The fat lady (cat?) might be singing for JP Morgan boss Jamie Dimon, as investors have kicked up a fuss over whether or not he should be allowed to continue occupying both the chairman and chief executive roles. This is a rather common problem in the corporate world – most recently, News Corp’s Rupert Murdoch came under fire for wielding too much power in the dual role. In JP Morgan’s case, an influential group of them has piped up demanding an independent chairman so that massive losses like those that were suffered last year, can be prevented in future.
It’s been a turbulent year for Dimon, who this time last year discovered he was being sued personally by investors because of a $2bn trading loss that happened on his watch. The infamous ‘London Whale’ trades then increased to a massive $4.4bn loss after some problems with ‘integrity’ were found (whatever that means). The bank then said it had to revise down the profit figure by around $460m as a result.
According to Dow Jones, about 40% of shareholders are in favour of Dimon having to split the roles and get a new chairman hired. Glass Lewis and Institutional Shareholder Services, two large investor advice companies, put the proposals forward. Glass Lewis said in a report: ‘An independent chairman is better able to oversee the executives of a company and set a pro-shareholder agenda.’
Such shareholder clamour has grown dramatically in recent years. Back in 2007, when investors were asked about separating the roles, just 15% were keen on the idea. By last year it was 40% and the figure as stayed put ever since. It’s worth noting that Dimon’s laissez-faire attitude is a bit of a wind-up for investors, even if he hadn’t been at the helm whilst all that money was lost. When the billions did do a runner last year, he described shareholder anger as a ‘tempest in a teapot’, before being forced to concede that the losses were a result of ‘bad judgement’. Only a banker could think that a $2bn loss was ‘no biggie’.
Understandably the bank is keen to keep the status quo. After all, a change at the top table could involve redundancies or pay cuts, couldn’t it? In a letter to shareholders, the bank said: ‘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.’ But then, the $4.4bn loss was hardly the paragon of shareholder benefit, was it?
It’s worth noting that the company is performing OK aside from these quibbles. In the first three months for this year, it posted record profits of £4.2bn. Deposits in its retail bank grew by 10%, and new mortgage orders jumped a massive 37% compared with the same period the previous year. Dimon argues that this means no changes are needed at executive level. Apparently at a conference last week, he even said ‘the board should be applauded’.
It is something of a conflict of interest if no separate chairman exsits to keep the chief exec in check. Of course, no-one usually cares about both roles being invested in one person if the money is just rolling in. And if record profits translate into a record divi, shareholders may decide it's best to shut up and let the somewhat hubristic Dimon carry on doing his thing…