Shareholder vote a win for Dimon

JPMorgan investors reject plan for chairman-CEO split

Receptionists greet stockholders as they arrive for the JPMorgan annual meeting Tuesday, May 21, 2013, in Tampa, Fla. Jamie Dimon, the chairman and CEO of JPMorgan Chase, said Tuesday that last year's $6 billion trading loss had been expensive and "extremely embarrassing" but he also asked shareholders not to fixate on the issue. (AP Photo/Chris O'Meara)
Receptionists greet stockholders as they arrive for the JPMorgan annual meeting Tuesday, May 21, 2013, in Tampa, Fla. Jamie Dimon, the chairman and CEO of JPMorgan Chase, said Tuesday that last year's $6 billion trading loss had been expensive and "extremely embarrassing" but he also asked shareholders not to fixate on the issue. (AP Photo/Chris O'Meara)

JPMorgan Chase Chief Executive Officer Jamie Dimon won shareholder support Tuesday to remain chairman, surviving a campaign to split the roles after a record trading loss at the biggest U.S. bank.

The proposal to divide Dimon’s duties won 32.2 percent of the votes, downfrom 40 percent last year, the bank said Tuesday at its annual meeting in Tampa, Fla. Dimon, 57, had told some investors he might quit if the nonbinding measure passed, according to a person with knowledge of the conversation, who requested anonymity because the discussion was private.

The vote to back Dimon, who guided JPMorgan to three straight years of record profit, is a defeat for investors who say companies need the balance of a separate chairman and CEO. Although Dimon can keep both jobs, the vote might spur JPMorgan’s directors to tighten how they oversee the biggest U.S. lender after last year’s $6.2 billion “London Whale” trading loss and identify a future successor.

“JPMorgan changes after this annual meeting season, even if all the votes go in the direction” JPMorgan wanted, Michael Mayo, an analyst at CLSA Ltd., said during a Bloomberg Television interview. The bank could give more authority to lead director Lee R. Raymond, the former chairman and CEO of Exxon Mobil, or split Dimon’s roles after he leaves, a person with knowledge of the matter said.

The board also might alter its makeup even among those who won re-election, with Raymond telling investors today that the risk committee might get new faces.

“In terms of the composition of the risk committee, you should stay tuned,” he said during the meeting.

If directors wind up with less than 60 percent of the vote, “I don’t think they will keep them in the face of such stark shareholder disapproval,” said Bill Patterson, the former director at the CtW Investment Group advisory firm and now a consultant.

The AFSCME (American Federation of State, County and Municipal Employees) Pension Plan, which was among investors sponsoring the vote to separate Dimon’s jobs, will keep pressing the bank for a more independent chairman, said Lisa Lindsley, director of capital strategies at the Washington-based union group.

The proposal drew more attention after last year’s trading loss at the London-based chief investment office, which the board blamed partly on Dimon and spurred directors to cut his pay by 50 percent.

“We do not see this measure as a panacea, but rather a badly needed first step to strengthen the board,” Lindsley told Dimon at Tuesday’s meeting. Although the vote wasn’t a referendum on his leadership, Lindsley criticized the firm for its lack of succession planning. “No one person should be indispensable,” she said. AFSCME said it represents about 1.6 million members.

The threat of Dimon’s departure caused some analysts to predict the stock could fall 10 percent or more in the absence of a clearly identified replacement.

“If an operation the size of JPMorgan depends on one person, that is itself a sign of board failure,” said Erik Gordon, a business and law professor at the University of Michigan in Ann Arbor. The company’s lack of rebuttal shows “there is no strong independent lead director, there is no strong special committee or independent group on the board that’s looking out for the interests of shareholders,” he said.

JPMorgan’s first priority is developing a “competent and capable successor,” Raymond said. “I hope that time is much into the future, and I have no illusions that we will be able to clone Jamie,” he said. Dimon attributed turnover in his top ranks in part to the board pressing him to put people in tough jobs to see whether they could be future CEOs.

The last time shareholders of a large U.S. bank opted for divided oversight was in April 2009, when Bank of America investors voted to strip the chairman’s title from CEO Kenneth Lewis in the aftermath of the Merrill Lynch takeover and federal bailout. Lewis had no successor in place when he announced later that year that he would step down as CEO.

Lloyd C. Blankfein, chairman and CEO of Goldman Sachs, avoided a similar vote on his firm’s proxy statement this year by agreeing with CtW Investment Group to expand the duties of lead independent director James Schiro.

Calls for Dimon to cede the chairmanship have mounted since May 2012, when JPMorgan disclosed lapses in risk controls at its chief investment office that led to last year’s losses on derivatives. Bruno Iksil, the trader who made the bets, was nicknamed the London Whale because his clout was so big.

Business, Pages 25 on 05/22/2013

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