Proxy advisory firm also calls on investors to reject three JPMorgan directors after derivatives trading losses
JPMorgan shareholders should vote against the renomination of three directors and force Jamie Dimon to give up his dual role as chairman and chief executive officer at this month’s meeting, according to proxy advisory firm ISS.
Shareholders should reject the renomination of directors David Cote, James Crown and Ellen Futter for ‘material failures of stewardship and risk oversight’ in relation to more losses stemming from the so-called London Whale derivatives trades, ISS is quoted as saying in various media. For a second straight year, the proxy advisory firm also recommends shareholders vote to separate the roles of chairman and CEO to improve corporate oversight.
The ISS recommendations come as regulators investigate large derivatives bets placed by a JPMorgan trader that led to more than $6 bn in losses. JPMorgan shareholders will meet on May 21 to vote on the issues after the SEC ruled against an attempt by the investment bank to avert a vote on the dual chairman/CEO role.
There is also growing pressure on the investment banking industry as a whole to split the roles of chairman and chief executive officer; at all major investment banks except Bank of America and Citigroup, these roles are combined. CtW Investment Group was seeking to split the roles at Goldman Sachs, but the bank reached a deal last month with the investor group to avert a vote on the dual role of Lloyd Blankfein by offering the lead independent director greater influence on the board. CtW is also backing the proposal to split Dimon’s dual role at JPMorgan.
The three directors opposed by ISS were all members of the company’s risk policy board at the time of the London Whale derivatives trades. ISS recommends a ‘refreshment’ of the board, including a search for ‘seasoned directors with financial and risk expertise’ to replace Cote, Crown and Futter. It recommends investors vote in favor of the other seven directors.
‘The company strongly endorses the re-election of its current directors and disagrees with ISS’ position,’ JPMorgan said in a statement over the weekend, according to media. ‘While the company has acknowledged a number of mistakes relating to its losses in CIO [chief investment office, where the derivative losses occurred], an independent review committee of the board determined that those mistakes were not attributable to the risk committee. The members of the board’s risk committee have a diversity and breadth of experiences that have served the company well.’
The proposal to split the dual role at JPMorgan came from several key investors, including Warren Buffet, who said last week in an interview on Bloomberg Television that he is ‘100 percent for Jamie. I couldn’t think of a better chairman.’