Dimon survives votes on pay, chairmanship

PALLAVI GOGOI

Asso­ci­ated Press

TAMPA, Fla. — The CEO of JPMor­gan Chase sur­vived a share­holder push Tues­day to strip him of the title of chair­man of the board, five days after he dis­closed a $2 bil­lion trad­ing loss by the bank.

CEO Jamie Dimon also won a share­holder endorse­ment of his pay pack­age from last year, which totaled $23 mil­lion, accord­ing to an Asso­ci­ated Press analy­sis of reg­u­la­tory filings.

Dimon, unusu­ally sub­dued, told share­hold­ers at the JPMor­gan annual meet­ing that the company’s mis­takes were “self-inflicted.” Speak­ing with reporters later, he added: “The buck always stops with me.”

Most of the share­holder bal­lots were cast in the weeks before Dimon revealed the trad­ing loss.

His pay pack­age passed with 91 per­cent of the vote. The vote to strip him of the chairman’s title won only 40 per­cent sup­port. The bank did not announce sep­a­rate results from before and after the loss was revealed.

Dimon was con­fronted at the meet­ing by share­hold­ers upset about the trad­ing loss, which has rat­tled investor con­fi­dence in the bank and com­pli­cated JPMorgan’s efforts to fight tougher reg­u­la­tion of Wall Street.

Rev. Sea­mus Finn, rep­re­sent­ing share­hold­ers from the Catholic orga­ni­za­tion Mis­sion­ary Oblates of Mary Immac­u­late, said that investors had heard Dimon apol­o­gize before for the fore­clo­sure cri­sis and other problems.

“We heard the same refrain: We have learned from our mis­takes. This will never be allowed to hap­pen again,” Finn said. “I can’t help won­der­ing if you are listening.”

Lisa Lind­s­ley, direc­tor of cap­i­tal strate­gies for an influ­en­tial union of pub­lic employ­ees that is also a major JPMor­gan share­holder, said inde­pen­dent board lead­er­ship was in share­hold­ers’ best interest.

“An all-powerful CEO is his own boss,” she said. “Look­ing for an infal­li­ble CEO is a fool’s errand.”

Most large Amer­i­can com­pa­nies com­bine the jobs of chair­man and CEO, but share­hold­ers have pushed in recent years to sep­a­rate them. About one in five Stan­dard & Poor’s 500 com­pa­nies sep­a­rate the jobs.

Sup­port­ers argue that an inde­pen­dent chair­man can pro­vide a check on the CEO’s power. Share­hold­ers also fre­quently push for sep­a­ra­tion at tur­bu­lent times for a company.

In JPMorgan’s case, the move to sep­a­rate the jobs was put on the bal­lot before the $2 bil­lion loss was unearthed. It was also on the bal­lot last year, but it received far less sup­port then, 12 percent.

JPMor­gan stock climbed through­out the morn­ing and was up 3 per­cent by mid­day, on a day when the broader stock mar­ket was up only slightly. Investors pum­meled JPMor­gan stock in the first two trad­ing days after the loss was revealed, dri­ving it down 12 per­cent and wip­ing out almost $20 bil­lion in mar­ket value.

Dimon said he did not expect the trad­ing loss to jeop­ar­dize JPMorgan’s quar­terly stock div­i­dend, which is 30 cents per share.

A law enforce­ment offi­cial said that the FBI’s New York office is head­ing an inquiry by the Jus­tice Depart­ment into the JPMor­gan loss. The offi­cial, who was not autho­rized to speak about the deci­sion, spoke on con­di­tion of anonymity.

The offi­cial char­ac­ter­ized the inquiry as preliminary.

There was a heavy police pres­ence at the meet­ing, in an office park east of down­town Tampa. Pro­test­ers were there as well, includ­ing some who threw eggs at a poster with Dimon’s pic­ture on it.

“We wanted to let Jamie Dimon know how we feel about what big banks have done to our econ­omy,” said Mar­i­lyn Lyday, a mem­ber of the protest group Occupy Orlando.

Dimon got some­thing of a vote of con­fi­dence from Pres­i­dent Barack Obama, who appeared on ABC’s “The View” for an episode air­ing Tues­day. Obama used the appear­ance to press for tighter reg­u­la­tion of Wall Street.

“JPMor­gan is one of the best-managed banks there is,” the pres­i­dent said. “Jamie Dimon, the head of it, is one of the smartest bankers we got, and they still lost $2 bil­lion and counting.”

Obama said the bank was “mak­ing bets” in the mar­ket for the com­plex finan­cial instru­ments known as deriv­a­tives. Dimon has said the bank was hedg­ing against finan­cial risk.

A part of the 2010 finan­cial over­haul leg­is­la­tion known as the Vol­cker rule is designed to pre­vent banks from plac­ing bets for their own profit, a prac­tice known as pro­pri­etary trading.

The idea is to pro­tect depos­i­tors’ money, which is insured by the gov­ern­ment. If a bank’s losses wiped out those deposits, the gov­ern­ment would be on the hook.

For­mer Fed­eral Reserve Chair­man Paul Vol­cker, for whom the rule was named, wanted spec­u­la­tive trad­ing by invest­ment banks to be sep­a­rated from the deposit-taking and lend­ing busi­ness of tra­di­tional com­mer­cial banks.

Dimon and crit­ics of the indus­try have dis­agreed over whether JPMorgan’s trad­ing would have vio­lated that rule.

In Wash­ing­ton, Trea­sury Sec­re­tary Tim­o­thy Gei­th­ner said JPMorgan’s trad­ing loss strength­ens the case for tougher rules on finan­cial insti­tu­tions, as reg­u­la­tors con­tinue writ­ing rules from the 2010 law.

Gei­th­ner said that the Fed­eral Reserve, the Secu­ri­ties and Exchange Com­mis­sion and the Obama admin­is­tra­tion are “going to take a very care­ful look” at the JPMor­gan inci­dent as they imple­ment the rules.

“I’m very con­fi­dent that we’re going to be able to make sure those come out as tough and effec­tive as they need to be,” Gei­th­ner said. “And I think this episode helps make the case, frankly.”

At the annual meet­ing for the invest­ment bank Mor­gan Stan­ley, which took place Tues­day in upstate New York, CEO James Gor­man appeared to allude to the JPMor­gan trad­ing loss when he said: “Events of the last few days remind us that risk lev­els remain high in the global markets.”

He noted twice that Mor­gan Stan­ley has jet­ti­soned or is in the process of dump­ing all of its busi­nesses that do pro­pri­etary trad­ing, or trad­ing for the bank’s own profit.

Gor­man also said, unprompted, that the bank main­tains the right to take back pay from exec­u­tives who act improp­erly. Gor­man was con­fronted by shout­ing pro­test­ers who said the loss at JPMor­gan was proof that banks are out of touch with their customers.

On Mon­day, Ina Drew, JPMorgan’s chief invest­ment offi­cer and one of the highest-ranking women on Wall Street, left the bank. Drew over­saw the trad­ing group respon­si­ble for the $2 bil­lion loss.

Posted by AP News on May 15 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.