NEW YORK - A shareholder vote scheduled for today has Wall Street abuzz over the power and future of Jamie Dimon, leader of the country’s biggest bank.
As chairman and chief executive of JPMorgan Chase & Co., Dimon burnished his reputation by steering the bank through the financial crisis virtually unscathed. Dimon has emerged as Wall Street’s most public face, an effective spokesman for an industry under siege by lawmakers, regulators and protesters.
Now Dimon is facing a shareholder push to strip him of the chairman’s job. Today’s vote at JPMorgan’s annual shareholder meeting in Tampa, Fla., isn’t binding, but it has nevertheless become a marquee referendum whose results could rattle nerves across the financial industry.
Among the proposal’s backers are some of the nation’s biggest pension funds, which believe that splitting the roles would add more accountability at the bank.
“The entire market is going to be watching this event unfold,” said Todd Hagerman, a banking analyst at Sterne Agee. “The ramifications are much more broad than perhaps people think.”
The measure was proposed by the American Federation of State, County and Municipal Employees. The campaign has won the vocal support of New York City Comptroller John Liu, whose office oversees the city’s pension funds, and Connecticut Treasurer Denise Nappier, who manages that state’s pension funds.
California’s two largest pension funds, which are also the biggest in the nation, have been early supporters. The California Public Employees’ Retirement System, the country’s largest public pension fund, will vote its shares - $636 million worth as of April 30 - to support separating JPMorgan’s chairman and CEO roles, spokesman Joe DeAnda said in Sacramento, Calif.
The country’s second largest public pension, the California State Teachers’ Retirement System, has taken a similar stand.
“As a principle, we are for the split between CEO and chairman,” said Ricardo Duran, spokesman for the $164 billion California teachers’ fund, “but this is by no means a statement on Mr. Dimon’s performance. He’s done a good job in guiding the bank through the financial collapse we all suffered through.”
The campaign to separate the positions has gained traction because of JPMorgan’s more than $6 billion loss stemming from wrong-way derivatives bets by a trader nicknamed the London Whale. The losses rekindled fears from the financial crisis and renewed calls for tougher regulation.
Along the way, Dimon’s reputation suffered. Critics questioned his stewardship over a bank known for strong risk management.
The vote is expected by some to be close. Last year, just as the London Whale fiasco was unfolding, 40 percent of shareholders supported separating the chairman and CEO jobs.
With Dimon holding both posts, JPMorgan remains in the majority - albeit a shrinking one - of companies in the Standard & Poor’s 500 index that have CEOs also leading boards.
According to the consulting firm Spencer Stuart, 57 percent of S&P 500 companies had CEOs who were also their chairmen last year. That’s down from 2002, when 75 percent of the companies combined the roles.
Combined chairman and CEO positions are a relic of an earlier age, when boards merely advised executives, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
“It’s an idea whose time has come,” Elson said. “Why should the person who is being monitored chair the group monitoring them? It doesn’t make sense.”
JPMorgan has said it believes that a corporate board should be able to split the roles on a case-by-case basis.
The bank’s board has endorsed Dimon in both roles, citing the firm’s strong performance.
The bank has suffered no quarterly losses during Dimon’s tenure, despite the London Whale trading losses and the financial crisis.
Lee Raymond, the presiding director of JPMorgan’s board, and William Weldon, who leads the board’s corporate governance and nominating committee, urged shareholders in a letter this month to vote against splitting Dimon’s role. In the letter, they also endorsed re-electing board members who oversee risk policy and audits.
“Our current structure provides the balance good corporate governance seeks to achieve and it would be a mistake to change it now,” they wrote.
Business, Pages 30 on 05/21/2013