JPMorgan Chase Faces Growing Drumbeat of Calls to Oust Directors

JPMorgan Chase (JPM) is facing a growing chorus of calls to oust some of its board and strip Jamie Dimon of his chairmanship.

The nation's biggest bank should replace six of the board's 11 directors and approve a proposal to name an independent chairman, shareholder advisory firm Glass Lewis said Tuesday.

The call by Glass Lewis follows a call Friday by proxy voting firm Institutional Shareholder Services for shareholders to oust three members of the board's risk policy committee.

Separately on Friday, CtW, a union-backed organization that owns six millions shares of JPMorgan Chase, called for removing three members of the risk policy committee and the head of the audit committee.

Kristin Lemkau, a spokeswoman for the bank, said Monday that that the company "strongly endorses" its current directors for reelection and disagrees with CtW's and ISS' positions.

Calls for Dimon, the company's chairman and chief executive, have escalated since last May, when JPMorgan Chase disclosed risk-control lapses in its chief investment office on investment bets that resulted in a $6.2 billion trading loss and resulted in regulatory probes.

Though the company "has acknowledged a number of mistakes relating to its losses in [its chief investment office], an independent review committee of the board determined that those mistakes were not attributable to the risk committee," Lemkau added.

Investigations by the company and lawmakers "have revealed questionable risk-management practices at both the senior management and board levels," Glass Lewis wrote in the report, according to Bloomberg. "Shareholders should be concerned that company management was allowed to build a massive exposure to credit derivatives," switch risk models and undervalue its positions without triggering a review by the board.

"With the two leading proxy advisory firms recommending investors vote against key directors, it is clear that the status quo can no longer continue," said Dieter Waizenegger, CtW's executive director.

JPMorgan Chase will hold its annual meeting in Tampa on May 21.

The company's top executives, including Dimon, have spent the spring rallying major holders of the company's shares to back the current board's current structure, which includes a director who presides over meetings of the board and sets its agenda.

JPMorgan officials also have stressed directors' experience and what the company says has been the board's effectiveness in steering JPMorgan Chase through financial crisis and acquisitions of Bear Stearns and Washington Mutual without reporting a quarterly loss.

In meetings with investors and materials sent to shareholders, JPMorgan Chase also has touted its recent performance, which includes record net income in each of the past three years.

Last year shareholders rejected a proposal to name an independent chairman despite calls for change from proxy advisory firms.

Two of JPMorgan Chase's most prominent investors, Warren Buffett and Home Depot founder Kenneth Langone, oppose splitting the CEO and chairman roles.

Roughly 20% of the company's shareholders had voted on the varied proposals, as of Tuesday.

Glass Lewis said shareholders should vote against James Bell, former chief financial officer at Boeing; Crandall Bowles, chairman of Springs Industries; David Cote, CEO of Honeywell; James Crown, president of Henry Crown & Co.; Ellen Futter, president of the American Museum of Natural History; Laban Jackson, CEO of Clear Creek Properties.

Bell, Bowles and Jackson are members of the board's audit committee. Cote, Crown and Futter serve on the risk policy committee.

"The risk-policy committee was likely too willing to trust senior management's risk oversight and did not have meaningful review processes in place to cover instances of risk limit breaches or significant deviations in portfolio valuation," Glass Lewis wrote in the report.