release of claims and restrictive covenants.

   Continued eligibility for certain health and welfare plan benefits during severance pay period.

 

14

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