Every year JP Morgan shareholders get together for their annual kumbaya meeting on the state of the bank, and every year a few agitators propose that CEO Jamie Dimon give up his position as Chairman of the Board.
Or at least, that he pick one — Chairman or CEO. Can’t have both.
Every year Dimon’s detractors are poo-poo’d. No one expects anything else, really.
However, this year it’s different. The detractors are growing in number influence, and at the same time, reports of what’s going on inside the House of Dimon sound increasingly like a JP Morgan out of his control.
There are your all-too-common lawsuits lingering from the financial crisis still leaving a stink all over the Street — but that’s not the problem here.
The government has made new allegations of impropriety within several parts of JP Morgan and last week they were leaked to the NY Times.
The accusations involve manipulation in the energy market, credit card debt collection, and even Bernie Madoff’s account with JPM. They came with a warning from regulators that Dimon is “losing credibility” in Washington.
More importantly, like the $6 billion trading loss JP Morgan suffered last spring, the allegations suggest that the bank is too big to manage, even for America’s best banker.
Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centres,” and that one of its most senior executives gave “false and misleading statements” under oath….
The possible action comes amid showdowns with other agencies. One of the bank’s chief regulators, the Office of the Comptroller of the Currency, is weighing new enforcement actions against JPMorgan over the way the bank collected credit card debt and its possible failure to alert authorities to suspicions about Bernard L. Madoff, according to people who were not authorised to discuss the cases publicly…
Mr. Dimon apologized to shareholders in a letter following the meeting, but it seems that words were not enough. They are being told by proxy advisors that should vote to separate his role as Chairman and CEO.
Proxy advisors, Institutional Shareholder Services and Glass Lewis, have told JP Morgan shareholders that Dimon needs to take one or the other, according to the WSJ. They also advised that three of the board’s directors be ousted completely.
Proxy advisors are companies that tell big shareholders like mutual funds how they should vote in corporate elections. Shareholders don’t have to follow their recommendations but they are historically very influential.
Here’s a part of Glass Lewis’ statement (via WSJ):
“Shareholders should be concerned that Company management was allowed to build a massive exposure to credit derivatives, switch [Value at Risk] models following a breach of risk limits, and value its positions so to minimize losses, and that it was able to do each of these things without triggering a board-level review or a mandatory containment of risk.”
The JPM shareholder meeting is scheduled for Tuesday, May 21st, so we’ll know how this all shakes out then.