NEW YORK — JPMorgan Chase, the biggest US bank, should separate the chairman and CEO roles that are both held by Jamie Dimon, says advisory firm Institutional Shareholder Services (ISS).
Stockholders should vote in favour of a proposal to name an independent chairman at New York-based JPMorgan’s annual meeting May 21, ISS said on Sunday in a report.
ISS, a unit of New York-based MSCI, advises investors on proxy voting and corporate governance. The firm also endorsed the proposal for an independent board chairman last year.
Calls for Mr Dimon, 57, to relinquish the chairmanship have mounted since last May, when JPMorgan disclosed risk-control lapses in its chief investment office on bets that fuelled losses of more than $6.2bn and sparked regulatory probes. The recommendation by ISS may undermine the bank’s efforts to persuade large investors to leave the leadership structure unchanged.
ISS cited "the governance failure in connection with the CIO (chief investment office) incident, the size and complexity of JPM’s business, and the continued challenges faced by the company".
The bank’s board urged investors in March to vote against naming a separate chairman, saying Mr Dimon’s dual role remained the "most effective leadership model." He has since drawn public backing from billionaire investor Warren Buffett, who has said he personally holds stock in the bank, and Kenneth Langone, the billionaire founder of Home Depot.
"I’m 100% for Jamie," Mr Buffett, 82, told Bloomberg Television’s Betty Liu on Thursday in Omaha, Nebraska. "I couldn’t think of a better chairman."
Mr Langone, another JPMorgan investor, called Mr Dimon the "finest CEO across any business in America" in an April 26 interview on Bloomberg Television. The bank has reported its third successive year of record profits with $21.3bn in net income for last year.
Last year’s losses in JPMorgan’s chief investment office were the focus of a probe by the US Senate permanent subcommittee on investigations. The panel said in a March report that the bank dodged regulators and misled investors amid souring bets by trader Bruno Iksil, dubbed the London Whale because his positions were so big.
ISS also recommended shareholders vote against three directors who have served on the board’s risk committee, faulting their "failures of stewardship".
ISS’s recommendation "adds enormous weight to the case for removing these directors", said Dieter Waizenegger, executive director of CtW Investment Group, which provides advice to union pension funds managing $250bn in assets, including shares of JPMorgan. "Upgrading director independence and financial expertise is critical if this board is to ask the tough questions of management and the bank’s risk-taking on good or bad days."
JPMorgan "strongly endorses" the re-election of current directors and disagrees with ISS’s position, said spokeswoman Kristin Lemkau in an e-mail. An independent board committee found mistakes were not attributable to the risk committee, she said.