• 02 Sep 2008 at 1:20 PM
  • CEOs

How Jamie Dimon Got JP Morgan Chase Out Of Subprime

Everyone now knows that Jamie Dimon is the king of Wall Street. Girls at hedge funds have crushes on him. He’s been on the cover of New York magazine, towering over the city. They’re calling him “King James.”
For the most part, the ascendency of Dimon has been due to the fact that JP Morgan successfully avoided falling into the chasm of subprime mortgages into which so many of his fellow chief executives drove their banks and brokerages. Fortune’s has a long profile that describes Dimon’s management style, and precisely how he pulled JP Morgan back from the subprime brink.
Dimon favors boisterous meetings that delve into detailed analysis of his bank’s business. Fortune’s Shawn Tully reports that people describe these variously as “Italian family dinners” and “the Roman forum.” There not a lot of kow-towing to the big man, apparently. Ideas are debated vigorously and sometimes Dimon backs down. He wanted to get JP Morgan to go “open source” with the financial products it sold, selling clients on products developed by competitors. But one of his lieutenants eventually talked him out of it, convincing Dimon that JP Morgan’s homegrown products were performing as well as anyone else’s.
The subprime call–literally, a call to the head of structured products who was on vacation–came from Dimon after a meeting discussing the performance of the retail bank. In October 2006, the mortgage servicing business was reporting that late payments on subprime mortgages were rising at an alarming rate. Dimon and his team concluded that quality control had slipped at the originator level and decided to slash its holdings of subprime debt. It was this leap from the granular details to the bigger picture that enabled JP Morgan to make the right call on subprime while so many others were still rushing headlong into what was one of the hottest businesses on Wall Street.
We can’t help but wonder if there are, in the Dimon and subprime story, the seeds of an even greater story defending the efficacy of the mega-bank. After all, it was the fact from a retail business that tipped Dimon off to a strategic change at the investment level. A smaller brokerage or investment bank would not have had access to this data. Maybe its not the model of mega-banks that’s broken, after all.
Jamie Dimon’s swat team [Fortune]

Gary Wilson, the chairman of Northwest Airlines, has penned a plea for the end of the “Imperial CEO,” the chief executive who also serves as the chairman of the board. Because of Wilson’s respected position as a board member of Yahoo and, until recently, Walt Disney, his article has the potential to be very influential.
Wilson argues that a conflict of interest arises when a chairman also serves as chief executive. Since a key role of the chairman is overseeing a board charged with hiring, overseeing and, if necessary, firing a CEO, the combining of the posts undermines a board’s independence from management, Wilson writes.
After the jump, we get all cynical about this proposal.

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  • 27 Jun 2008 at 1:50 PM
  • CEOs

Merrill Lynch Boss Man Top Paid CEO On Wall Street

Last year, Merrill Lynch’s John Thain was the highest paid chief executive at a public company in the North East corridor stretching from Washington DC to Boston, according to the Associated Press.
Thain took over as CEO and chairman of Merrill in December, after record-breaking losses forced Stan O’Neal out of the corner office. According to the AP study, Thain took home $83 million in salary, bonus, benefits and perks last year. Although Thain only joined Merrill Lynch in December and was paid a base salary of $57,000, his compensation was boosted by a $15 million cash signing bonus, plus restricted stock and stock options, that Merrill paid to him when he agreed to leave the New York Stock Exchange. Much of that compensation, however, is tied up in incentive pay that Thain won’t be able to access for several years. And those options won’t do him much good if Merrill’s stock price doesn’t recover.
Lloyd Blankfein, the chief of Goldman Sachs, and Morgan Stanley’s John Mack also made the list of top earner. The rest of the list is after the jump.

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  • 10 Jun 2008 at 1:05 PM
  • CEOs

Is The GOP The Anti-CEO Party?

Is John McCain trying to make headway with the activist investor community? Activists have been among have been among the vocal critics of lavish executive pay packages at public companies, and most of the biggest names among the activists favor Democrats in this election. (Carl Icahn, who said Barack Obama would be a terrible president, is an exception.)
Today John McCain is speaking to a small business conference on economic issues. He is expected to hit the usual Republican notes, calling for lower corporate taxes and opposing hiking capital gains taxes. But he’s also going to take a shot at “excessive” corporate pay and severance packages.
“Americans are right to be offended when the extravagant salaries and severance deals of CEOs … bear no relation to the success of the company or the wishes of shareholders,” his prepared remarks released in advance of the speech say.
It’s not just talk. He’s going so far as to endorse the hardest versions of the “say on pay” proposals that would require shareholder approval of a CEO’s pay.
“If I am elected president, I intend to see that wrongdoing of this kind is called to account by federal prosecutors. And under my reforms, all aspects of a CEO’s pay, including any severance arrangements, must be approved by shareholders,” he will say.
McCain wants low corporate taxes, regulated CEO pay [Reuters]

  • 03 Jun 2008 at 1:10 PM
  • CEOs

Wall Street Bucks National Trend Of Rising CFOs

Nearly one-fifth of US chief executive officers in 2005 were formerly chief financial officers, a doubling of the percentage from the prior decade. The Economist explains the changing make-up of CEOS–more women, shorter tenures–but it leads with the rise of the financial professional, which seems to be caused largely by regulatory changes such as Sarbanes-Oxley and increased financial disclosure requirements.
Perhaps surprisingly, Wall Street is bucking this trend. Although CFOs such as Gary Crittenden, Zoe Cruz and Erin Callan often get talked about as successors to the top spot at their respective banks, they more often get passed over. Of Wall Street’s current chiefs, only John Thain, now the head of Merrill Lynch, served as chief financial officer (when he was at Goldman Sachs). This could be because years of Wall Street experience involve enough hands-on finance regardless of what position a senior executive takes, making the CFO experience superfluous. Or maybe Wall Street is still trapped in a pattern other US companies broke out of a year ago.
How to get to the top [The Economist]

We can’t get enough of the downfall of Ken Thompson, the as-of-this-morning former chief executive of Wachovia. Thompson hoped to preside over the growth of the bank into a universal banking powerhouse. Instead, he nearly ran it into the ground.
This morning Lanty Smith, the chairman of the company, also took over as interim CEO. One of his first duties was to send an email to Wachovia’s employees. Read the email after the jump.

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  • 02 Jun 2008 at 2:52 PM
  • CEOs

What Will Become Of Wachovia’s Ken Thompson?

This morning Wachovia shocked everyone by unceremoniously firing Ken Thompson, the ambitious corporate leader who wanted to make Wachovia into a domestic version of Citigroup. He might wonder if he succeeded too well, now that he has met the same fate of Citigroup’s one-time head, Chuck Prince.
So what will Thompson do now that he’s been tossed out for over-promising and under-delivering? We’d like to suggest that Ken take his cues from some of the other Wall Street kings who recently lost their thrones.

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  • 29 May 2008 at 8:55 AM
  • CEOs

Wall Street Chiefs Divided On Election

Wall Street’s chiefs are divided on the presidential election, according to DealScape.
The Federal Election Commission’s records show that Hillary Clinton received campaign donations from JP Morgan Chase chief Jamie Dimon, Morgan Stanley chief John Mack and Goldman Sachs chief Lloyd Blankfein. John McCain received support from Merrill Lynch’s John Thain. Dick Fuld of Lehman Brother’s is hedging his bets, supporting McCain and Clinton, as well as Barack Obama.
Citigroup’s Vikram Pandit didn’t contribute to any of the campaigns.
What does this tell us about the political acumen of Wall Street’s top men? Find out after the jump.

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