[ by Howard Haykin ]

E*Trade Financial Corporation issued a big "Wall Street vote of confidence" to its Chief Executive Officer, Steven Freiberg.  According to a regulatory filing last Friday, the company doubled Mr. Freiberg's total compensation.  Including a cash bonus, his pay package was raised to $6.3 million for 2011.  In 2010, Freiberg’s compensation was $3 million.

For 2011, Freiberg’s pay package includes: $1 million in salary; $3 million cash bonus;  stock awards of $1.5 million; $742,000 in options; and, $44,000 in other compensation.  Furthermore, the CEO was granted shares worth $3 million, which will vest over a period of 4 years.

Running Counter to Wall Street Trends. E*Trade acknowledges that many firms on the Street have responded to the economic slowdown, in part by slashing the pay of senior banking executives.  That includes large U.S. banks, like Bank of America, Morgan Stanley, and Goldman Sachs.  However, others, like JPMorgan Chase has rewarded its senior executives with the benefit of a steady pay structure.  Given where E*Trade was, compared to where it is now, an increase of $3 million in compensation appears to be a sound move.

Freidberg Appointed CEO. Freiberg was appointed CEO in April 2010, and in 2011, E*Trade generated a profit for the first time since 2006 - reporting net income of $157 million, or 54¢ per share in 2011.  For 2010, the prior year, the firm had a net loss of $28.5 million, or 13¢ per share.

E*Trade's financial difficulties began with the collapse of the U.S. housing market.  The banking unit recorded billions of losses on risky loans in its mortgage portfolio.  Since then, however, E*Trade has worked on its mortgage-related issues and managed to reduce legacy loan portfolio to $13 billion in 2011 - a $19 billion decrease from $32 billion figure in 2007.

Going forward, the competitive position of brokerage businesses will depend on trading customers, predominantly active traders.  It is incumbent on the firm to develop innovative online trading and long-term investing products and services, delivery of advanced customer service, creative and cost-effective marketing and sales, as well as expense discipline.    [Zacks Equity Research, 3/13/12]