By Tom Bradley

Early in my career, the banks all looked and behaved alike. They battled for retail market share (cozily) and pursued copycat strategies – for instance, they all bought brokerage firms and trust companies within a few years of each other. At that time, Canada accounted for most of their earnings.

Canadians may still not see much difference in the branches, but over the last decade or so, the banks have differentiated themselves. RBC (Market capitalization - $80 billion) has continued to lead in all areas and has become a large capital markets player in NYC and London, as well as the biggest asset manager. TD ($72 billion) has focused on retail banking and established a significant presence on the east coast of the U.S. BNS ($58 billion) is Canada’s most international bank, with a successful business in South and Central America. BMO ($37 billion) has lagged in most areas, but continues to expand in the U.S. mid-west. And CIBC ($30 billion) has pulled in its horns while it rebuilds after failed excursions outside of its core banking business.

With the Big 5 quite different today, you’d expect that their CEO’s compensation would also vary. Different levels of salary, bonus and stock options. Each rewarded at different times as their bank’s fortunes ebb and flow. Different compensation philosophies at the board level. Well, not so much.

In the table below, I’ve compiled the numbers for the 2011 fiscal year. I’ve included the annualized return of each of the stocks up to December, 2011.

Firm Total Compensation 5 YR Total Return
Gord Nixon RBC $11.17 Million 2.7%
Ed Clark TD $11.38 Million 5.5%
Rick Waugh BNS $10.62 Million 3.6%
Bill Downe BMO $11.4 Million 0.7%
Gerald McCaughey CIBC TBA -0.8%

This table speaks to what’s wrong with executive compensation. The process goes something like this. The compensation committee of the board looks at what other companies are paying, with the help of consultants, and adjusts their CEO’s compensation a tiny amount to reflect other factors. If TD smokes the other banks and Mr. Clark is rewarded, the other CEO’s are rewarded too. If one of them stumbles, that CEO takes a hit for one year, but generally gets right back in the pack the next year.

I can’t help but finish with a sports analogy. Should Ed Clark, a 50-goal scorer, be paid the same as a good two-way winger on a deep team, a dependable defenseman, a second-line center and a penalty-killing specialist?