Managerial Finance Executive Compensation at Research Proposal

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Attention to this and other metrics will be used in determining performance and thus compensation.

J.P. Morgan Chase's accounting statements tell a similar though less extreme story. Non-interest revenue climbed substantially in 2009 after a significant drop in 2008, but have remained essentially flat over the past two years and over the five-year period. Interest income has shown a fairly steady decline, and though interest expenses are now a fraction of what they were four years ago the net revenue gains this has contributed to appear to be at an end, with interest expense unlikely to drop lower and with income and revenue both decreasing or at least flat lining. Compensation expenses have not showed the strong upward trend observable in Bank of America, but they have been subtly and steadily climbing despite poor performance. Though compensation does not appear to be as out-of-tune with performance at J.P. Morgan Chase as it is in Bank of America, it is still an issue that needs to be addressed.

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Executive performance should be adjusted according to income performance, expense reduction, and stock improvements. The P/E ratio is a useful indicator of investor confidence, and company performance can be measured indirectly through this ratio as well. Standard salaries can be established at a specific fraction of industry standards, with bonuses meant to make up the detriment or more assuming performance metrics are in line, and with stock options making up a significant portion of the contracted bonus for each executive. The basic bonus amount should be calculated from the profits of the company as measured each quarter, with multipliers determined for expense reduction and for other increases in profitability rates. Precise rates and multipliers will need to be determined based on an analysis of similar compensation packages in the industry, but this new compensation package should be much more closely and completely tied to performance measurements......

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