Weekend Economists Give Two Thumbs Up for Roger April 5-7, 2013

[Demeter]

12. JPMorgan Works to Avert Split of Chief and Chairman Roles

http://dealbook.nytimes.com/2013/04/05/behind-the-scenes-jpmorgan-works-to-sway-shareholders-on-dimon-vote/

JPMorgan Chase is working behind the scenes to avert a major potential embarrassment. In anticipation of a crucial vote at next month’s annual meeting, board members are planning to sit down with some of the bank’s biggest shareholders to make their case that JPMorgan’s influential chief executive, Jamie Dimon, should keep his chairman title, according to several people briefed on the plans. The campaigning, which shareholders indicate is unusually proactive this year, reflects the growing worries within JPMorgan that investors may be dissatisfied with management because of the continuing fallout from a multibillion-dollar trading debacle.

In the past, such investors say they usually received only a phone call from executives in the investor relations department or met with them in person. Along with director meetings, the company this year is also contacting smaller shareholders who previously might not have heard from the big bank at all. Voting to split the roles would send a powerful message. Few big banks have separated the chairman and chief executive positions. And when they do, it generally occurs during a broader management shake-up, as in the case of Bank of America and Citigroup.

“As we approach our annual meeting, we are conducting our normal shareholder outreach program, which offers an opportunity to review company matters with investors and which sometimes includes conversations with directors,” Joe Evangelisti, a JPMorgan spokesman, said. “As we mentioned in our proxy filed last week, a director can be available for discussions with major shareholders.”

A few big shareholders can make a difference in either direction. Last year, roughly 40 percent of the JPMorgan investors supported a proposal to split the roles. Firms that advise some of the nation’s largest shareholders are expected to recommend again that JPMorgan separate the posts of chief executives. Other big investors, including some that voted to keep the roles together last year, remain undecided, according to a number of shareholders who spoke on the condition of anonymity because of policies against talking to the media.

“If you separate the roles, there is another set of eyes and ears,” said Michael S. Levine, a portfolio manager at OppenheimerFunds. “That is not a bad thing, because there is more accountability.” But in comparison to its peers, he said, JPMorgan has done “arguably the best job.” On proxy matters, Oppenheimer, which owns 20 million JPMorgan shares, typically votes in line with the recommendations of the advisory firm, Institutional Shareholder Services.

While a shareholder vote in favor of splitting the positions would not be binding, it would put pressure on the board to split the roles. Such an outcome would also indicate that many shareholders had lost faith in Mr. Dimon, 57, a precipitous fall for an executive who successfully steered the bank through the turmoil of the financial crisis. If the vote goes against the company and the board decides to split the role, some board members and shareholders are concerned that Mr. Dimon might resign rather than accept what would most likely be regarded as an affront. Several shareholders have said privately that succession is a major factor in their decision-making process. In meetings with directors, the shareholders said they expected to ask about succession planning, and the board’s ability to exert influence on bank management. In recent years, companies have been moving to split the role of chairman and chief executive, either proactively or at the urging of shareholders. The move is aimed at creating stronger, independent boards, to keep management in check. Last year, Citigroup’s board, let by a strong-willed chairman, Michael E. O’Neill, voted to oust the chief executive, Vikram S. Pandit. In February, a group of JPMorgan shareholders filed a resolution to divide the chairman and chief executive posts. Since then, those investors have been working to gather support for the proposal...

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