Lloyd Blankfein Jamie Dimon

CEO pay at big Wall Street banks is a big deal. 

JPMorgan CEO Jamie Dimon took home $27 million for 2015. Goldman Sachs chief Lloyd Blankfein earned $23 million.

Those are big numbers, and there are sure to be lots of people out there who think they are too big. 

Another huge issue, though, is why the most well-paid bank CEOs earn what they earn. 

Keefe, Bruyette & Woods shared their thoughts on the weighty topic of CEO compensation in a note Friday, and concluded that the CEO’s interests are not aligned with those of shareholders. 

Frederick Cannon and Allyson Boyd said in the note (emphasis ours):

There is little doubt that regulation has punished the shareholders of most large banks, reducing profitability, trapping capital, and limiting returns. This suggests that the large banks should consider accelerating the sale of parts of their businesses or breaking up. But does management have the incentive to pursue such strategies? As we show in this note bank executive compensation is closely and positively related to the size of the institution, but not generally related to profitability. 

The KBW argument here is that big banks have had a tough time of it, with post-crisis regulations encouraging larger institutions to downsize. And yet, CEOs have shown little interest in breaking themselves up into smaller parts. The reason: They get paid more for working at a big bank. 

Here’s Cannon and Boyd again:

There would appear to be little benefit to top managers to explore breaking up their companies to increase shareholder return, as they would likely receive lower compensation at the smaller companies they would be running.

And here are some charts illustrating this divergence in incentives:

SEE ALSO: Here’s what Goldman Sachs’ US workforce looks like

KBW looked at the relationship between total shareholder returns and executive compensation. There isn’t one.

Meanwhile, KBW also looked at the much stronger relationship between CEO compensation and the size of each institution. The analysts said: “Compensation appears to relate much more to size than to shareholder returns.”

See the rest of the story at Business Insider