The Tribune

Big paydays on Wall Street often come under laserlike scrutiny, while Silicon Valley gets a pass on its own compensation excesses. Why the double standard?

Take Eric Schmidt, the former chief executive and current chairman of Google. Google’s compensation committee last month awarded Schmidt $100 million in restricted stock plus $6 million in cash. The stock vests in four years and comes on the heels of a $100 million award made in 2011.

It’s unclear why Google felt the need to award Schmidt this amount.

When asked for comment, a representative of Google directed me to the regulatory filing Google made disclosing Schmidt’s compensation award. The filing states the award was paid “in recognition of his contributions to Google’s performance in fiscal year 2013”. How about that for detail?

Schmidt already owns shares worth billions of dollars in Google, and has a net worth of more than $8 billion, according to Forbes. So the latest award amount is just a few ducats to him.

As chairman, Schmidt does make a substantial contribution to Google, including helping the company negotiate a settlement with the EU in an antitrust case. But his pay is extraordinarily high for a chairman. The typical director at a Standard & Poor’s 500 company was paid $251,000 in 2012, according to Bloomberg News.

Still, Schmidt’s pay award was greeted with few questions and apparently no criticism from Google’s shareholders or others. Compare this with the continued outcry over Wall Street executive pay.

The latest was the criticism of Jamie Dimon’s pay for 2013, given the many regulatory travails of his bank, JPMorgan Chase.

The bank’s board awarded Dimon $20 million in pay for 2013, $18.5 million of which was in restricted stock that vests over three years.

In doing so, the JPMorgan board stated that the award was justified because of JPMorgan’s “sustained long-term performance; gains in market share and customer satisfaction; and the regulatory issues the company has faced and the steps the company has taken to resolve those issues”.

While JPMorgan may be hogging the regulatory limelight at the moment, other Wall Street banks have faced that glare and have been questioned about their chief executives’ compensation. Total pay for Lloyd Blankfein of Goldman Sachs, no stranger to regulatory scrutiny, has not yet been disclosed, but he was recently awarded $14 million in stock. Once his cash bonus is announced, Blankfein will probably be paid an amount similar to Dimon’s.

Like JPMorgan’s board, Goldman’s board has sought to justify such pay and is criticised just the same.

This double standard for finance and technology doesn’t make sense.

For one, the outsize pay for Schmidt doesn’t square with Google’s performance. Putting aside the fact that he is not even the chief executive, Google had net income of $12.9 billion last year. JPMorgan was higher at $17.9 billion after adjustments for significant events and at $23.3 billion before, well, those regulatory problems. Goldman was lower than Google, but not 20 percent — it had $8 billion in net earnings.

Google’s share price has performed better than JPMorgan, but it is not the best-performing stock for 2013.

On pure economics, Schmidt appears to be receiving an inordinate amount. By every measure, JPMorgan is bigger, with more profits. And yet Google awards $100 million to its chairman and there is nary a peep.

The pay of Dimon and Blankfein, however, is seen as symptomatic of what’s wrong with Wall Street.

If Schmidt’s role in spearheading negotiations with regulators is an argument for his rich pay, then why doesn’t a similar role hold true for Dimon? Moreover, all of Google’s regulatory issues came on Schmidt’s watch, while some of JPMorgan’s predated Dimon and were legacy issues inherited when the bank acquired Bear Stearns and Washington Mutual.

The divergent public views on pay are particularly odd, since today’s excesses are more often in Silicon Valley. When the sequel to the movie “Wall Street” was filmed a few years ago, it was in Eric Schmidt’s apartment, not at a Wall Street executive’s. Schmidt, by the way, was reported by Business Insider to have a “fabulous life” with a Gulfstream V, a 195-foot yacht and multiple homes across the country including a new $22 million Hollywood mansion. You could write similar things about Google’s co-founders.

Imagine if Dimon or Blankfein lived so ostentatiously? Wall Street is certainly known for its high-end consumption, but it is also a place where being conspicuous about it is frowned upon. In Silicon Valley, however, the superwealthy can flaunt their toys and no one says a word.

By STEVEN M DAVIDOFF

c.2014 New York Times News Service