As head of Axos Financial Inc. — formerly Bank of Internet USA — Gregory Garrabrants made $34.5 million in 2018, more than even Jamie Dimon of JPMorgan Chase & Co. and Goldman Sachs Group Inc.’s David Solomon raked in.
. 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.
“There’s no requirement for the CEO to sustain performance,” John Roe, head of ISS Analytics, a unit ofInc., says of Garrabrants’ package. Beat your target “big in year one and you’ve made it. You don’t have to worry anymore.” Founded in 1999, Axos was a pioneer in online lending in the U.S. and still has no physical branches. The 47-year-old CEO, whose career has included stints at Goldman, McKinsey & Co. and mortgage originator IndyMac Bancorp Inc., has led the bank for over a decade. Since he took over in 2007, Axos’ assets have increased tenfold, fueled in part by providing esoteric loans that some other financial institutions avoided.
In the summer of 2017, Axos struck a new contract — the one which triggered the huge payday in 2018 — with Garrabrants to keep him on the job for at least another five years. It was structured to tie his compensation more closely to the bank’s share-price performance, after some investors criticized his previous deal for failing to do so.
In any year that Axos beats the index, Garrabrants gets 2% of the market-cap outperformance in dollars. It’s akin to carried interest reaped by general partners of hedge funds. When asked about the plan, several big shareholders were taken aback by how Garrabrants’ compensation was structured and surprised by just how much he was actually paid. That includes Don Hankey,“I would rate Greg Garrabrants a 9.9 on a scale of one to 10,” he said, “but this pay plan is way too lucrative.”To be fair, both the shares and the units will take several years to vest, which means their value could decline.
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