JP Morgan: Are investors about to clip Jamie Dimon's wings?

The all-powerful chairman and chief executive of JPMorgan, weakened by gigantic trading losses on his watch, faces calls to split his roles

There could be thunderstorms in Tampa, Florida, this afternoon, not just in the literal sense – there’s a 50 per cent chance of rain – but, as far as Wall Street is concerned, when shareholder votes are counted at JP Morgan’s annual meeting at its Highland Oaks Campus on the east side of the city.

Among the proposals for which final voting tallies will be announced is a non-binding one calling for the separation of the jobs of chairman and chief executive.

Thus far they’ve been fused in the silver-haired personage of Jamie Dimon, who burnished his credentials during the financial crisis. That storm took down Lehman and its overleveraged brothers – but JP Morgan emerged bigger and stronger, and Wall Street gave the credit to Mr Dimon. A shareholder rebellion against the 57-year-old would be a massive blow for a man who just last year was being mooted as a possible Treasury Secretary by none other than Warren Buffett.

Mr Buffett remains a fan – as do others, including a fund manager at the JP Morgan shareholder T Rowe Price – with the Sage of Omaha saying recently that he is 100 per cent for Mr Dimon holding on to both his hats at the helm of the bank. But for his critics, including two of country’s most prominent shareholder advisory firms, Institutional Shareholder Services and Glass Lewis, it is about time that the powerful bank boss got a boss of his own.

Exhibit A in the case against Mr Dimon is the massive loss suffered when a series of trades involving complex financial instruments went awry (losses which he initially appeared to dismiss; he has since changed his tune). The so-called “London Whale” debacle, named after the Wall Street moniker for a London-based trader at the centre of the fiasco, dealt the bank a blow worth around $6bn (£4bn), triggered a series of regulatory inquiries and Congressional scrutiny, and led JP Morgan’s directors to slash Mr Dimon’s pay for 2012. His package fell to $11.5m from $23m for 2011.

“Even a Master of the Universe can be swallowed by a London Whale. We need a system of checks and balances to protect shareholders,” said Lee Saunders, the president of the AFSCME union group which, along with the City of New York Comptroller’s Office, Hermes Fund Managers and other investors, put forward the proposal to split Mr Dimon’s roles. The New York Comptroller, Jon Liu, said that as far he was concerned, “without an independent board chair, JPMorgan will be unable to restore investor confidence and ensure future compliance”.

For critics of Mr Dimon’s dual role, the Whale loss shows how important it is to step up oversight at every level of the bank, including the board. And true oversight involves appointing an independent chairman who can hold the chief executive to account, particularly at what is America’s biggest bank holding company – bigger than Citigroup, Bank of America or Wells Fargo.

Although proposals to split Mr Dimon’s roles have been tabled in the past, they received little attention before the Whale loss. Last year, however, votes representing around 40 per cent of shareholders came down on the side of appointing an independent chairman. But that was very soon after the Whale losses first emerged, and when their full extent wasn’t known. Those in favour for a split are hoping that this year they can cross the 50 per cent threshold – and thus send a powerful message to Mr Dimon, and Wall Street in general.

The case for the defence has been articulated by the company itself, as JP Morgan’s directors –  a number of whom are themselves in the firing line, with both Glass Lewis and ISS advising against the re-election of a clutch of directors – have strongly endorsed Mr Dimon’s position, advising shareholders to think twice before backing the motion. They say that not only should the board be allowed to retain the flexibility of deciding the question of whether the jobs should be separate, but also that there is little evidence to suggest that an independent chairman is always a good thing.

As for questions of oversight, in a letter to shareholders earlier this month, the bank’s presiding director, Lee Raymond, and William Weldon, the chairman of the board’s governance committee, said they’d held the bank and Mr Dimon to account, “even though the company achieved record earnings in 2012”.

“During Mr Dimon’s tenure, and largely with the current board in place, our stock has outperformed the industry averages and most other financial services companies, and we have achieved a top-two leadership position in each of our lines of business,” they wrote.

Mr Dimon’s supporters also point out how far the bank’s share price has come, despite the Whale losses. The stock began 2013 at just over $40 apiece. Since then, strong quarterly earnings have helped to drive the price up to over $50.

Already, even before the meeting commences, the proposal has sparked controversy, after the firm that’s been collecting ballots cut off those who put forward the proposal from receiving early voting tallies. The move by Broadridge was triggered following a request from a Wall Street lobby group. JP Morgan’s managers, however, continued to receive updates on how the voting was going.

Mr Dimon himself has not said much in recent days – at least not publicly. But earlier this month he was reported to have to hinted that “I might leave” if the proposal does succeed today. On the other hand, if the proposal fails to attract enough support, it will cement his position as one of the most powerful – if not the most powerful – bank bosses of our time.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement