By Nadia Damouni and David Henry
May 5 JPMorgan Chase & Co's Jamie Dimon
may be losing ground in his fight to keep the title of chairman,
as some major investors push for more oversight of the chief
executive after the "London whale" trading losses.
At the largest U.S. bank's annual meeting in two weeks,
shareholders will be able to vote on a non-binding proposal to
separate the chairman and CEO roles. Two of the bank's top 10
shareholders told Reuters they are considering voting in favor
of the proposal, a reversal of their position last year, because
of the disastrous bets on credit derivatives that cost the bank
more than $6 billion last year.
The proposal is only a non-binding recommendation and it is
not clear what the board will do if it passes. ISS Proxy
Advisory Services, the leading proxy advisory firm, on Friday
recommended investors support the proposal and also said they
should vote against the re-election of three directors who they
said had failed in their oversight of the bank.
JPMorgan declined to comment for this story. The bank's
board has said it opposes the shareholder proposal and that the
company's handling of the trading loss shows its current
The bank's directors are leading an aggressive campaign to
persuade shareholders to vote against it, one of the investors
said. It is not clear how much investor support there is for the
The two JPMorgan investors, who were not authorized to speak
on the record, said that however the vote shakes out, they plan
to continue to push the bank's directors behind the scenes to
take at least some power from Dimon.
One investor said they will likely encourage the bank to
give more authority to its lead independent director, former
ExxonMobil Chief Executive Lee Raymond. At JPMorgan, the lead
director is currently known as the "presiding director," a role
that includes approving board agendas and schedules and leading
meetings of independent directors.
The second investor said they would not be satisfied with
anything less than a separation of the two roles because being a
chairman is a full-time job.
Complicating the vote is Dimon's reputation as the best
manager on Wall Street. The 57-year-old executive is still
viewed by many shareholders as a shrewd leader and they want him
to continue to run the bank, albeit with some oversight. Some
investors fear that Dimon will leave if he loses the vote.
Dimon's difficulties began last year, when news emerged of
the London Whale trades. The bank has since had a series of
run-ins with regulators over issues ranging from money
laundering controls to allegations of power market manipulation.
JPMorgan's growing array of problems has overshadowed last
year's record profits in the minds of many investors.
As investors ponder whether Dimon can provide enough
oversight to a bank with nearly $2.4 trillion of assets, their
doubts could give momentum to an idea held by a small but
growing minority of U.S. lawmakers and regulators that the
biggest banks are too big to manage.
The vote also comes amid a broader debate in corporate
America over whether the head of a company should also lead the
directors that oversee the company. In the United Kingdom, the
two roles are typically separate.
"Independence is the cornerstone of accountability," said
Joe Dear, chief investment officer at the California Public
Employees' Retirement System, which owns JPMorgan shares. "As a
principle, CalPERS believes boards should be chaired by an
independent director, and we support the separation of the CEO
and chair roles."
Dear declined to comment specifically on JPMorgan.
The shareholder proposal was sponsored by the American
Federation of State, County & Municipal Employees, New York City
and state of Connecticut employee retirement plans and the
United Kingdom's Hermes Fund Managers.
At last year's meeting, the AFSCME was the sole sponsor of
the proposal, and it won 40 percent of investors' votes,
relatively high for a measure that the board had opposed.
Last year's vote happened only five days after the company
first acknowledged its bad bets on credit derivatives. Since
then, shareholders have learned much more about the company's
failed risk controls and the trouble it has had with regulators.
ISS, which is also known as Institutional Shareholder
Services, had supported last year's proposal, but this year
added a two-page analysis that concluded the London Whale loss
had displayed the board's lack of independence from Dimon.
A second proxy advisory firm, Glass, Lewis & Co, endorsed
last year's proposal but has yet to announce its recommendation
for this year's vote.
Dimon has had other problems recently. U.S. government
investigators have found that a JPMorgan unit manipulated
trading in the California and Michigan electricity markets, the
New York Times reported on Friday.
The Office of the Comptroller of the Currency, one of the
bank's main regulators, is also considering censuring the bank
for failing to conduct adequate due diligence and report
suspicions about Ponzi-schemer Bernard Madoff, Reuters first
reported last month.
In his annual letter to shareholders, Dimon said executives
throughout the bank are putting other projects on hold or
scaling them back, so they can focus on the bank's regulatory
obligations. Dozens of these projects are on the back burner
now, a source familiar with the situation said.