Performance Woes Lead to Bank Execs' Comp. Cuts

February 21, 2003 ( - Some financial services company executives are taking big hits to the pocketbook through compensation cuts growing out of their firms' poor performance.

The latest example of the trend, according to a report on, was the announcement by two FleetBoston Financial Corp. executives that they would skip bonuses after the bank’s poor 2002 performance. Instead, chief executive Chad Gifford and chief operating officer Eugene McQuade will take a restricted stock that will be tied to the Boston-based bank’s performance in 2004 and 2005.

Fleet executives will also be required to hold at least 75% of stock granted to them as part of compensation for as long as the bank employs them. Gifford’s total 2003 compensation package was not disclosed, but he received $992,200 in salary and a $2.25 million bonus in 2001.

Although Fleet reported net income of $1.12 billion for 2002, up from $968 million the previous year, its revenues fell and reserves against credit losses rose during the year. According to CBS MarketWatch, the bank also shuttered San Francisco-based Robertson Stephens, which provided investment-banking services, and took $294 million in charges last year to exit the business. The charges were also to cover losses from investments in Argentina and Asia.

Morgan Stanley, Citigroup Executives Affected

The Fleet developments follow similar cuts taken by financial services companies’ biggest players in recent weeks:

  • a regulatory filing showed Morgan Stanley chief executive Philip Purcell took a 26% pay cut to $11 million. Purcell received a base salary of $775,000 and a $5.6 million bonus. He also got $2.3 million in stock options from Morgan as well as $2.3 million in restricted shares.
  • Citigroup Inc. chief Sanford I. Weill also rejected a bonus for 2002. However, Weill will receive options to buy 1.5 million shares, Citigroup said. Weill, who has a $1 million salary, got bonuses of nearly $17 million in 2001 and $18.5 million in 2000.