JPMorgan Chase shareholders are voting not to clip Jamie Dimon's wings, deciding against cutting his job responsibilities in half, the New York Times is reporting.
Dimon has served as the JPM CEO and chairman of the board since 2006, but some shareholders had proposed to strip Dimon of his chairmanship as a result of the large trading losses the company suffered last year at the hands of one rogue trader known as the "London Whale." Though the votes are not all in, shareholders appear ready to keep Dimon in place both as chairman and CEO.
Though he steered the bank through the financial crisis, Dimon has several stains on his record as CEO and chairman: the federal government recently found that the company manipulated electricity markets in two states and federal investigators have also questioned whether the company sat on suspicions about infamous Ponzi schemer Bernie Madoff. In addition, he doesn't have shareholders' full confidence: they also voted last year (unsuccessfully) to separate his roles.
Still, there's plenty of reason why shareholders voted to keep the status quo. Here is what worked in Dimon's favor this time around:
He isn't the London Whale.
The London Whale incident was the largest trading loss in JPMorgan's history, and it happened on Dimon's watch. He has been apologetic and even contrite about the fiasco, having told Congress last year that he was "absolutely responsible." However, some finance experts point out that the loss was not as bad as it seems. "It barely made a dent in their financial statements," says Jim Angel, associate professor of finance at Georgetown University's McDonough School of Business (Angel also is a JPMorgan shareholder). The company took in $97 billion in revenue in 2012, making its $6 billion loss look a little less daunting. In addition, Dimon may have taken a little too much blame when he claimed full responsibility, says one expert.
"It would have been much better for Jamie Dimon if there had been no London Whale. But he didn't lose the money. It was the London Whale," says Jim Barth, senior fellow at the Milken Institute and a former chief economist at the Office of Thrift Supervision, a government regulatory agency. "What [Dimon] did do: he earned substantial net income to cover the $6 billion and then some."
A new director doesn't mean fewer losses.
If Dimon were replaced as chairman, there's no good reason to think that the company would be more successful. "It would be nice if one separated the two roles and the chairman was truly independent, that never again would we have any banking problems or any problems with any financial or non financial companies," says Barth. "But unfortunately it doesn't work that way."
In addition, there are many who think Dimon has been an example of strong leadership in tough times.
"He steered this company through the financial crisis, and it's come out in pretty good shape," says Angel. Indeed, the bank's share price is higher today than when Dimon first took over, at the start of 2006. Dimon did not make $6 billion in bad trades, and removing him from the board won't ensure smooth sailing. But that's not to say that the shareholders who brought the proposal forward were unreasonable. One key reason looms for why shareholders might yet want to cut Dimon's job description.
It's good governance.
"In principle, everybody should separate the chair and the CEO," says B. Espen Eckbo, founding director of the Lindenauer Center for Corporate Governance at Dartmouth University's Tuck School of Business. Of course, many shareholders care more about profits than principle. And JPMorgan, like other firms where the CEO also chairs the board, does have an "independent lead director" on the board whose job is to provide a balance to the powerful chairman-CEO.
Still, Eckbo argues that separating the two roles is a matter of checks and balances.