(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Antony Currie
NEW YORK, Jan 24 (Reuters Breakingviews) - Wall Street has
found a new way to put shareholders second. While many banks are
finally bowing to pressure to restrain compensation, Goldman
Sachs (GS.N) and JPMorgan (JPM.N) are now trying to stifle
investors from voting on legitimate matters at their upcoming
Goldman asked the Securities and Exchange Commission for
permission to omit a proposal that would require it to appoint
an independent chairman. JPMorgan, meanwhile, wants the
regulator to let it remove from its proxy an initiative to have
the board of directors explore "extraordinary transactions that
could enhance stockholder value" - in other words, a breakup.
Both suggestions are rational topics for debate. Calling for
a bank to split the roles of chairman and chief executive is
hardly a new concept. Last year, Goldman and Lloyd Blankfein,
who holds both titles, negotiated their way out of putting the
issue to shareholders by striking an agreement with aggrieved
investors to revise slightly board oversight of executives.
Meanwhile, shareholders seeking ways to improve returns
aren't revolutionary either. Headline-making activists like Bill
Ackman and Dan Loeb do it all the time. Sure, JPMorgan performs
better than many of its rivals, delivering an 11 percent return
on equity last year despite a whopping $6.2 billion trading
loss. Even so, the bank's shares still trade just below book
value, a figure that essentially represents what the disparate
parts should fetch if sold off.
Yet both Goldman and JPMorgan are claiming the ballot
initiatives are, among other things, too "vague." That can
happen with flighty individual investors, but isn't typically
the case from established investors like union adviser CtW and
the AFL-CIO, which put forward the two questions this year.
What's odd is that both banks have made their cases before.
JPMorgan boss Jamie Dimon regularly addresses why he thinks
carving up big institutions isn't the answer, including in his
annual missives to shareholders. Goldman, like others, reviews
its leadership structure each year.
If the crisis made anything clear, it's that banks should be
forced to defend their business models and corporate governance
– regularly. Fighting to suppress such questions only makes it
sound like these supposedly master sellers are afraid they can't
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- JPMorgan has asked the Securities and Exchange Commission
to allow it to omit from its proxy materials a shareholder
proposal to investigate breaking up the bank, Reuters reported
on Jan. 24. The AFL-CIO's Reserve Fund, which manages pensions
for U.S. labor unions, wants the bank's board to explore
"extraordinary transactions that could enhance stockholder
value," hire independent advisers to help and submit a report to
shareholders 120 days after JPMorgan's annual shareholder
meeting in the spring.
- JPMorgan, in a letter to the SEC, argued that the proposal
covers the bank's ordinary business, which would allow the bank
to exclude it, according to the watchdog's rules, Reuters
reported. The bank also called the proposal "vague and
indefinite" and said it contains "false and misleading
- Goldman Sachs has asked the regulator to block a
shareholder proposal to require an independent chairman, Reuters
reported on Jan. 23. Chief Executive Lloyd Blankfein is also
Goldman's chairman. The bank called the proposal "inherently
vague and indefinite," according to Reuters.
JPMorgan looks to block shareholder proposal on bank
Goldman seeks to block vote on independent chairman
- For previous columns by the author, Reuters customers can
click on [CURRIE/]
(Editing by Jeffrey Goldfarb and Martin Langfield)
Keywords: BREAKINGVIEWS BANKS/SHAREHOLDERS
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