By Paul Hodgson
FORTUNE -- In January, news stories claimed that JPMorgan CEO Jamie Dimon got a 74% pay increase in 2013. But in April, now that the proxy is out, his pay is reported as declining by 37%.
One thing is certain, it can't have done both. The surprising fact is that neither figure represents what Dimon actually earned in either year. In 2012, Dimon earned $9,506,114 while last year he earned $12,033,071, figures that have not been reported elsewhere. That's a 27% increase in a year when the bank saw some of the largest fines ever handed out to a financial institution. In this case, it's not so much performance-related pay as fine-related pay.
The confusion arises from the different ways of measuring CEO pay. There is the pay figure reported in the headline "summary compensation table" in the proxy statement. Let's call that "headline pay." It consists of salary, bonus, estimated value of stock and stock options granted in the year, benefits, and perquisites.
Then there's "realized pay." This consists of salary, bonus, actual value of stock vested in the year, actual profits on stock options exercised during the year, benefits, and perks. It's roughly equivalent to what some companies, such as GE, are reporting as W-2 pay. The big difference is in the stock valuation, and it can make a very substantial difference in the pay amounts being reported.
Headline pay is a reflection of what the board thinks of performance right now. Realized pay is a reflection of actual performance over anything up to the last 10 years. For example, part of Dimon's 2012 pay was more than $4 million from options due to expire that year -- in other words, options that he had held on to for 10 years.
This confusion is the same for most of the other bank CEOs. For example, Morgan Stanley CEO James Gorman was reported as having received an increase of around 45%; Lloyd Blankfein, CEO of Goldman Sachs, was said to have seen a rise of around 10%; and Citigroup (C) CEO Michael Corbat a rise of around 42%. In fact, the increase in Corbat's realized pay in 2013 was only 25% -- less than the headline increase, though still substantial. Blankfein's realized pay went up by only 4%, while Gorman's actually declined by 15%.
But these two figures are not the only source of confusion about CEO pay. The banks, being banks, have come up with another source of confusion, which they conveniently blame on SEC disclosure regulations. Dimon's 74% increase is a perfect example -- this was due to an $18.5 million stock award for performance during 2013. But because JPMorgan (JPM) made the award in 2014, the SEC's disclosure regulations require such awards to be reported as 2014 compensation. This is a complete reversal of the way cash bonuses -- also often settled in the following year -- are treated, so this is partly the SEC's fault as well.
It's the same at Goldman Sachs (GS). Lloyd Blankfein saw a realized pay increase of only 4%, but a headline pay increase of almost 50% from 2012 to 2013, based on an $11.3 million stock award for 2012's performance and included in 2013's pay figure, not the $14.7 million for 2013. If we make the headline pay consistent, cash bonus and stock award reflecting that year's performance, changing reported pay in 2012 and 2013, the headline increase drops to 20%. Similarly for Morgan Stanley (MS), its version of Gorman's pay in 2013 is reported as $18 million, up 71%, while the summary compensation table has $14 million, up 32% from 2012, while his realized pay fell 15% to $7.4 million.
Finally at Citigroup, the CEO's headline pay of $17.6 million includes the estimated value of around $8 million for stock awards that include conditional performance shares, deferred shares, and a couple of other awards that were awarded by the compensation committee based on 2012 performance. In contrast, his realized pay of $11.7 million contains only $2 million worth of vested stock that represents the deferred into equity portion of annual bonuses over several years. Confusingly, the equity bonus actually for 2013 performance was also around $8 million.
Confused yet? I know I am. And to make things worse, all these equity awards based on either 2012 or 2013 performance are estimates of future value. Neither shareholders, nor the board, know what they might be worth when they actually vest. On the other hand, the realized pay amounts are set in stone, and reportable to the IRS on a W-2. I know which figure I trust the most.
Investors might want to take a closer look at the part of the bank Citi executives have been telling them to ignore.
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Trouble at the big banker reminds us that the 2002 law did some good.
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FORTUNE -- Citigroup appears to have evidence of wrongdoing at the bank.
On Friday, Citi (C) released a memo that CEO Michael Corbat sent to his staff two weeks ago saying he has knowledge of instances in which a number of the bank's employees have "violated our Code of Conduct and disrespected our values."
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