JPMorgan Chase shareholders reject splitting Jamie Dimon's duties

Is the glass half-empty or half-full for Jamie Dimon, who made waves this week by broaching the topic of his eventual departure from JPMorgan Chase ?

On one hand, JPMorgan shareholders on Tuesday rejected a shareholder proposal — opposed by Dimon — to split the chairman and CEO roles that he has long held. On the other hand, the proposal won 42.5% of the vote, which represented substantially more support than similar measures at Goldman Sachs and Bank of America this year.

One day before, JPMorgan's stock price slid some 4.5% following Dimon's announcement that succession plans at the country's largest bank are "well on the way," and that his timeline for holding onto the CEO role "is not five years anymore." Ebrahim Poonawala, an analyst at Bank of America Securities, said in a research note that it would take time for the market to get comfortable with the bank's next CEO following the "unparalleled shareholder returns" during Dimon's term.

The idea of separating the chairman and CEO roles, and appointing an independent chair, has been proposed at JPMorgan in each of the last four years. It has garnered between 37% and 47.5% of the vote over that span.

In 2023 and again this year, the proxy advisory firms Glass Lewis and Institutional Shareholder Services both recommended voting in favor of the independent board chair proposal, pitched by veteran corporate gadfly Kenneth Steiner. An ISS report said that since the board oversees management and accountability, one person in both positions could cause conflicts of interest.

"As consistently highlighted in past similar proposals, the size and complexity of JPMorgan suggests that it is difficult for any one person to run both the company and the board," the ISS report said.

But Mike Mayo, an analyst at Wells Fargo Securities, called the high level of support on Tuesday for the proposal "bewildering and baffling."

Mayo said in an interview that he's in favor of strong corporate governance and shareholder rights, but he thinks the proposal to dilute Dimon's role is "the wrong playbook for the wrong person at the wrong time."

"I can give you many cases of other times and other firms where this would make incredible sense," Mayo said. "I'm baffled at why now, when they're performing among the best of any bank I've seen…. Look at the past year. They crushed it."

Dimon said in his Monday comments that his departure is, ultimately, up to the board. Mayo said that he thinks Dimon has another two and a half years in the head seat, and he will then likely hand over the CEO title and become executive chairman of the board.

JPMorgan adopted a policy in 2022 that it will separate the chief executive and chair positions upon the next CEO transition, "subject to the board's determination of the leadership structure that best serves the firm and its shareholders at the time." However, JPMorgan won't require that the chair be independent.

ISS said in its report that Dimon's potential retention of the chairmanship could reduce the effectiveness of the role. Glass Lewis called the bank's policy to someday split the two roles "relatively weak," adding in a report that an independent chair "fosters the creation of a thoughtful and dynamic board that is not dominated by the views of senior management."

In lieu of an independent board chair, the company has retained an independent lead director, a position that Dimon said in his annual letter to shareholders often holds "most of the authorities previously assigned to the chairman."

Steiner, in his proposal to split the chairman and CEO jobs, said that JPMorgan's lead director, Stephen Burke, isn't effectively independent due to his 20-year tenure in the position. JPMorgan countered in its proxy statement that Burke's tenure means he's built institutional knowledge.

JPMorgan also said that there is no basis for Steiner's assertion that having an independent board chair is best practice. The bank said that the proposed change would restrict "the board's ability to use its experience, judgment, boardroom insight and ongoing shareholder feedback" to make well-informed decisions on corporate leadership.

JPMorgan declined to comment beyond its response in the proxy statement.

At other banks, resolutions to appoint independent chairs received less support this year than they did at JPMorgan. About one-third of shareholders at both Bank of America and Goldman Sachs voted in favor of stripping the chair title from chief executives Brian Moynihan and David Solomon at the companies' annual meetings last month.

Dimon said in his annual letter to shareholders last month that "there's no evidence" that splitting the roles is advantageous.

"The governance of major corporations is evolving away from guidance by governance principles that focus on a company's relationship to long-term economic value toward a bureaucratic compliance exercise," he said in the letter. "Good corporate governance is critical, and a little common sense would go a long way."

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Also during the company's annual meeting, 40% of voters supported a proposal to require a non-binding shareholder vote on some executive officers' so-called "golden parachute payments," which refers to compensation that is paid out or vests when a senior leader is terminated.

That pitch, submitted by shareholder activist John Chevedden, urged the company to seek investor support for senior managers' new or renewed contracts when such payments' value exceeds 2.99 times the sum of the executive's base salary plus target short-term bonus.

JPMorgan said in its response that the firm doesn't provide golden parachute agreements, and that all employees participate at the same level of severance, which is capped at 52 weeks of salary or $400,000 for U.S.-based employees.

Chevedden said in the proxy that his proposal is relevant "even if there are current golden parachute limits."

"A limit on golden parachutes is like a speed limit," Chevedden said in the proposal. "A speed limit by itself does not guarantee that the speed limit will never be exceeded. Like this proposal, the rules associated with a speed limit provide consequences if the limit is exceeded."

Shareholders also voted down a proposal to request that JPMorgan outline the effectiveness of its policies and practices respecting Indigenous Peoples' rights. Some 30% of voters supported the proposal, which was close to the level of support that similar proposals at Wells Fargo and Citigroup received this year.

All of the proposals backed by the bank — which involved its board appointments, executive compensation, long-term incentive plans and ratification of its accounting firm — passed.

Allissa Kline contributed to this story.