JPMorgan lifts salary freeze

By Elinor Comlay

NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N) is lifting a salary freeze it put in place last year, according to an internal memo, a sign of its growing confidence in the economic recovery after it reported several quarters of improving investment-banking profits.

Separately, the bank said it is adding more than 300 staff to its branches to support a $4 billion increase in small business lending. The initiative, like its mortgage modification program for homeowners, is an effort to show it is extending lending and helping to revive the U.S. economy.

As year-end bonus season approaches, bankers' compensation looms as a hot-button issue again. When the financial crisis was deepening, the industry came under fire from lawmakers for paying large bonuses to its executives even as it was being propped up with taxpayer money and cutting loans to a trickle.

The decision by JPMorgan to lift the salary freeze is part of its year-end performance and compensation review process, according to the memo from human resources director John Donnelly.

The memo was confirmed by a spokesman for the firm, which has returned $25 billion it got from the government -- unlike peers Citigroup Inc (C.N) and Bank of America Corp (BAC.N).

JPMorgan believes its pay practices for top executives follow best principles, Donnelly wrote in the memo, noting that the bank's senior executives receive most of their compensation in stock that vests over multiple years and it eliminated so-called golden parachutes for executives in 2005.

Chief Executive Jamie Dimon did not receive a bonus last year and it is not yet clear whether he will get one this year. For 2008, he received about $19.7 million in total compensation, including a $1 million salary and stock and options awarded in previous years, according to regulatory filings.

The second-largest U.S. bank will also return to matching eligible U.S. employees' 401(k) pension plan contributions, after suspending those payments earlier this year, according to the memo.

REGULATION

The Federal Reserve last month issued bank pay guidelines aimed at curbing incentives for risk-taking that officials say contributed to the financial crisis.

U.S. Senate Banking Committee Chairman Christopher Dodd was expected on Tuesday to unveil draft legislation to tighten bank and capital market regulation.

"It is possible that the regulatory rules will change compensation standards and we will, of course, adhere to all regulatory standards," Donnelly wrote in the memo.

"We will continue to be committed to being highly competitive and paying for performance," he added.

Dimon has publicly defended the bank's need to pay for talented staff, although at a recent industry gathering he said the bank would not actively seek to hire from banks including Citi and Bank of America that still face pay restrictions.

The New York-based bank will pay a $500 special award to employees globally that receive less than $60,000 in total compensation, Donnelly wrote in the memo.