Proxy adviser Institutional Shareholder Services this month urged Santander’s investors to vote against a package that would pay the bank’s executive chair, Ana Botín, €12.2 million ($13.1 million) for 2023.
The gripe may prompt head-scratching in the U.S., where even the lowest-paid CEO among the six largest banks, Citi’s Jane Fraser, makes double that.
Santander’s pay proposal would increase the salaries of both Botín and the bank’s chief executive, Héctor Grisi, by 5% — a year after Botín’s fixed pay notched up 3%.
The bank is justifying the proposed increases by pointing to its 15% rise in net income over 2022, a 32% jump in share price last year, and a need to stay competitive.
In one of the more dramatic examples of bank executive pay increases across the Atlantic, HSBC CEO Noel Quinn’s pay nearly doubled in 2023, from £5.56 million to £10.6 million ($13.4 million). HSBC’s pretax profit, too, saw a marked increase in 2023 — 78%.
ISS, in a report seen by the Financial Times, called Santander’s pay proposal “far from being uncompetitive,” adding, “the proposed increase is likely to exacerbate recurring pay-for-performance concerns.”
Another proxy adviser, Glass Lewis, expressed concern over Botín’s proposed pay increase but backed the overall package, highlighting the bank’s results.
The bank, too, stood by those metrics.
“The board of Santander is committed to ensuring the remuneration of executives is fully aligned with the interests of shareholders,” the bank said in a statement seen by the Financial Times. “The bank has set stretching targets for 2024 and remains focused on delivering sustainable long-term value creation.”
The numbers alone show the gulf between bank CEO pay in the U.S. and those abroad. When Goldman Sachs on Friday issued its shareholder proxy, observers could note, for example, that the bank’s No. 2 executive, John Waldron, made $30 million in 2023. That’s more than all but three U.S. bank CEOs: Morgan Stanley’s now-executive chair, James Gorman, JPMorgan Chase’s Jamie Dimon; and Waldron’s boss, David Solomon, who made just $1 million more. To put it another way, the second-in-charge at Goldman out-earned the CEO at Bank of America.
The U.S. appears utterly alone in its pay scale. Canada’s top-earning bank CEO, RBC’s Dave McKay, made C$16.13 million in 2023 last year.
ISS’s issue with Botín’s pay, though, is not the overall figure but the salary part. Her €12.2 million package breaks down to €7.4 million in cash and €4.8 million in gross profit on shares and other awards. Her fixed salary increased in 2023 to €3.43 million, from €3.27 million the previous year.
Grisi, by comparison, made €6.8 million last year. Under Santander’s proposal, €3.15 million of that would be fixed salary, up from €3 million.
None of the chief executives at the U.S.’s top six banks made more than $2 million in salary last year.
Santander’s shareholders will vote on the pay proposal at the bank’s annual general meeting Friday. But as the banking sphere has seen in recent years, the recommendations of shareholders are not binding.
JPMorgan shareholders in 2022 rejected the bank’s compensation plan for its six top executives, presumably over $52.6 million in option awards granted to CEO Jamie Dimon.
The measure received 31% support, but the bank ultimately stayed the course.
Ahead of the meeting, JPMorgan said its compensation and management development committee “will take into account the outcome of the vote when considering future executive compensation arrangements. Dimon, at the meeting, said the board “appreciates the feedback received from shareholders regarding compensation.”
“The board takes it very seriously and we will continue to actively engage with them,” he said.
