April 11, 2019

Bloomberg – CEO of Tiny California Bank Makes Twice as Much as Jamie Dimon

By Anders Melin and Michelle Kim

Gregory Garrabrants is one of the highest-paid bank CEOs in America. Is he worth it?

Chief executives of Wall Street’s largest banks were awarded record pay packages last year as profits soared.

Nearly 2,500 miles away, the CEO of a little-known online lender, born at the height of the dot-com bubble, quietly out-earned them all.

His name is Gregory Garrabrants. As head of Axos Financial Inc. — formerly Bank of Internet USA — he made $34.5 million in 2018, more than even the princely sums that Jamie Dimon of JPMorgan Chase & Co. and Goldman Sachs Group Inc.’s David Solomon raked in. It’s all the more remarkable considering just how small the San Diego-based bank is. With $9.8 billion in assets, Axos is little more than a rounding error compared with JPMorgan’s $2.62 trillion.

So, how did Garrabrants make so much? And importantly, at a time when income inequality has become such a political flashpoint, did he deserve it?

The answer to the first lies in a complex pay structure more commonly found at hedge funds, which wound up being far more lucrative than the bank predicted. As for the second, well, it’s complicated. Some say it’s a fair outcome for a leader whose pay was directly tied to his firm’s hefty share gains. Others say it reflects short-term incentives gone wrong and an out-of-touch board beholden to its CEO. While Axos’ stock price shot up 72 percent last fiscal year, holders of nearly half those shares voted against the plan.

“There’s no requirement for the CEO to sustain performance,” John Roe, head of ISS Analytics, a unit of Institutional Shareholder Services Inc., says of Garrabrants’ package. Beat your hurdle “big in year one and you’ve made it. You don’t have to worry anymore.”

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