- if a majority of shareholders vote in favor of the nonbinding proposal to strip him of his role as chairman of the board, and
- he remains chairman of the board, then
- he’s probably too powerful!
Let’s find out!
Honestly, who cares who cares who cares who cares if JPMorgan’s board has an independent Chairman or just an independent Presiding Director? The board’s job is to keep an eye on Jamie; if it failed to do that then giving it a fancy new title doesn’t seem likely to improve performance. Is it your impression that Jamie Dimon, who apparently rides roughshod over pissant Presiding Directors,1 will nonetheless be meek and subservient when faced with a Chairman?
Discussion about this proposal is confused because some people think that having an independent chairman is a good thing in all circumstances, or at least say they do; CalPERs’s governance czar, for instance, believes that “There’s a fundamental conflict in combining the roles of chairman and C.E.O.” and so CalPERS will vote to split the roles at JPMorgan just as they did last year. Others think that, y’know, it depends on the people. The people here would presumably remain the same though there’s some rumbling that Dimon would take his toys and go home if he couldn’t be chairman too.
Outside of CalPERS, though, the universal-good-governance theory doesn’t seem to move anyone much. Here, if you’re interested, are JPMorgan’s top 20 shareholders:
So around 45% of JPMorgan’s top shareholders separate the chairman and CEO, which is a bit more than the average for U.S. public companies,2 but I guess if you’re an institutional investor you’re more governance-focused than if you’re just like an oil company or whatever. By shares, though, these guys3 tilt strongly toward the imperial-CEO model. For what it’s worth. (Nothing?)4
Realistically, though, this proposal is not about What Is The Right Form Of Corporate Governance; it’s about How Mad Are We At Jamie Dimon.5 And the answer is A Medium Amount, right? I think you’d have to characterize the Whale thing as being a bit of a failure. Though the failure doesn’t seem to me to have occurred mainly at the board-to-CEO-relationship level: the problems were less the board not keeping an eye on Dimon, and more Dimon not keeping an eye on Ina Drew, Drew not really understanding what her team was up to, and the team not really understanding what was wanted of them.6
But the point is less how to improve those relationships and more on how much to punish Dimon for the failures of his marine menagerie. And that’s a squishy question isn’t it? He’s already been punished a bit, both financially – he lost half his bonus! – and via the sort of public-shaming processes that I imagine work better on people other than bank CEOs.
Isn’t that enough? Is it? One thing that I’ve tried to do here as a public service to our readers7 is to render a bit more predictable and quantifiable how much trouble you’ll get in – measured in years of jail time – for insider trading; that’s proved tolerably easy in part because each axis is readily quantifiable. The much broader question of how much trouble you’ll get in, measured in lost perks and strange rituals of pride, for committing any of the world’s other wondrously diverse forms of ineptitude is of course much harder; even measuring what malfeasance is worse (rogue trader or rogue algorithm?) and what punishment is more severe (Senate hearing or lost chairmanship?) seems daunting. I’ll leave the work to someone else but I think the form is something like this:
And JPMorgan’s vote on May 21 will provide a useful data point. Also though I hope there’s a slot, more severe than “lose half your bonus” but less severe than “lose your chairmanship,” for “have shareholders vote for you to lose your chairmanship but keep it anyway.” And then I hope that the board chooses that option.
1. Whose powers include that he “will approve Board meeting agendas and schedules for each Board meeting, and may add agenda items in his or her discretion,” as opposed I guess to the proposing of agendas that the chairman does, though the distinction seems like a bit of a formality; getting the last look at the agenda seems more agenda-setting than doing the first draft no? I dunno, agendas. How often do you think board meetings are like “We can’t talk about that, Fred, it’s not on the agenda”? Pretty often, right?
Incidentally there are other theories on what a vote on this proposal might mean; here you can read about how BlackRock’s vote is an emblem of the shift of power from the sell side to the buy side, which is somewhat undercut by the fact that BlackRock won’t be voting its own shares.
6. Really Dimon comes across not as too powerful but not powerful enough; there’s that amazing bit on page 46 of the Senate report (previously) where Dimon asks the CIO for an analysis of the correlation between its positions and the portfolio it was meant to hedge, and the CIO ignored him. “We’re busy, Jamie, go away.” What? I guess that argues for separating the chairman and CEO job so that Dimon can focus more on overseeing operations and leave the big-picture stuff to Presiding Director Lee Raymond? Maybe?
7. But not as legal advice.