Counterparties: Split personalities
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Institutional Shareholder Services’ message is clear: no one man should have all that power.
More specifically, ISS has declared Jamie Dimon shouldn’t be JP Morgan’s chairman and CEO. The firm, which advises shareholders on corporate voting, is also recommending that its clients not support the reelection of three of the bank’s directors. Each of those directors — David Cote, James Crown and Ellen Futter — sits on the bank’s risk committee. The proposal to split the roles of chairman and CEO is non-binding; the re-election of board members is binding. It’s unclear whether either measure will pass.
The risk committee, whose oversight failed spectacularly prior to and during last year’s $6.2 billion trading loss, has no members who have worked at a bank or as financial risk managers. ISS called the committee members’ “lack of robust industry-specific experience” odd, particularly compared to their counterparts at JPM’s competitors.
The WSJ’s Francesco Guerrera wrote last month that the era of the “imperial chief executive” might be winding down on Wall Street. The trend goes beyond finance. Boeing and GE faced (and defeated) proposals to split the roles of chairman and CEO this year. With shareholders demanding more scrutiny of management, the “current Wall Street incumbents are likely to be the last ones to hold a dual role”.
Dimon does have at least one high profile shareholder on his side. Warren Buffett says he is “100% for Jamie… I couldn’t think of a better chairman”, which is no surprise to Jonathan Weil. JP Morgan and Berkshire Hathaway share a director (Stephen Burke), and Buffett is a JP Morgan shareholder. The avuncular investor is also chairman and CEO of his own company, but tellingly, that won’t continue past his lifetime.
Shareholders may be able to take comfort in executives’ discomfort. One study found that “companies that had separated the two roles received a 28-percent higher five-year return”. – Ben Walsh
On to today’s links:
The era of austerity is over, according to the French finance minister – Bloomberg
“There probably will not be any major changes in Europe until after Merkel’s reelection” on Sept. 22 – Calculated Risk
The Supreme Court under Roberts is the most business-friendly court since WWII – NYT
“How business fares in the Supreme Court” – Minnesota Law Review
MBIA, Bank of America reach legal settlement - Reuters
And, of course, there are many more links at Counterparties.