Following the appeals of activist investors, shareholders of office landlord CommonWealth REIT on Tuesday forced the resignation of a trustee on the company’s board, Joseph Morea, by failing to give him a majority of votes.
The rest of the board didn’t need to look far for a replacement. On Wednesday, the board announced it had voted Morea right back into his old seat.
Morea lost a binding shareholder vote on whether he could keep his job - "CommonWealth’s bylaws require directors to resign if they don’t get a majority" - and the board told the shareholders to go fuck themselves.1
The sense I'm getting is that Jamie Dimon is going to win his can-he-still-be-chairman vote, which I find a little disappointing - not because I want him to stop being chairman, but because the truly Dimonesque move here would be to lose the vote and stay chairman anyway. "Think I'm too unconstrained? I'll show you unconstrained!" etc. It would fit well with this:
The firm that is providing tabulations of the JPMorgan vote stopped giving voting snapshots to the proposal’s sponsors last week. The change followed a request from Wall Street’s main lobby group, the firm says. ... Lyell Dampeer, a senior executive at Broadridge, said his firm was required to give real-time results to companies, and for years Broadridge gave that same information to proposal sponsors. But late last week, he received a call from an employee of the Securities Industry and Financial Markets Association, Wall Street’s main lobby group, requesting that Broadridge cut off access to organizations that are sponsoring proposals, he said. Sifma represents JPMorgan and other big banks and brokerage firms.
Broadridge is a little-known firm that distributes materials on behalf of banks and brokers and provides voting tabulations. Mr. Dampeer said the brokerage firms were his clients so he was “contractually obligated” to comply with their request. “It was a short call,” he said. ... In a statement, the lobby group said one of its working groups had concerns about “the authority of a vendor to release confidential information” and that group asked Sifma to pursue the issue. Executives at some banks were concerned, according to people briefed on the matter, that shareholder groups were leaking early vote tabulations.
Isn't the surprising thing here that for years, a vendor contracted by brokers to provide proxy services was providing information to shareholder-proposal proponents? I don't know if you've ever met shareholder-proposal proponents, but they have a tendency to be ne'er-do-wells, like nuns and union pension funds:
“If they aren’t providing results to one side, they shouldn’t give it to the company,” said Brandon Rees, acting director of the A.F.L.-C.I.O. Office of Investment. ... William Patterson, the executive director of the CtW Investment Group, which represents union pension funds and owns six million shares in JPMorgan, said that when deprived of the initial tallies, shareholders were at the whim of management.
THAT IS THE IDEA, buddy. If you want to know what's going on, go hire a proxy solicitor to get vote estimates of uncertain accuracy at significant expense, like the big boys do. Brokers work for the establishment, not the nuns and unions, and now they expect their vendors to do the same.2
The idea that corporate boards and managements work for the shareholders is a controversial one, but it's certainly not one that's reflected in how institutions are structured. Shareholders who want to fire board members can vote against them, but, as CommonWealth shows, that vote can be ignored. Shareholders who really want to fire board members can nominate alternatives, but to do so they need to run a proxy contest with significant expense and legal headache. For some years the SEC has made burbling noises about "proxy access," which would require companies to put shareholder board nominees in the proxy in limited circumstances, but those noises haven't really led anywhere. Shareholders who want to fire Jamie Dimon as chairman but keep him on as CEO can do, in round numbers, nothing, though of course there's a nonbinding vote with unbalanced access to the results to make them feel better about it. The only sure fix is to just buy the company, and even that is pretty easy to prevent with poison pills and whatever CommonWealth has gotten up to.
That state of affairs, understandably, bothers some shareholders, who would prefer to be more important. "At least tell us how our meaningless vote is going!"3 So you get a lot of passionate fighting over symbols. DealBook notes:
For JPMorgan, a yes vote would put pressure on JPMorgan’s board to split the two roles. Management would not be required to do anything with the results, but failure to take some course of action could lead to more unrest at the bank.
Shareholders are pissed off, and this latest denial of access to the tabulations has made them more pissed off, and if the board ignores their nonbinding vote they'll get even more pissed off, and then ... hmm. More nonbinding votes, probably.
2.That said: like, I'm genuinely surprised to learn that Broadridge was providing vote tallies to shareholder proposal sponsors, because I'd have expected brokers to prioritize the interests of corporate issuers (who pay banking fees etc.) over the interests of shareholder proponents (who tend to be small-time governance scolds, not, like, Bill Ackman and Carl Icahn). But they were providing those tallies. And they stopped last week. Because SIFMA told them to. IT'S A LITTLE SUSPICIOUS. SIFMA was cool with it when the proponents were going after SIFMA members' clients, but going after JPMorgan was a step too far.
3.Like: if I'm CtW Investment Group, I'd probably call JPMorgan and demand, and try to get other shareholders to demand, that JPMorgan release the vote tabulations to the proponents, or to shareholders more generally. (Presumably that's what's going on with this DealBook article.) There's nothing stopping JPMorgan from giving out the information, even if Broadridge stopped. Their failure to do that is a governance question, same as their failure to separate chairman and CEO: they're making a decision that is, in the traditional governance-scold sense, "not shareholder friendly." Of course the problem is that no one's going to call JPMorgan and convincingly threaten "if you don't release the tabulations I'm going to vote in favor of the proposal to de-chairmanize Jamie." Because anyone who's actually pissed off about this sort of administrative nonsense was already going to vote in favor. JPMorgan hasn't alienated anyone new by doing this.