(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
By Rob Cox
NEW YORK, May 13 (Reuters Breakingviews) - What Would Jamie Dimon Do? That’s a question investors need to answer before voting to split the chairman and chief executive roles at JPMorgan’s (JPM.N) annual meeting next week. The risk is that shareholders score a corporate governance point but lose Dimon. As a general rule, cutting off your nose to spite your face is a bad investment strategy.
Dimon hasn’t come cheaply and he can be insufferable, like when he lambasted Federal Reserve Chairman Ben Bernanke in public, even if he had a point. Now his board is warning shareholders that voting in favor of the split could be “disruptive” – a barely veiled threat that Dimon would leave. It’s a petulant response to the prospect of a majority of shareholders favoring an increasingly mainstream proposal. And it’s a worrying sign that Dimon and his directors are misaligned with JPMorgan’s owners.
Though a vote wouldn’t be binding, Wall Street’s top bank would be unable to ignore the wishes of the majority. Were he to leave just because of this, it would be akin to a baby throwing its toys out of the crib. Still, it’s hard to see him struggling to find a new gig. Warren Buffett, for one, has long admired his skills and praised his annual letter to shareholders.
Yet what should sway investors most are the returns they have received by owning JPMorgan stock during Dimon’s tenure. He officially took over as CEO at the end of 2005. Since then, JPMorgan shares are up about 22 percent. That’s a bit less than the S&P 500.
Compared to peers, however, JPM has outperformed, in some cases by leaps and bounds. Wells Fargo and Goldman Sachs come closest, rising 19 percent and 16 percent, respectively. It’s no contest when it comes to Bank of America and Citigroup: these bank stocks lost 73 percent and 90 percent of their value in the same period.
As the investment industry is required to disclose, past performance is no guarantee of future returns. But JPMorgan’s feats with Dimon running the show before, during and after the worst financial crisis in decades ought to give pause to shareholders considering the governance question - no matter how bullied they might feel.
- Two ranking JPMorgan Chase directors issued a letter to shareholders on May 10 advising them not to vote in favor of splitting the duties of Chairman and Chief Executive Jamie Dimon and not to vote against some directors.
- The move to split the top two roles was instigated by the American Federation of State, County and Municipal Employees pension plan managers and is to be voted on at JPMorgan Chase’s annual meeting on May 21 in Tampa, Florida. Hermes Fund Managers, The City of New York Comptroller’s Office and the Connecticut Retirement Plans and Trust Funds are co-sponsors of the proposal.
- The proposal states that the “requirement shall apply prospectively so as not to violate any contractual obligation at the time this resolution is adopted. Compliance with this policy is waived if no independent director is available and willing to serve as Chair.”
- The board is unanimous in its view that it is best for Dimon to hold both roles and that the current governance structure “is working effectively,” according to the letter signed by presiding director Lee Raymond and William Weldon, who is chairman of the corporate governance and nominating committee.
- The letter warned that a vote against current directors or to split the CEO and chairman roles “could be disruptive to the company and is not in shareholders’ best interests.”
- JPMorgan Chase proxy: here
- Reuters: Dimon might leave JPMorgan if stripped of chairmanship: WSJ [ID:nL2N0DS0FF]
Junius Pile-on Morgan [ID:nL2N0DO0ZI]
Dimon’s rough spot [ID:nL1E8GMC20]
JPMorgan vs JPMorgan [ID:nL2N0CY0SW]
-- For previous columns by the author, Reuters customers can click on [COX/]
(Editing by Antony Currie and Katrina Hamlin)
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