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]
CEOs
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The Revolt Against “Imperial CEOs”
Will The New Boss Be The Same As The Old Boss?
By Bess Levin
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.
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.
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]
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Lanty Smith Writes To Wachovia’s Employees: All Your Functions Report To Me
By John CarneyWe 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.
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.
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.
First off, in case any of you were unaware, our stance regarding “say on pay” is that no CEO should ever allow him or herself to be roped into such a demeaning situation. You might as well work on commission. We don’t even think anyone should entertain a discussion on the matter. The board either believes in you 100 percent or not at all. Unfortunately, sometimes the snakes known as your shareholders trick you into walking into the room under the guise of bagels and lox, and them bam! they surround you, and start demanding your compensation be tied to performance. This happened to Goldman Sachs CEO Lloyd Blankfein yesterday. He handled it all wrong.
Blankfein told shareholders pushing for a “lid on excessive pay” at GS’s annual meeting that he was very concerned about the company adopting the proposal, as it would “create a feedback loop. It would create a cloud, a constraint, a limitation on decisions that have been at the heart of what a board has done.” The whole thing was said to be very impassioned and that at several moments, one could detect a slight cracking in Blankfein’s voice. Huge mistake. Obviously Blankfein, who was paid $70 million last year would like to keep himself in the lifestyle he’s become accustomed to. But as the CEO on Wall Street who’s fucked up the least in recent memory, he should be playing it cool. He should’ve walked in there and said “I am Lloyd fucking Blankfein. There will be no say on my pay. In fact, bitches, just because you have offended me, I want my 2008 bonus package to be determined today. $100 million. That’s right, a unit, baby.” Then dropped the mic and walked off. And you know what? They would’ve said okay. You want say on pay, I have two words for you, people: Jimmy Cayne. I hear he’s looking for work, and will agree to just about anything.
Goldman Chief Says ‘Say on Pay’ Would Be Damaging [DealBook]
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Caption Contest Monday: “Don’t Be Fooled By The Crackers Up Here, This Is All About Keeping The Black/Orange Man Down”
By Bess Levin
Best entry wins one of the free SAC sandwiches.
A Brighter Spotlight, Yet the Pay Rises [NYT]
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How To Think About Vernon Jordan Asking For Free Access To The Olsen Twins
By Bess LevinThere’s an outrageous article in Crain’s today about executive perks. Apparently senior management at some banks get to fly on the corporate jet. Others have their country club tabs picked up by the company. A few—VERNON JORDAN, LAZARD LTD, SHAME HIM IN THE STREETS—even get their apartments paid for, at up to $24,000 a month. Crazy, isn’t it? No, it’s not crazy. What’s crazy is that everyone—author, shareholder activists, Tim Robbins and Susan Sarandon– still fails to get it. If I agree to run one of these things, I want to plied with gifts at every turn. This job is really hard and I’m very sensitive and the suggestion that I’m not worth tons of freebies plays on the deep insecurity I attempt to mask with a self-righteous attitude and shameless bravado. That makes me unhappy and you know what happens when I’m not happy—I destroy billions in shareholder capital (I might do that anyway, but without the gifts the threat is more imminent).
Plus, the notion that shouldering my basic costs of living is a “gift” is absolutely absurd. That’s a basic requirement of your job in keeping me comfortable enough to work. I never, EVER, would’ve taken this gig if I thought I would be asked to pay for wherever I happen to rest my head. It’s extremely demeaning. Know what I would consider a “gift” and something I’d even think about standing before shareholders and fighting for? Free access to the Olsen twins, which I hear Goldman has no problem subsidizing for LB, though, as this video shows, he made be getting duped.
Including $45.76 million in vested stock, Lloyd Blankfein “earned” $100 million in 2007, which the Goldman CEO tells DealBreaker he’ll be putting toward the Bowflex machine he needs in order to train for his upcoming fight with Lou Dobbs. Other senior executives at firm also got paid a decent amount. Meanwhile, fellow 941 Park Avenue resident, Stan O’Neal, is still, hideously, being asked to explain to Congress why he should get to keep his $163 million paycheck. Thank god Blankfein is moving out of that dump ASAP, otherwise, those elevator rides could get awkward again, and I don’t think anyone wants to relive the uncomfortableness that ensued after 2005′s non-denominational Key Party, except for Mark Haines, who used his press pass to gain entry, and made out like a bandit.
Goldman Sachs CEO gets $100 mln in pay, stock [Reuters]
Goldman Sachs Proxy Statement [SEC]
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