(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
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.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- 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 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
- 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)
Keywords: BREAKINGVIEWS JPMORGAN DIMON
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