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JPMorgan Chase (JPM) is facing another call from institutional investors to separate the roles of chairman and chief executive.
February 20
JPMorgan Chase's (JPM) board said Jamie Dimon should remain both chairman and chief executive officer after it halved his pay for failing to properly supervise a unit that generated a record trading loss last year.
"The board has determined that the most effective leadership model for the firm currently is that Mr. Dimon serves as both," the panel said Friday in a proxy filing, advising shareholders to reject a proposal to split the roles.
The bank paid three of Dimon's top executives, Mary Erdoes, Daniel Pinto and Matthew Zames, more than him for 2012. It also clawed back more than $100 million from people it deemed responsible for the so-called London Whale trading loss.
Calls for Dimon to give up the chairmanship have been building since the bank disclosed more than $6.2 billion in losses on derivatives trades and failures in risk controls last year. The push intensified last week as a Senate investigation found the bank and CEO dodged regulators and then misled investors as losses escalated on the "monstrous" bet in London. The bank "mischaracterized high-risk trading as hedging," and withheld key information from its primary regulator, sometimes at Dimon's behest, investigators found.
The board cited the debacle while cutting Dimon's 2012 compensation to $11.5 million from $23 million the previous year. It also credited his "leadership and management abilities" for the lender's performance. Dimon led the bank, the largest in the U.S. with $2.4 trillion in assets, to its third straight year of record profits in 2012 with $21.3 billion in net income.
The bank rose 0.9% to $48.78 in New York trading today. The stock is up 11% this year.
Zames and Pinto, who helped clean up the trading mess, were the bank's highest-paid executives, with each getting $17 million, the proxy shows. Zames, elevated to co-chief operating officer after overhauling the chief investment office last year, "demonstrated leadership and risk management discipline," the board said. His pay included a cash bonus of $6.1 million and $9.2 million of restricted stock.
Pinto, also promoted after helping unwind the faulty trades, got a $8.1 million cash bonus and $7.1 million in restricted stock. Erdoes, the CEO of asset management, received $15 million in total compensation, including a $4.9 million cash bonus and $7.4 million of restricted stock.
Ted Dimon, the CEO's father and a broker at the firm, more than tripled his compensation in 2012 to $1.6 million from $447,000 in 2011, the company's proxy filings show.
For people responsible for the trades, the bank "invoked comprehensive clawbacks of previously granted outstanding awards and/or repayment of previously vested awards," it said.
A coalition of retirement plans, including the AFSCME Employees pension fund, is pressing to separate Dimon's dual roles. The fund said last month its views reflect "mounting investor concerns with the board's oversight in the wake of the London Whale losses, recent regulatory sanctions and its failure to fully demonstrate that it can manage the size and complexity of its balance sheet."
The Federal Reserve and Office of the Comptroller of the Currency both censured JPMorgan in January over failures in risk controls for the London derivatives trades as well as for lapses in its anti-money laundering practices.
A shareholder proposal to appoint an independent chairman failed with 40% of the vote last year. Glass Lewis & Co., a corporate governance advisory firm that backed the plan, said an independent chairman is "better able to oversee the executives of a company and set a pro-shareholder agenda without the management conflicts that a CEO or other executive insiders often face."
