Based on an option grant he got in 2021, Jamie Dimon has a $75 million reason to stay on as CEO of JPMorgan Chase for another two or three years.
Dion, who is 68 years old, hinted at his plans to step down as CEO earlier than planned at the company’s investor day on Monday. He said, “The timetable isn’t five years anymore,” which was the usual answer he gave when asked about succession.
Dimon is likely to stay CEO until 2026, when a special option award of 1.5 million shares of JPMorgan stock will become fully paid. That grant has a “cliff” vesting, which means that he must work for the company until 2026, with a few exceptions, in order to get the stock options.
The extra grant was given to him in July 2021 as an incentive to stay on as CEO. He would still be able to get the grant, though, even if he quits as CEO and stays on as chairman in 2026, because the grant says he has to work at the bank to get it. Dimon is now CEO and chairman at the same time.
Not many people know about this chairman loophole. But the language of the grant, which is written out in the 2022 proxy, makes it sound like the goal of the reward is for Dimon to stay CEO until 2026. The bank says that the grant shows that the board wants him to “continue to lead the Firm for a significant number of years.” Dimon could get the grant even if he was only chairman, but he is expected to stay CEO until at least 2026, and maybe even longer if his health doesn’t get worse.
Dimon was given stock call options, which give him the right to buy shares at a certain price (called the “strike price”) during a certain time period.
The 2022 proxy statement says that Dimon’s options had a strike price of $148.73 per share, which was based on the price of the stock at the time. Beginning in July 2026, five years after the grant was made, Dimon will be able to exercise the options, which means he can buy the stock at that strike price.
Tuesday, JPMorgan stock was up 1.6% to $198.71. Monday, they dropped more than 4% after Dimon talked about succession and said that the bank would limit buying back shares because the price of shares was too high.
Now, each option is worth $50 more than its strike price, which is the difference between the price at which it was bought and the sale price of the stock. Barron’s figures that the grant is worth about $75 million right now, which is 1.5 million shares times $50 each.
In the end, the grant will be worth what the stock price is in July 2026. Some people question whether Dimon needs more money to stay on as CEO of JPMorgan. In 2022 and 2023, Dimon made a total of $35 million, which shows that he loves his job and is getting paid well. The option grant, on the other hand, would be a nice bonus for him. Bloomberg says Dimon’s net worth is $2.6 billion, which makes him one of the wealthier bank CEOs. He has a lot of money in JPMorgan stock. The 2024 proxy says that he owns 7.7 million shares. It’s worth about $1.5 billion now.
Dimon has to hold on to the net shares he received from the option grant for five more years, until 2031. This is what the terms of the exchange say. This was meant to make him more like the shareholders after the options were first exercised. Dimon could wait, though, and use the options at any time between July 2026 and July 2031, when they ran out.
Dimon will be 70 years old when he steps down as CEO in 2026. This is a round number that might appeal to both him and the JPMorgan board, which will make the final decision.
