(Bloomberg) -- Big banks are struggling to find the best way to compensate their chief executive officers, said Sallie L. Krawcheck, former head of wealth management for Bank of America Corp.

“Each bank is working hard to find the right thing,” Krawcheck said today in a television interview on “Bloomberg Surveillance” with Tom Keene. “The real question when you look at some of these plans is, ‘Are we seeing it through a cycle? And are we rewarding the right behavior?’”

Citigroup Inc. outlined a new pay program yesterday that ties the compensation of CEO Michael Corbat and other top executives more directly to the lender’s performance. New York- based Citigroup awarded Corbat, 52, an $11.5 million pay package for 2012 that included a $4.18 million cash bonus and $3.14 million of so-called performance pay units, according to a regulatory filing.

Corbat’s 2012 total compensation matched that of JPMorgan Chase & Co. CEO Jamie Dimon, 56, whose bank posted a $21.3 billion profit last year. Citigroup, the third-largest lender, had 2012 profit of $7.54 billion. Directors of New York-based JPMorgan cut Dimon’s pay 50 percent from a year earlier after a $6.2 billion loss by the bank’s chief investment office. Citigroup shares gained 50 percent in 2012, compared with JPMorgan’s advance of 32 percent.

‘Human Tragedy’

Shareholders rejected former Citigroup CEO Vikram Pandit’s 2011 pay plan last year amid complaints it was too easy for him to collect his $15 million package plus long-term incentives that could have been worth about $40 million. After promising to reconsider, the board ousted Pandit, 56, in October and promoted Corbat. Citigroup arrived at its new performance-based compensation plan after meeting with some of the bank’s largest shareholders, according to the filing.

Krawcheck, 48, said it’s important to consider bond holders and the banking industry’s impact on the global economy in addition to shareholder returns.

“The impact of these large banks, particularly of course when things go wrong, is so much broader than just the shareholders,” Krawcheck said.

Krawcheck said recent job cut announcements on Wall Street are a “human tragedy.” Corbat has said that he plans to fire 11,000 workers at Citigroup and pull back from certain markets as he seeks to cut costs and increase returns for shareholders. Morgan Stanley is eliminating 1,600 jobs from its investment- banking division and support staff after reducing the number of employees by about 4,500 in 2012.

Big banks are going to be “volatile” in 2013 and investors need to be “careful” when analyzing risk, Krawcheck said.

“If you want to play them, play them tactically,” she said in today’s interview. “You also have to be careful of playing any individual one because it’s almost impossible from the outside to know what those risks are.”

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