JPMorgan Chase shareholders reject splitting Jamie Dimon’s duties

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JPMorgan Chase CEO Jamie Dimon
JPMorgan Chase Chairman and CEO Jamie Dimon not too long ago mentioned “there is not any proof” that splitting the 2 roles is advantageous. On Tuesday, 42.5% of the financial institution’s shareholders expressed help for the thought of separating the chairman and CEO roles.

Nathan Laine/Bloomberg

Is the glass half-empty or half-full for Jamie Dimon, who made waves this week by broaching the subject of his eventual departure from JPMorgan Chase ?

On one hand, JPMorgan shareholders on Tuesday rejected a shareholder proposal — opposed by Dimon — to separate the chairman and CEO roles that he has lengthy held. Alternatively, the proposal received 42.5% of the vote, which represented considerably extra help than comparable measures at Goldman Sachs and Financial institution of America this 12 months.

At some point earlier than, JPMorgan’s inventory worth slid some 4.5% following Dimon’s announcement that succession plans on the nation’s largest financial institution are “properly on the best way,” and that his timeline for holding onto the CEO position “shouldn’t be 5 years anymore.” Ebrahim Poonawala, an analyst at Financial institution of America Securities, mentioned in a analysis notice that it might take time for the market to get snug with the financial institution’s subsequent CEO following the “unparalleled shareholder returns” throughout Dimon’s time period.

The thought of separating the chairman and CEO roles, and appointing an impartial chair, has been proposed at JPMorgan in every of the final 4 years. It has garnered between 37% and 47.5% of the vote over that span.

In 2023 and once more this 12 months, the proxy advisory corporations Glass Lewis and Institutional Shareholder Providers each really useful voting in favor of the impartial board chair proposal, pitched by veteran company gadfly Kenneth Steiner. An ISS report mentioned that for the reason that board oversees administration and accountability, one particular person in each positions may trigger conflicts of curiosity.

“As constantly highlighted in previous comparable proposals, the scale and complexity of JPMorgan means that it’s tough for anybody particular person to run each the corporate and the board,” the ISS report mentioned.

However Mike Mayo, an analyst at Wells Fargo Securities, referred to as the excessive degree of help on Tuesday for the proposal “bewildering and baffling.”

Mayo mentioned in an interview that he is in favor of sturdy company governance and shareholder rights, however he thinks the proposal to dilute Dimon’s position is “the improper playbook for the improper particular person on the improper time.”

“I may give you a lot instances of different instances and different corporations the place this might make unbelievable sense,” Mayo mentioned. “I am baffled at why now, after they’re performing among the many better of any financial institution I’ve seen…. Take a look at the previous 12 months. They crushed it.”

Dimon mentioned in his Monday feedback that his departure is, finally, as much as the board. Mayo mentioned that he thinks Dimon has one other two and a half years within the head seat, and he’ll then seemingly hand over the CEO title and develop into govt chairman of the board.

JPMorgan adopted a coverage in 2022 that it’ll separate the chief govt and chair positions upon the following CEO transition, “topic to the board’s dedication of the management construction that finest serves the agency and its shareholders on the time.” Nevertheless, JPMorgan will not require that the chair be impartial.

ISS mentioned in its report that Dimon’s potential retention of the chairmanship may scale back the effectiveness of the position. Glass Lewis referred to as the financial institution’s coverage to sometime cut up the 2 roles “comparatively weak,” including in a report that an impartial chair “fosters the creation of a considerate and dynamic board that isn’t dominated by the views of senior administration.”

In lieu of an impartial board chair, the corporate has retained an impartial lead director, a place that Dimon mentioned in his annual letter to shareholders usually holds “a lot of the authorities beforehand assigned to the chairman.”

Steiner, in his proposal to separate the chairman and CEO jobs, mentioned that JPMorgan’s lead director, Stephen Burke, is not successfully impartial as a result of his 20-year tenure within the place. JPMorgan countered in its proxy assertion that Burke’s tenure means he is constructed institutional data.

JPMorgan additionally mentioned that there isn’t any foundation for Steiner’s assertion that having an impartial board chair is finest apply. The financial institution mentioned that the proposed change would prohibit “the board’s skill to make use of its expertise, judgment, boardroom perception and ongoing shareholder suggestions” to make well-informed selections on company management.

JPMorgan declined to remark past its response within the proxy assertion.

At different banks, resolutions to nominate impartial chairs acquired much less help this 12 months than they did at JPMorgan. About one-third of shareholders at each Financial institution of America and Goldman Sachs voted in favor of stripping the chair title from chief executives Brian Moynihan and David Solomon on the firms’ annual conferences final month.

Dimon mentioned in his annual letter to shareholders final month that “there is not any proof” that splitting the roles is advantageous.

“The governance of main companies is evolving away from steering by governance ideas that target an organization’s relationship to long-term financial worth towards a bureaucratic compliance train,” he mentioned within the letter. “Good company governance is crucial, and a bit widespread sense would go a great distance.”

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Additionally in the course of the firm’s annual assembly, 40% of voters supported a proposal to require a non-binding shareholder vote on some govt officers’ so-called “golden parachute funds,” which refers to compensation that’s paid out or vests when a senior chief is terminated.

That pitch, submitted by shareholder activist John Chevedden, urged the corporate to hunt investor help for senior managers’ new or renewed contracts when such funds’ worth exceeds 2.99 instances the sum of the manager’s base wage plus goal short-term bonus.

JPMorgan mentioned in its response that the agency does not present golden parachute agreements, and that every one staff take part on the similar degree of severance, which is capped at 52 weeks of wage or $400,000 for U.S.-based staff.

Chevedden mentioned within the proxy that his proposal is related “even when there are present golden parachute limits.”

“A restrict on golden parachutes is sort of a pace restrict,” Chevedden mentioned within the proposal. “A pace restrict by itself doesn’t assure that the pace restrict won’t ever be exceeded. Like this proposal, the foundations related to a pace restrict present penalties if the restrict is exceeded.”

Shareholders additionally voted down a proposal to request that JPMorgan define the effectiveness of its insurance policies and practices respecting Indigenous Peoples’ rights. Some 30% of voters supported the proposal, which was near the extent of help that comparable proposals at Wells Fargo and Citigroup acquired this 12 months.

All the proposals backed by the financial institution — which concerned its board appointments, govt compensation, long-term incentive plans and ratification of its accounting agency — handed.

Allissa Kline contributed to this story.

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