Counterparties: Split personalities
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Institutional Shareholder Servicesâ€™ message is clear: no one man should have all that power.
More specifically, ISS has declared Jamie Dimon shouldnâ€™t be JP Morganâ€™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 bankâ€™s risk committee. The proposal to split the roles of chairman and CEO is non-binding; the re-election of board members is binding. Itâ€™s unclear whether either measure will pass.
The risk committee, whose oversight failed spectacularly prior to and during last yearâ€™s $6.2 billion trading loss, has no members who have worked at a bank or as financial risk managers. ISS called the committee membersâ€™ â€ślack of robust industry-specific experienceâ€ť odd, particularly compared to their counterparts at JPMâ€™s competitors.
The WSJâ€™s Francesco Guerrera wrote last month that the era of the â€śimperial chief executiveâ€ť 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 â€ścurrent Wall Street incumbents are likely to be the last ones to hold a dual roleâ€ť.
Dimon does have at least one high profile shareholder on his side. Warren Buffett says he is â€ś100% for Jamie… I couldnâ€™t think of a better chairmanâ€ť, 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 wonâ€™t continue past his lifetime.
Shareholders may be able to take comfort in executivesâ€™ discomfort. One study found that â€ścompanies that had separated the two roles received a 28-percent higher five-year returnâ€ť. – Ben Walsh
On to todayâ€™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 -Â Reuters
Are stock buybacks in the interest of shareholders or CEO bonuses? Both. Maybe. – WSJ
â€śBuybacks are an efficient way of returning money to shareholders of a shrinking companyâ€ť – Felix
And, of course, there are many more links at Counterparties.