April 15, 2013
Shareowners Call for a Vote in Favor of Good Governance at JPMorgan
by Robert Kropp
In a letter to the bank's shareowners, the American Federation of State, County & Municipal
Employees and its co-filers argue for support for their resolution calling for separation of the
positions of Chair and CEO.
The New York Times recently reported that the board of directors
of JPMorgan Chase is "working behind the scenes to avert a major potential embarrassment" with an
"unusually proactive" campaign to convince shareowners to vote against a resolution calling for the
separation of the positions of Chair and CEO.
The resolution, filed by the American
Federation of State, County & Municipal Employees (AFSCME) and a coalition of co-filers, states,
"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." Jamie Dimon currently holds both positions at the financial institution. Last year's
resolution, also filed by AFSCME and voted on by shareowners just days after reports that JPMorgan
had lost billions of dollars in the now-infamous London Whale episode, gained an impressive 40%
A recent report by the Senate's Permanent
Subcommittee on Investigations described the episode as "a massive bet on a complex set of
synthetic credit derivatives."
"Wall Street greed and conflicts of interest drove our
economy into a ditch," AFSCME President Gerald McEntee said. "The stakes are too high to leave
Jamie Dimon unsupervised. Dimon denied that the 'London Whale' was making risky bets, and now that
this has turned out to be a fish story, shareholders need to step in."
The campaign of
support for Dimon by the bank's board certainly suggests a case of "excessive management
influence," as AFSCME argues in its resolution. The separation of the two positions has become an
increasingly common benchmark for good corporate governance. A report published last year by GMI Ratings concluded,
"Five-year shareholder returns are nearly 28 percent higher at companies with a separate CEO and
AFSCME and its co-filers are not letting the board's campaign go unanswered. In a
letter to shareowners, the coalition identifies itself as "a group of US and UK
institutional investors representing assets of over $320 billion."
"It is incumbent on JPM
and its board to restore credibility with regulators in light of multiple violations, litigation,
settlements and investigations that have cost the company $16 billion since 2009," the letter
states. "Serious internal control, corporate culture, board oversight, and risk management issues
exist at JPM as evidenced by recent reports regarding the 'London whale' trades; the firm's own
investigation points to a failure to inform the relevant board committee of important events at the
The letter quotes findings by the Group of Thirty (G30), an organization of
international economic and financial policy experts, that seem to support dividing the roles at an
institution such as JPMorgan. It also includes statements by Wall Street analysts who argue that
JPMorgan would benefit by dividing the positions.
Furthermore, the letter continues,
"JPM's primary regulator, the Office of the Comptroller of the Currency (OCC), downgraded the
firm's Management rating from 2 to 3 meaning 'the capabilities of management or the board of
directors may be insufficient,' and that management and board performance 'need improvement.'"
The London Whale losses "underscore the need for separating CEO and Chair," the letter
JPMorgan Chase's annual general meeting will be held on May 21st.
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