JP Morgan's Jamie Dimon in shareholder revolt over role

- highly relevant to P1 GRE Candidates.

 

JP Morgan's board says keeping Jamie Dimon in both jobs is the "most effective leadership model"

 

JP Morgan chairman and chief executive Jamie Dimon is facing a shareholder revolt as investors prepare to vote on whether he should be allowed to keep both jobs. 

A group of shareholders has demanded an independent chairman to help protect the bank from future trading fiascos.

The fallout from the so-called London Whale trades, which cost the US bank $6.2bn (£4bn), has sparked the furore.

Support for the proposal is running at just over 40%, according to Dow Jones. 

Although the result of the vote is non-binding, meaning Mr Dimon could continue as before, reports have suggested that he may resign if the votes are not in his favour.

Both Glass Lewis and Institutional Shareholder Services, influential firms that give advice to large shareholders, are recommending that the jobs be split. 

"An independent chairman is better able to oversee the executives of a company and set a pro-shareholder agenda," Glass Lewis argues in its proxy report.

Last year's annual meeting, which came just after the London Whale losses were first revealed, saw 40% of shareholders vote for a similar proposal. On previous occasions in 2007 and 2008 when shareholders were asked about separating the roles, just 15% voted in favour. 

"Even a Master of the Universe can be swallowed by a London whale," said Lee Saunders, president of public employees' union AFSCME, which is also voting for the roles to be split.

London Whale In April last year, JP Morgan reported a loss in a London-based division responsible for using trades to hedge the bank's overall risk in markets.

At the time, Mr Dimon dismissed the incident as a "tempest in a teapot". But just a month later, he admitted the bank had lost about $2bn on the erroneous trades and was forced to acknowledge that the bank had shown "bad judgement".

Bruno Iksil, the trader at the heart of the incident, was dubbed the London Whale because the huge positions he had taken on JP Morgan's behalf were big enough to move markets. 

Despite the incident, the bank insists that the joint role is the "most effective leadership model." Last week, it sent a letter to shareholders, urging them to reject the proposal to split the top two roles.
"We believe that a vote against our current directors or a vote to permanently separate the chairman and chief executive officer positions could be disruptive to the company and is not in shareholders' best interests," it wrote.

Record profit The vote comes just after JP Morgan reported record first-quarter profits of $6.5bn (£4.2bn) for the first three months of the year. Retail banking deposits rose 10%, new mortgage orders rose 37% and the company said it had kept the top spot for earnings from investment banking.

Mr Dimon has said the results indicate that no changes are necessary to either the bank's board or its financial structure.

"The board should be applauded," Mr Dimon is reported to have said at a conference last week in Boston. 

Oh how much class the ruling class have. On a conference call with investors and analysts JP Morgan CEO Jamie Dimon displayed the kind of wit and grace one could only expect from the truly refined – not only agreeing to answer a mere peasant’s question but offering illumination into his heavenly projection into the boundless stratosphere of plutocracy.

Conversation reflecting Dimon's arrogance and dominance over JP Morgan's Board: 

At a J.P. Morgan investor event this week Mike Mayo, an analyst at CLSA, who has been a critic of large banks and, at times, Dimon, asked if J.P. Morgan wasn’t at a competitive disadvantage compared to more highly capitalized peers.

Mayo: I think what I hear UBS saying in the presentation is that if I’m an affluent customer I’ll feel a lot better going to UBS if they have 13.5 (percent) capital ratio than another big bank with a 10 percent ratio. Do you agree with that?

Dimon: You would go to UBS and not JPMorgan?

Mayo: I didn’t say that. That’s their argument.

Dimon: That’s why I’m richer than you.
(Laughter, perhaps embarrassed, perhaps of the schoolyard variety, ensues.)

P1 GRE style Exam Question: 
By splitting the roles of Chairman and CEO, what impact will it have on JP Morgan?