What Would Jamie Dimon Do?

May 13, 2013

By Rob Cox

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

What Would Jamie Dimon Do? That’s a question investors need to answer before voting to split the chairman and chief executive roles at JPMorgan’s annual meeting next week. The risk is that shareholders score a corporate governance point but lose Dimon. As a general rule, cutting off your nose to spite your face is a bad investment strategy.

Dimon hasn’t come cheaply and he can be insufferable, like when he lambasted Federal Reserve Chairman Ben Bernanke in public, even if he had a point. Now his board is warning shareholders that voting in favor of the split could be “disruptive” – a barely veiled threat that Dimon would leave. It’s a petulant response to the prospect of a majority of shareholders favoring an increasingly mainstream proposal. And it’s a worrying sign that Dimon and his directors are misaligned with JPMorgan’s owners.

Though a vote wouldn’t be binding, Wall Street’s top bank would be unable to ignore the wishes of the majority. Were he to leave just because of this, it would be akin to a baby throwing its toys out of the crib. Still, it’s hard to see him struggling to find a new gig. Warren Buffett, for one, has long admired his skills and praised his annual letter to shareholders.

Yet what should sway investors most are the returns they have received by owning JPMorgan stock during Dimon’s tenure. He officially took over as CEO at the end of 2005. Since then, JPMorgan shares are up about 22 percent. That’s a bit less than the S&P 500.

Compared to peers, however, JPM has outperformed, in some cases by leaps and bounds. Wells Fargo and Goldman Sachs come closest, rising 19 percent and 16 percent, respectively. It’s no contest when it comes to Bank of America and Citigroup: these bank stocks lost 73 percent and 90 percent of their value in the same period.

As the investment industry is required to disclose, past performance is no guarantee of future returns. But JPMorgan’s feats with Dimon running the show before, during and after the worst financial crisis in decades ought to give pause to shareholders considering the governance question – no matter how bullied they might feel.

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