TAMPA -- Shareholders of JPMorgan Chase voted Tuesday to let Jamie Dimon keep both the chairman and CEO roles, but they signaled that the bank needed better oversight, giving only narrow approval to three of the bank's board members.
It was a mixed verdict in a closely watched test of corporate governance at U.S. companies. Dimon emerged in a stronger position after the proposal to split his roles won just 32 percent of the shareholder vote, less than the 40 percent a similar proposal got last year.
But the tepid support for the three directors came as a rebuke of the bank following a surprise $6 billion trading loss JPMorgan suffered last year. Prominent shareholder advisory firms had urged JPMorgan shareholders to withhold their support for those directors, who served on the bank's risk policy committee at the time of the loss.
JPMorgan was an unusually strong company to be targeted by shareholder activists. It has been turning in record profits and its stock price is at a 12-year high. Dimon has been widely praised for his astute stewardship of the bank through the 2008 financial crisis, though his reputation has been tarnished since the trading loss, which seems to have caught him flat-footed, came to light.
Dimon, speaking after the vote, said the bank was taking the feedback from the bank's shareholders "very seriously."
The outcome was a disappointment to the shareholder groups that had lobbied to split the chairman and CEO roles. A "yes" vote would have served as a request to the bank to strip Dimon of his role as chairman of the board and have someone from outside the company do the job. Since corporate CEOs answer to their boards of directors, headed by the chairman, the thinking goes that having the roles split would result in greater accountability for the CEO.
While the chairman-CEO measure didn't succeed, share
holders expressed their discontent in other ways. Three JPMorgan board members were re-elected by only slim margins: David Cote, chairman and CEO of Honeywell; James Crown, who runs a privately owned investment company; and Ellen Futter, president of the American Museum of Natural History, were re-elected with less than 60 percent approval. The other eight directors, including Dimon, were re-elected with support of more than 90 percent.
It isn't clear if or how the board will respond to the tepid support shareholders gave the three directors, but it does put pressure on them to make changes. Lee Raymond, the No. 2 board member behind Dimon and the retired chairman and CEO of Exxon Mobil, said the board "will continue to review" its current makeup.
While Dimon survived the call to split his roles, the shareholder proposals against the bank are another sign that corporate governance activism is gaining traction, said Brad McMillan, chief investment officer at Commonwealth Financial.
"Jamie Dimon is one of the best, if not the best, CEO in the world," McMillan said. "But, at the same time there have been failures under his management that suggest maybe it does make sense .... to say that we need some independent board supervision."
Lawrence Hamermesh, director of the Widener Institute of Delaware Corporate Law, said it was unclear if JPMorgan would take action, noting that its strong stock performance would have a "remarkably calming effect" on investors. JPMorgan's stock is up 21 percent this year and is the highest it's been in 12 years. On Tuesday it rose another 2 percent, or 93 cents, to $53.20.
Bill Patterson, executive director of the CtW Investment Group, which had lobbied both to split the CEO/chairman roles and against Cote, Crown and Futter, said he expected the three directors to step down.
"A split vote is not a shareholder mandate," Patterson said. "It's a vote of no confidence."