NEW YORK — Jamie Dimon, the chairman and CEO of the country’s biggest bank, faces a key test this week: Shareholders are voting on whether to let him keep both jobs.
It’s been just more than a year since his bank, JPMorgan Chase, revealed a surprise trading loss that tarnished its reputation in Washington and on Wall Street. Shareholder groups are calling for the bank to strip Dimon of his chairman job, a move that would be a bruising referendum against a man who’s normally chieftain even among other big-bank CEOs. Shareholders are also lobbying to kick out several longtime board members, saying they should have done more to detect or prevent the trading loss.
On Tuesday, at the bank’s annual meeting in Tampa, Fla., union group AFSCME, the New York City Comptroller’s Office and other fund managers will ask shareholders to approve a proposal asking JPMorgan to split the roles of chairman and CEO, and to give the chairman job to someone who isn’t a bank employee. The underlying idea is to install stricter checks and balances against Dimon and other top bank executives.
A similar measure got 40 percent approval at last year’s meeting, held just days after the bank announced the $6 billion trading loss. In the previous six annual meetings where Dimon has been chairman and CEO, shareholders have been asked about separating the roles four times, and last year marked the highest level of votes in favor of the idea.
Both Glass Lewis and Institutional Shareholder Services, two influential firms that give advice to big shareholders, are recommending the jobs be split. Glass Lewis is also recommending getting rid of six of the 10 independent board members, and ISS recommends booting three.
The board has defended Dimon. It says keeping him in both jobs is its “most effective leadership model.” It’s an arrangement they are used to: Six of the 10 independent board members are or have been the simultaneous chairman and CEO of other businesses. Lee Raymond, who is No. 2 on the board behind
Dimon, is the retired chairman
and CEO of Exxon Mobil.
The board says JPMorgan has done well under Dimon, who guided it through the financial crisis and nursed it to emerge as one of the strongest banks in the country. It says it meets regularly without him and has taken steps to clean up the practices that caused the trading loss, including cutting Dimon’s 2012 pay – down 19 percent to $18.7 million, according to Associated Press formulas for executive compensation, though the bank calculates that it cut his pay by half.
The shareholders’ proposal is nonbinding, so technically the bank doesn’t have to follow it.
In 2009, shareholders at Bank of America voted to split the jobs, and the bank took away the chairman title from chairman and CEO Ken Lewis. Later that year, he resigned from the bank entirely.
Last year, shareholders at just four U.S. companies voted to split chairman and CEO roles, according to ISS. So far this year, shareholders at only one company, department store chain Kohl’s, have voted to separate the jobs.
At a public company, the board is essentially supposed to be the boss of the CEO, hiring and firing him and reining him in from risky practices that could hurt shareholders. Shareholder activists say that if the CEO is also running the board, then the board can hardly police him. Many companies argue that the CEO knows the company better than anyone and is best equipped to run the board as well.
Dimon, 57, a native of Queens and grandson of a Greek immigrant, is an essential player in banking’s world order. During a time of increased public anger against the industry, and as some of his peers tried to fly under the radar, he was outspoken, defending big paydays for bankers and criticizing some of the government’s proposed new rules for the industry. He was President Obama’s confidante in the banking industry, and then the banking leader with the guts and credibility to challenge him.
“He’s obviously a brilliant executive,” said Brandon Rees, acting director of the investment office at the AFL-CIO, a union group that supports splitting the roles. “But it’s a rare quality for brilliance to be accompanied by lack of hubris.”
Not everyone thinks that getting rid of Dimon would be best for shareholders. CLSA analyst Mike Mayo predicts that the stock would plunge 10 percent, noting there’s no obvious successor. Nomura analyst Glenn Schorr, writing to clients last week after a meeting with Dimon, said he found it “fascinating” that investors were considering “shrinking the role of one of the best managers there’s ever been in the business.”
What everyone agrees on is this: From a public relations perspective, it’s been a tough year at JPMorgan Chase & Co. Many of Dimon’s highest-level executives have departed, including co-chief operating officer Frank Bisignano, who left in April to become CEO of payment processor First Data. The bank is also under extra scrutiny from regulators who are examining not only the trading loss but also the bank’s foreclosure practices, its controls for preventing money laundering and other areas.
“Let me be perfectly clear: These problems were our fault, and it is our job to fix them,” Dimon wrote in the annual letter to shareholders this year. “In fact, I feel terrible that we let our regulators down.”