Will JPM Shareholders Vote to Clip Dimon's Wings?  If So, Will the Board Comply with the Shareholders' Mandate?

[ by Melanie Gretchen and Howard Haykin ]

JPMorgan Chase directors are still chasing after the bank's largest shareholders – BlackRock, Vanguard, and Fidelity – trying valiantly to secure critical support for Jamie Dimon, who says he may walk if he is not re-elected to serve as both Chairman and CEO of JPMorgan Chase.

And while Mr. Dimon waits to see how all the electioneering plays out in his final vote, the fates of several "on the bubble" directors hang in the balance.  These directors are blamed, in part, for the bank's failure to prevent or contain large trading losses and other deficient bank operations.  Yet, no matter how JPMorgan shareholders vote, no decisions will be finalized until the Board of Directors convenes and takes its own votes.

[C-I Note:  In some ways, the shareholder votes simply serve as a prelude to the all-important votes by Directors, which follow the annual meeting.  These decisive votes take place within the guarded and secured boardroom.  Because the shareholder votes are non-binding, the Directors theoretically are free to vote as they see fit.

That's not to say that shareholder sentiment cannot carry over into the Boardroom - it can and it has happened where directors are swayed  by the shareholder vote, even though they are not obligated to do so.]

The Big Players. BlackRock Inc, Vanguard Group Inc and Fidelity Investments, on a combined basis, control around 12% of all publicly traded shares of JPMorgan Chase.  While each is free to vote as they choose, the decision of any or all these institutional investors can heavily influence how other shareholders vote. 

But again, it is important to reiterate that the shareholder vote is NON-Binding on Directors, who may vote without regard to the outcome of the shareholder vote - even if it turns out to be a landslide.  For example:

• The Board may vote to retain Jamie Dimon as both Chairman and CEO.

• And the Board or the Chairman can choose to not accept the resignations of those directors who were "voted out of office" by shareholders.   

It's anyone's guess how the voting will go at the Shareholder Meeting, and which executives and directors will still be standing at day;s end.  

The Compliance Insights team has long believed that the bank should split the Chairman and Chief Executive roles, retaining Jamie Dimon as CEO so that he has greater hands-on control.  However, we are concerned that the board will bow to Mr. Dimon's preferences and vote him in for another year as Chairman and CEO.  Our concerns are based on the chance that the Board is making its decision based not on what's best for the bank or its shareholders, but for fear of what the future may bring if Mr. Dimon were to step out before a successor has been properly anointed. 

In other words, one man's threats will be heard over the shouts of a multitude of shareholders.

For further details, go to [Reuters, 5/6/13].