trending Market Intelligence /marketintelligence/en/news-insights/trending/6jfc15gdvzkg3dr7d3y9ka2 content esgSubNav
In This List

In CEO pay ratio, US banks' focus is on median employee compensation

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


In CEO pay ratio, US banks' focus is on median employee compensation

Median employee pay became the unexpected focal point of the otherwise-unremarkable debut of U.S. banks' CEO pay ratio disclosures, according to compensation experts.

For the first time, the SEC required companies to disclose the compensation of their median employee and the ratio between that individual and the chief executive officer, giving large latitude to determine total compensation. Investors' reaction to the ratios was muted, but the ratios did bring attention to how much companies pay their median employee, the experts said.

"There's been a lot less conversation on this than everyone expected," said Todd Leone, partner of corporate and consumer banking at compensation firm McLagan. "While the organizations were initially focused around the ratios themselves, the other area where people were watching was around the median employee compensation, because that scenario is ripe for miscommunication."

SNL Image

SNL Image

Executives at companies across a variety of industries grappled with whether they wanted to report a high ratio or low one, based on the median employee pay, said Deb Lifshey, managing director at Pearl Meyer. Higher ratios may look like a company is not compensating employees well, but a low ratio and a higher median may lead to uncomfortable conversations with employees who feel undercompensated.

Several employment features factored into the ratios at U.S. banks: most workers are domestic, the industry does not use many seasonal or temporary workers and compensation tends to be higher at the entry level than other industries. S&P Global Market Intelligence analyzed public disclosures for all public banks with more than $20 billion in assets as of April 26, excluding foreign subsidiaries.

Citigroup Inc. had the largest reported ratio, at 369-to-1 with a median employee pay of $48,249. Megabank peer JPMorgan Chase & Co. came in second, with 364-to-1, but with a higher median pay of $77,799. In supplemental information accompanying the ratio, Citigroup said more than 65% of its workforce is outside of the United States in about 100 countries and 52% of employees work in the global consumer banking unit, which includes retail and credit card operations.

The bank with the smallest ratio was Texas Capital Bancshares Inc., with 39.6-to-1. The bank, which had $24.45 billion in assets at the end of the first quarter, recorded median pay of $91,315 — the fourth-highest in the analysis. The highest reported median pay was $126,500 at First Republic Bank, an institution that targets high-net-worth individuals and whose geographic footprint is in costly coastal markets.

SNL Image

Some banks chose to disclose additional information, and some calculated a second ratio due to special bonuses or deferred compensation. First Horizon National Corp. reported a ratio of 126-to-1 with median employee pay of $81,836. That ratio included a one-time bonus for the company's performance since the financial crisis — $5.5 million — awarded to Chairman, President and CEO D. Bryan Jordan. Excluding that bonus, the ratio would have been 59-to-1. IBERIABANK Corp. and Webster Financial Corp. also reported two ratios with one excluding bonuses or deferred compensation.

Disclosing a second ratio allows companies to report numbers that may be more in line with future figures, rather than one year's number that is out of line because of special awards, said Laura Hay, managing director at compensation firm Pearl Meyer.

Valley National Bancorp also reported a second ratio that included the cost of company-paid health insurance for both the median employee and President and CEO Ira Robbins. Including healthcare dropped the ratio from 100-to-1 to 92-to-1. Leone said this variable often benefits the median employee's pay versus the executive's.

"If you add $2,000 of [healthcare coverage] to a median employee who is making $45,000, now you're at $47,000. That ratio will go down much quicker," he said.

Some institutions went so far as to describe the exact role of the median employee. The median employee at Huntington Bancshares Inc. provides customer service in the commercial banking division and that person's total compensation was $59,693. Regions Financial Corp.'s median employee is a full-time employee who works in a branch as a financial relationship senior consultant team lead. That individual has a base pay of $43,160; including benefits, their total compensation was $63,174.

SNL Image

Did you enjoy this analysis? Click here to set alerts for data-driven articles on the U.S. financial sector.

Click here to view median employee salary and CEO to median employee salary ratio data for banks covered into this analysis.