(February 21, 2013) – A coalition of institutional investors have filed a shareholder proposal requesting that JP Morgan Chase name an independent chairperson-a position currently held by CEO Jamie Dimon.
According to the shareholder proposal, filed Wednesday, February 20, the coalition believes that combining the roles of board chairman and chief executive officer “weakens a corporation’s governance which can harm shareholder value.”
The coalition includes New York City’s five pension funds, the Connecticut Retirement Plans, and Hermes Equity Ownership Services, among others. The firm faced a similar proposal last May.
A joint statement released by the American Federation of State, County & Municipal Employees cites last year’s “London Whale” losses as an example of JP Morgan’s weak internal controls.
“Unchecked risk-taking and oversight failures have cost JP Morgan more than $6 billion in losses and seriously damaged its reputation,” said NYC Comptroller John Liu, who is the legal custodian and trustee of New York City’s retirement system, in the statement. “Without an independent board chair, JP Morgan will be unable to restore investor confidence and ensure future compliance-both integral to protecting and creating long-term value.” As of February 14, the $120 billion pension system held 9,747,342 shares of JP Morgan, totaling $480 million in value.
The CEO/Chairman complaint levied against JP Morgan is not the first conflict of interest accusation the corporation has faced.
In November, a separate group of pension funds filed a lawsuit against JP Morgan claiming that Dimon “secretly transformed the CIO from a risk management unit into a proprietary trading desk whose principal purpose was to engage in speculative, high-risk bets designed to generate profits,” according to the complaint.
Dimon had responded to criticism of the CIO office in July 2012, although it did not sufficiently dissuade the plaintiffs. In the corporation Q2 earnings statement, Dimon announced the CIO desk would cease in trading a synthetic credit portfolio, and instead focus on its core mandate of “conservatively” investing excess deposits for a modest return.
“The firm has been conducting an extensive review of what happened in CIO,” Dimon said at the time. “We have already completely overhauled CIO management and enhanced the governance standards within CIO. We believe these events to be isolated to CIO, but have taken the opportunity to apply lessons learned across the firm. The board of directors is independently overseeing and guiding the company’s review, including any additional corrective actions.”
It is the very independence of JP Morgan’s board of directors that is the issue for this latest coalition of shareholding pension funds, according to Connecticut Treasurer Denise Nappier: “It is impossible to imagine how board oversight of the company’s affairs will be strengthened while CEO Jamie Dimon leads the very board that is charged with overseeing his own shortcomings.”