Shareholder Anger Skips Dimon and Hits JPM’s Board
JPMorgan Chase (NYSE:JPM) Chief Executive and Chairman Jamie Dimon is still the most powerful man in the United States banking industry. With threats that the leader, who had 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.
Following the vote, Dimon left the stage of the company’s annual meeting to the soft piano strokes of Bruce Hornsby’s “The Way It Is,” which has a refrain that states: “That’s just the way it is/Some things’ll never change.” While the bank naturally denied that it was a message to shareholders, it could not have been better choreographed. A memorandum sent to employees after the meeting read that he plans to stay at the bank “for many years to come,” according to The Financial Times.
Still, despite the emphatic tone taken by the bank in its official communications, questions and concerns linger; the board remains under scrutiny and questions regarding his successor persist. Dimon may have escaped, but the several of the bank’s directors who sit on its risk committee continue to feel the force of investors’ anger. All three — Ellen Futter, a museum president, James Crown, who runs a Chicago-based investment firm, and David Cote, the head of Honeywell, bore the brunt of shareholder anger regarding the London Whale, trader Bruno Iksil who lost JPMorgan $6.2 billion in misplaced derivative bets last year.
Rubber-stamping exercises — those that serve to reaffirm de jure power of institutions or leaders — are commonplace in corporate America, but even so, none of those three directors, who have little expertise in risk management, could attract more than 60 percent of the vote in their re-elections. According to the shareholder advisory service Institutional Shareholder Services, which criticized all three for their lack of experience in risk management and financial regulation, the average support for board nominees at S&P 500 companies this year is 96.9 percent. Before the JPMorgan vote, just six nominees from a total of 2,127 executives elected this year have failed to receive more than 60 percent of votes cast.
This clear break with precedent has a profound implication for the bank. Given the choice between criticizing the board of directors or limiting the power of the company’s still-popular chief executive, investors decided to keep on Dimon as both chief executive and chairman. But, as the proposal to strip him of his chairmanship was aimed at bringing more oversight, Tuesday’s vote begets the question of whether the issue of increased oversight of Dimon has been laid to rest.
A change in leadership did emerge to some degree during the annual meeting. The bank’s lead director, former Exxon Mobil Chief Executive Lee Raymond, took a more active role during the meeting compared with last year, including answering shareholder questions. But many investors were displeased that queries addressed to other directors were answered by either Dimon or Raymond, while most of the board sat with their backs to the room.
However, the biggest concern raised by shareholders was the vote count for the three risk committee members. “This is borderline rejection, too close for comfort, and I would suggest they step down,” said Anne Simpson, head of corporate governance at the pension fund Calpers, according to the Times. Of the three directors, Flutter — who received just 53 percent of the vote — is the most likely member of the committee to depart, sources told the publication.
Raymond promised that the bank took shareholders’ “concerns, suggestions, and feedback very seriously and said that it would give an unspecified “tempered” response to the votes against the directors. The most likely response the bank will take is to add an additional member to the risk policy committee, as it did last year when the board hired former KPMG executive Tim Flynn.
The other pressing problem is who will replace Dimon when he does retire. Raymond said that “shortly after Jamie became the chairman and CEO the board made it clear to Jamie that his first priority was to develop successors.” But that conversation took place more than six years ago, and since then, experienced executives, including Bill Winters and Steve Black, have left the bank and questions over his potential successor remain unanswered.
Despite these problems, Dimon said that his executive committee is “as good a team of leaders as I’ve ever had the privilege to work with.”
Follow Meghan on Twitter @MFoley_WSCS
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