FORTUNE — Last week, Mike Cavanagh was considered the heir apparent to JPMorgan Chase & Co. CEO Jamie Dimon. Then this past Tuesday he became the latest high-profile banker to shun Wall Street for the world of private equity, agreeing to join The Carlyle Group as co-president.
What we didn’t realize at the time, however, was that Cavanagh wasn’t just taking a new job. He also was taking a substantial pay cut (at least for now).
Cavanagh’s compensation at JPMorgan was never publicly disclosed, but various sources put his 2013 package at around $17 million (including a $10 million stock grant). But his Carlyle Group deal only is slated to pay him around $7 million this year, according to an 8-K filed earlier this afternoon by Carlyle with the SEC.
That $7 million figure would include around $5 million in cash — including a $275,000 salary, signing bonus and anticipated year-end bonus — and another $2 million in Carlyle stock. He also would receive a total of $30 million of so-called make-good payments over the next three years in the form of Carlyle stock, in order to compensate for unvested JPMorgan shares that Cavanagh left on the table.
Before continuing, let’s state the obvious: No one is crying for Cavanagh here, or worrying about how he’ll pay the rent. But voluntarily accepting such a steep pay cut is unusual, particularly on Wall Street, so let me explain the apparent carrot:
Also included in the 8-K is information about a new executive incentive program that will include Cavanagh, fellow co-president Glenn Youngkin and chief financial officer Adena Friedman. It would provide each of them with an annual stock payout based on a percentage of carried interest in each new investment made by Carlyle funds going forward (i.e., it’s unlikely these incentives will be realized until several years from now). Cavanagh and Youngkin each would be entitled to 0.5% of all carry, while Friedman would receive 0.1%. Carlyle does not disclose how much carried interest is generated by all of its various platforms, although it does report nearly $1.2 billion in “realized performance fees” for 2013 (most of which is likely considered carry).
Other executives may be added to the incentive program later, but so far it’s beginning with just those three. Firm co-founders and managing partners David Rubenstein, Dan D’Aniello and Bill Conway are not part of the program.
[Correction: An earlier version of this story overstated the amount of carried interest Carlyle funds generated last year. Sincere apologies.]
Sign up for Dan Primack’s daily email newsletter on deals and deal-makers: GetTermSheet.com
