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Is stage set for JPMorgan board, shareholders to battle over Dimon?

March 26, 2013|By Andrew Tangel
  • Jamie Dimon, chief executive and chairman of JPMorgan Chase & Co., speaks at the South Florida Economic Summit in Miami.
Jamie Dimon, chief executive and chairman of JPMorgan Chase & Co.,… (Joshua Prezant / Bloomberg )

NEW YORK – Does Jamie Dimon have too much power?

JPMorgan Chase & Co.'s board apparently doesn’t think so. Last week, its directors decided to keep Dimon as both the bank's chairman and chief executive, even after a Senate panel's scathing report about $6 billion in trading losses incurred by the so-called “London Whale.”

Their decision to keep Dimon in both posts could set the stage for a rift with some big JPMorgan shareholders who support splitting the roles as a “best practice” for running a public company.

Shareholders will vote on a nonbinding measure to appoint an independent chairman ahead of JPMorgan’s annual meeting on May 21. A similar measure won a surprising 40% approval at last year’s meeting shortly after the “Whale” trading losses came to light in May of that year. Two major California pension funds voted in support of splitting the roles then.

Given the steady drumbeat of news over the bank's trading losses over the last year, some believe the measure could win a majority’s approval this year.

“These things are doing better each year,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “It just doesn’t make sense to have the person being monitored – the CEO – chairing the group that’s monitoring him or her.”

In keeping Dimon in both spots, JPMorgan remains in the majority – albeit a shrinking one – of companies in the Standard & Poor’s 500 index that have CEOs also serving as chairs of their boards.

According to the consulting firm Spencer Stuart, 57% of S&P 500 companies had CEOs who were also their chairmen last year. That’s down from 2002, when 75% of the companies combined the roles.

Dimon, once dubbed the “King of Wall Street” after steering JPMorgan through the financial crisis unscathed, has defended holding both jobs. Last week, JPMorgan’s board said in securities filings it “strongly endorses” keeping Dimon in both roles, citing the firm’s “strong performance” under his leadership (the New York bank reported record profit last year).

The board noted that it docked Dimon’s pay by 50% last year (to $11.5 million) following the “Whale” fiasco, as an example of its independent oversight. And a JPMorgan spokesman said the firm believes a board should be able to split the roles on a case-by-case basis.

Still, the Whale trading losses – which resulted from risky wrong-way derivatives bets – has spurred some of JPMorgan's big institutional investors to push for stripping Dimon of his chairmanship.

New York City Comptroller John Liu, whose office oversees the city's pension funds, and Connecticut Treasurer Denise Nappier, who manages that state's pension funds, have joined the campaign supporting this year's measure, which was proposed by the AFSCME Employees Pension Plan.

“This is not a referendum on Jamie Dimon’s leadership as CEO,” said Michael Garland, who oversees corporate governance issues for Liu's office. “He should not chair the board. He should be accountable to a board that is chaired by an independent director.”

Two major California pensions voted to split JPMorgan’s CEO and chairman jobs last year. But the funds –  the California Public Employees' Retirement System and the California State Teachers' Retirement System – have yet to decide on this year's measure, spokesmen said.

If a majority of shareholders support an independent chairman and JPMorgan's board ignores the vote, Garland said shareholders could take on the bank's directors at next year's shareholder meeting.

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