Last year, 40 percent of JPMorgan Chase’s (NYSE:JPM) shareholders voted to break up Jamie Dimon’s dual roles of chairman. At the bank’s annual meeting on Tuesday, the same proposal was put before investors once again, but this time only 32 percent voted in favor of the proposal. That could be read as a vote of confidence in Dimon — or alternatively, as a sign that JPMorgan handled the voting politics better this year. At the time of last year’s meeting, JPMorgan’s $6.2 billion trading loss had just come to light, catching the bank by surprise. This year, the bank had a campaign prepared.
Dimon has shown that he is more than a capable chief executive; the bank’s shares are trading higher than they have been in five years. But, despite the fact he managed to keep his title as chairman, he has not necessarily shown that he should keep both roles.
Currently, Dimon is still the most powerful man in the United States’ banking industry. With threats that the leader, who led the bank through the financial crisis with not one quarterly loss darkening its balance sheet, would resign from his post if shareholders chose to strip him of his title of chairman, investors voted down that proposal at Tuesday’s annual meeting. While it has been argued that Dimon has made too many mistakes to hold both roles, shareholders reaffirmed their support for him nonetheless.
It may seem surprising that Dimon would walk away from JPMorgan if the chairman position was given to another, but losing the title would not only show a lack of confidence and appreciation from shareholders, it would also likely be a blow to his ego.
Separating the role of chairman and chief executive was aimed at bringing more oversight to management. The job of the chairman is to make sure the CEO does his job, and many took the infamous London Whale debacle — when trader Bruno Iksil lost JPMorgan $6.2 billion from misplaced derivative bets last year — as a sign that the bank’s leadership was lacking a key element; increased supervision, especially in terms of risk. While he has argued that the loss was an anomaly, there was still no one in the boardroom to hold him accountable, although investors did shave dollars off JPMorgan’s stock price for months.
Dimon has been held accountable in public forums for errors several times in the past year, but he has come out unscathed. Last year, when he testified before the House of Representatives about the London Whale incident, Dimon argued that the trading loss was the fault of a few bad apples rather than the result of a corporate culture that encouraged traders to keep risking money rather than take a loss. At the end of his testimony, lawmakers even asked him to help write future bank regulation. Dimon did not even appear at the Senate hearing and investigation.
Just as congressional hearings failed to be decisive, so too did Tuesday’s annual meeting fall short of clearly defining a strong leadership for the future. The bank is still dogged by the London Whale scandal, and it should be thinking about new ways to manage risk and deal with the departures of many legacy Dimon-backed executives. But leadership problems persist. Even after promising to develop a successor when he first began his tenure, no candidates have emerged. Furthermore, the board’s management treated shareholders like adversaries at Tuesday’s meeting and resorted to defensive tactics by keeping early tallies of the chairman vote secret. JPMorgan’s executives answer to shareholders, and therefore, their concerns about the bank’s governance should have been met with respect, not elaborate vote-tallying schemes.
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