February 21, 2013
Shareowners Renew Call for Separation of CEO and Chair at JP Morgan Chase
by Robert Kropp
The American Federation of State, County & Municipal Employees and a coalition of institutional
co-filers will return to the banking giant's annual general meeting this year with a resolution
that gained 40% of shareowner support in 2012.
Last year, JP Morgan Chase held its annual general meeting just days after disclosing that its
London-based investment office had lost billions of dollars in risky proprietary trading.
Recognizing that the ultimate responsibility for risk management belonged to James Dimon, the
banking giant's CEO, an impressive 40% of shareowners voted in favor of a resolution filed by the
American Federation of State, County & Municipal
Employees (AFSCME), calling for the appointment of an independent director as Chair of the
As Andrew Grove, the former Chairman
of Intel, once observed, "The separation of the two jobs goes to the heart of the conception of a
corporation. Is a company a sandbox for the CEO, or is the CEO an employee? If he’s an employee, he
needs a boss, and that boss is the board."
Last year's vote total in favor of the
resolution might have been even higher if a report from GMI Ratings, published about
a month later, had been available. An analysis of 180 North American corporations with market
capitalizations of more than $20 billion, the report concluded, "Five-year shareholder returns are
nearly 28 percent higher at companies with a separate CEO and chair."
Dimon continues to
hold both positions at JP Morgan, and AFSCME, along with a coalition of co-filers, will return to
this year's AGM to put the resolution to a vote again. The filing of the resolution "reflects
mounting investor concerns with the board's oversight in the wake of the London Whale losses,
recent regulatory sanctions, and its failure to fully demonstrate that it can manage the size and
complexity of its balance sheet," the coalition stated.
"We believe that a CEO who also
serves as chair operates under a conflict of interest that can result in excessive management
influence on the board and weaken the board's oversight of management," the resolution states. "We
believe that independent board leadership would be particularly constructive at JPM."
New York City Pension Funds is a member of the coalition filing the resolution this year.
"Unchecked risk-taking and oversight failures have cost JPMorgan more than $6 billion in losses and
seriously damaged its reputation," said NYC Comptroller John Liu. "Without an independent board
chair, JPMorgan will be unable to restore investor confidence and ensure future compliance."
And Connecticut Treasurer Denise Nappier said, "At the heart of the company's failures in
managing risk and developing a strong corporate culture of ethics, accountability and transparency
is the question about independence."
"JP Morgan Chase needs an independent chair to
address these significant governance issues as a forerunner to protecting and enhancing long-term
shareholder value, and doing so in a responsible manner," Nappier continued.
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