JPMorgan Chase shareholders to confront CEO Dimon
The nation's largest bank holds its annual meeting Tuesday in Tampa, Florida, where it's expected that some shareholders will ask Jamie Dimon to divest himself of one of his twin roles.
Shareholders of JPMorgan Chase & Co gathered in the hundreds on Tuesday for its annual meeting as pressure rises on the company and Chief Executive Officer Jamie Dimon over billions of dollars in trading losses.
The meeting, at the bank's back-office complex in Tampa, Florida, will give investors their first crack at Dimon, who is also JPMorgan's chairman, since he revealed a soured hedging strategy had cost at least $2 billion.
Nearly two hours before the meeting began, the company appeared to have a heavy turnout on its hands, with half of the 300-plus seats already filled and the potential for many more people to come. Security guards started taking shareholders' coffee cups and water bottles as the meeting drew nearer.
Shareholders will also vote on proposals like splitting the roles of chairman and CEO.
The California Public Employees' Retirement System, the largest pension fund in the United States, will lead calls to strip Dimon of the chairmanship in a move it said would probably lead to better risk controls.
"CalPERS believes if the chairman was independent the board may be able to exercise stronger oversight of management," the organization said in a note setting out its voting intentions ahead of the meeting.
The group, which owns around $565 million of JPMorgan stock, said it would support executive compensation proposals, but warned it would "closely review" the effects of the trading losses when analyzing the 2013 say-on-pay vote.
The two leading proxy advisory firms -- ISS and Glass, Lewis -- are already backing the nonbinding proposal calling for a split of the jobs of chairman and CEO.
The California State Teachers Retirement System, the Florida State Board of Administration and the New York State Comptroller's office, which each oversee about $150 billion in assets, have said they will also vote for the split.
"Generally we support these kinds of proposals," said Ricardo Duran, information officer for CalSTRS. "We always look kindly on the separation of those two positions."
JPMorgan is likely to face a barrage of questions about what Dimon knew, when he knew it and how a bank that has boasted of its "fortress" balance sheet could make such a major mistake.
The shakeup from those trades started Monday, as the company's chief investment officer retired.
The company now faces calls from some quarters for a "clawback" from departed executives who were responsible for the trades, including the retired CIO, Ina Drew. New York City Comptroller John Liu, who oversees the city's $400 million stake in JPMorgan, made such a call on Tuesday.
In its 2011 annual report, JPMorgan said its stock-based compensation awards were subject to such provisions. It said in its proxy filing that it could conduct a clawback review "as a result of a material restatement of earnings or by acts or omissions of employees."
JPMorgan can cancel unvested awards or require the value of distributed shares to be repaid when "the employee engages in conduct that causes material financial or reputational harm to the Firm or its business activities," according to the proxy.
'F' ON CORPORATE GOVERNANCE
No matter the circumstances, governance experts expect some fireworks on Tuesday.
"It was going to be a noisy shareholder meeting anyway, but it's likely to be more boisterous than if it had been held before last Thursday," said Paul Hodgson, senior research associate of GMI Ratings.
The firm slapped its lowest rating - "F" - on JPMorgan's corporate governance policies before disclosure of the loss. Fewer than 5 percent of the companies rated by GMI get the bottom ranking, Hodgson said.
Many large shareholders wait until the last few days to vote, so the trading loss may influence some to withhold votes supporting management proposals or to actively support some shareholder resolutions.
Tim Piechowski, associate portfolio manager at ACR Alpine Capital Research, said his firm voted clients' shares in favor of the measure to split the chairman and CEO roles. But the decision was based on the firm's policy and was not related to the trading loss, Piechowski said in an email.
JPMorgan said in its proxy filing that the split was not necessary for Dimon. All other directors are independent under the rules of the New York Stock Exchange, and one is designated as a "presiding director."
William Frels, CEO of investment advisory group Mairs & Power, said via email that his firm was supporting management on all issues on the proxy. "The shares seem more like a 'buy' than a 'sell' from what we know about the loss so far," Frels said.
Although declines in JPMorgan shares following the announcement of the loss have wiped nearly $19 billion off the company's market value, many analysts and investors expect a rebound rather than a prolonged slump.
"We're not looking at losses in a portfolio that could continue deteriorating because of systemic issues," said Guggenheim Securities analyst Marty Mosby. "We're dealing with a hedging strategy that didn't work."