Chapter 10: Corporate Governance 335
The Imperial CEO, JPMorgan Chase’s Jamie Dimon
Jamie Dimon, CEO of JPMorgan Chase & Co., is one
of the very few top executives at large banks or major
financial services firms who was unscathed by the sub-
stantial economic recession which began in 2008—a
recession largely caused by those firms taking inap-
propriate risks. He is described as charismatic and an
excellent leader. Yet, in 2012, JPMorgan Chase experi-
enced its own scandal caused by exceptional risk taking.
Traders in its London operations were allowed to build
a huge exposure in credit derivatives that breached the
acceptable risk limits of most analytical models. As a
result, the bank suffered losses of more than $6 billion.
It is referred to as the London Whale trading debacle.
In 2013 and 2014, there were large regulatory and legal
settlements. Most significant was a $13 billion settle-
ment with regulators over mortgage bond sales in 2013.
In addition, to this record settlement, “the bank paid
$2.6 billion to resolve allegations that it didn’t stop
Bernie Madoff ’s Ponzi scheme and two fines of about
$1 billion each stemming from currency rate manipula-
tion and the London Whale trading loss.” It may need an
additional $20 billion in additional capital to satisfy reg-
ulatory bank safety rules. One Democratic Senator from
Delaware, Ted Kaufman, noted: “I think Jamie Dimon is
Teflon-coated.”
Because of the huge loss and concerns about the
lack of oversight that led to these fines and settlement,
there was a move by shareholder activists to separate the
CEO and chair of the board positions, requiring Dimon
to hold only the CEO title. Playing key roles were the
American Federation of State, County and Municipal
Employees (AFSCME) and the Institutional Shareholder
Services (ISS). The AFSCME was pushing to separate
the holders of the CEO and chair positions at JPMorgan
Chase. The ISS was pushing for shareholders to withhold
the votes for three directors currently on the Morgan’s
board policy committee.
Dimon described the London Whale debacle as an
anomaly caused by the inappropriate behavior of a few
bad employees. However, this debacle plus the huge fines
and settlements seems to suggest serious weaknesses in
the bank’s oversight of activities involving significant risk
and compliance with regulatory rules.
Executives and board members of JPMorgan Chase
worked hard to thwart these efforts. Lee Raymond, the for-
mer CEO of ExxonMobil who has been on the JPMorgan
board for 28 years, played a key role in these efforts to
support Dimon and avoid a negative vote. This group
lobbied major institutional shareholders and even asked
(though he declined) former U.S. President Bill Clinton
to help work out a compromise with the AFSCME. They
even suggested that Dimon would quit if he had to give
up one of the roles and it would harm the stock price. In
the end, Dimon and the bank won the vote with a two-
thirds majority for Dimon to retain both positions.
Several analysts decried the vote and suggested that
having a third of the shareholders vote against Dimon is
not a major vote of confidence. One even suggested that
the vote is not surprising because of the 10 largest institu-
tional owners of the bank’s stock, seven have CEOs who
also hold the chair position. So, how could they openly
argue that this is bad for JPMorgan when they do it in
their organizations? Furthermore, these major institu-
tional investors want the banks to engage in high-risk
activities with the potential to produce high returns. This
is especially true because the downside risk of losses is
low as the government cannot afford to allow the big
banks to fail.
One analyst suggested that the shareholders voted
out of fear (potential loss of Dimon) and for personal-
ity instead of good corporate governance. Analysts for
the Financial Times argued that the outcome of this
vote demonstrates how weak shareholder rights are in
the United States. Finally, another analyst noted that
while splitting the CEO and chair positions does not
guarantee good governance, it is a prerequisite for it. Lee
Raymond suggested that the board would take action.
Several speculate that such actions will not relate to
Dimon duel positions, but rather to a reconfiguration
of the board members on the risk and audit committees.
Some have argued that certain members of these com-
mittees have little knowledge of their function and/or
have financial ties to the bank, thereby creating a poten-
tial conflict of interest. One protection for Dimon is that
the JPMorgan Chase continues to perform well, even
with poor ratings from governance evaluators.