Has Jamie Dimon Made Too Many Mistakes?
A favorite saying of JPMorgan Chase (NYSE:JPM) Chairman and Chief Executive Officer Jamie Dimon is “Do the right thing.” But shareholders are increasingly thinking that Dimon has been doing just the opposite. Because many investors in the bank believe that he has made too many mistakes during his tenure to hold both positions, they have proposed splitting Dimon’s job and naming a new chairman.
While he may be the first to admit that he has made many blunders — including his failure to detect or prevent the risks incurred by the London Whale, who cost the company $6 billion last year — a vote will be put to shareholders at the company’s annual meeting on May 21.
JPMorgan executives and several board members have been meeting with institutional investors in order to convince them to oppose the resolution seeking to elect a separate chairman and re-elect current board members. But two major proxy advisers — Institutional Shareholder Services and Glass Lewis — have urged shareholders to support the proposal to separate the chairman and chief executive roles and vote out the directors who serve on the bank’s risk committee. Following one after another, these recommendations have increased the pressure on Dimon ahead of the annual meeting.
Proxy advisers give large shareholders, like mutual funds, guidance on how to vote in corporate elections, and while their recommendations are not binding, they can be influential.
“Shareholders should be concerned that Company management was allowed to build a massive exposure to credit derivatives, switch VaR models following a breach of risk limits, and value its positions so to minimize losses, and that it was able to do each of these things without triggering a board-level review or a mandatory containment of risk,” proxy adviser Glass Lewis said in its report.
Both Glass and ISS advised shareholders to vote against three members of the board’s risk committee — David Cote, Ellen Futter and Chairman James Crown — for what Glass termed failures of oversight around the bank’s trading losses. But Glass took its recommendation a step further than ISS; the firm also said that shareholders should vote against three members of the board’s audit committee: James Bell, Crandall Bowles, and Chairman Laban Jackson Jr.
JPMorgan declined to comment on the issue to The Wall Street Journal, but pointed out that in its proxy statement, the bank strongly endorsed Dimon for both the CEO and chairman jobs.
Even one proxy adviser, Egan-Jones Proxy Services supported the bank’s decision to keep the CEO and chairman roles combined. “We believe that the current Board leadership structure provides appropriate leadership and oversight of management,” the firm said in its recommendation.
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