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By Staff Report
Feb. 3, 2009
Executive compensation shouldn’t be based purely on performance, warned Jamie Dimon, chairman and CEO of JPMorgan Chase, in his opening keynote speech at “The Future of New York City,” a half-day conference held by Crain’s New York Business, a sister publication of Workforce Management.
In his speech Tuesday, February 3, at the Grand Hyatt Hotel in New York, Dimon warned regulators and the government against taking a too-simple approach to solving the issues that caused the financial crisis.
“It’s very important that companies acknowledge the legitimate concerns around issues like executive compensation,” said Dimon, whose company received federal bailout funds. “But don’t paint all executives with the same brush.”
Performance measures have an important place in executive compensation, Dimon said, noting that JPMorgan executives are required to keep 75 percent of their equity shares.
But in order to get people to do difficult jobs, compensation can’t be based solely on performance, he said.
To demonstrate his point, Dimon described a scenario in which he has an easy job and a tough job. “Let’s call the tough job Vietnam,” he said.
“While we would want the best person for that job, we also know that there will be casualties,” he said. “You want to support that person and sometimes it’s not performance-based.”
Some aspect of the compensation for difficult jobs has to show those who hold them that the organization trusts and supports them, Dimon said, adding that he hopes President Barack Obama approaches this issue carefully.
“Performance is not the end-all, be-all,” he said. And making proper and balanced judgments on issues like executive compensation is going to be crucial in turning the economy around, Dimon said.
“We need to keep companies healthy … in order to keep our country growing,” he said.
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