Directors’ pay on the rise for big-bank boards

NEW YORK — Wall Street pay, while lucrative, isn’t what it used to be — unless you are a board member.

Since the financial crisis, compensation for the directors of the biggest banks has continued to rise, even as the banks, facing difficult markets and regulatory pressures, rein in bonuses and pay.

Take Goldman Sachs, where the average annual compensation for a director — essentially a part-time job — was $488,709 in 2011, the last year for which data are available, up more than 50 percent from 2008, according to Equilar, a compensation data firm. Some of Goldman’s 13 directors make more than $500,000 because they have extra responsibilities.


And the numbers are likely to skyrocket for 2012, because the firm’s shares rose more than 35 percent last year and directors are paid in stock. Goldman Sachs is expected to release fresh pay data in coming weeks.

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Its board is the best compensated of any big US bank’s and is the fifth-highest paid of any company in the country, according to Equilar.

Some of its rivals are not far behind. In 2011, the biggest banks paid their directors over $95,000 a year more, on average, than what other large corporations paid.

Goldman defends the board’s pay, saying it’s mostly in stock directors can’t touch until they leave the board. That, it says, aligns directors’ interests with those of shareholders.

“The board’s pay is set at a level that reflects the firm’s long-term performance as well as directors’ substantial time commitment and the increased demands placed on them in recent years by new laws and regulations,’’ said David Wells, a spokesman.


More broadly, banks and compensation experts say, financial firms must now pay a premium to keep qualified directors. After the financial crisis, some boards were criticized for being asleep at the wheel and not understanding the risks being taken. Recruiters say banks are redoubling efforts to recruit directors with more financial expertise.

Yet it is also a balancing act, because too much pay may end up giving boards an incentive to not rock the boat.

Some Wall Street insiders question the need to pay bank directors more than their counterparts at other big corporations, arguing that increased regulation has limited bank boards’ ability to perform important tasks, like raising capital and issuing dividends. Even when it comes to paying senior executives, boards have less leeway because regulators have pressured boards to bring down executive pay.

‘‘About the only thing bank directors have more of these days is meetings,’’ joked one senior executive. ‘‘Regulators have all but stripped boards of the main powers they had before the crisis.’’

Morgan Stanley’s director pay is the second-highest on Wall Street, an average of $351,080, roughly the same as in 2008 but much higher than the pay at bigger and more complicated rivals like JPMorgan Chase and Citigroup.


Board pay at Morgan Stanley has drawn criticism from Daniel S. Loeb’s hedge fund, Third Point, which recently bought 7.8 million shares, or a 0.4 percent stake, in the firm. While praising Morgan Stanley and its management, Loeb wrote to investors how surprised he was about directors’ pay. “We hope Morgan Stanley will show that its reinvention begins at the top and set an example for the company by quickly revising its board practices,’’ he wrote.

At Citigroup, directors make an average of $315,000 a year, according to Equilar, up 64 percent from 2008.

The value of the annual cash retainer and deferred stock award Citigroup directors receive has not changed since 2005, but the pay for additional work, like leading a committee, has risen.

Of the five financial institutions to have reported director pay for 2012, JPMorgan is the biggest, but it gives its directors compensation, on average, worth $278,194 each.

Only Bank of America, where directors are paid $275,000, pays less.