STEVE INSKEEP, HOST:
JPMorgan Chase holds its annual shareholder meeting today in Tampa, Florida, and the shareholders will vote on a key measure: a proposal to strip the CEO, Jamie Dimon, of his other title, chairman of the board. A growing number of companies have split the CEO and chairman roles.
Shareholder activists and corporate governance experts say having a balance of power at the top helps to reduce risk. The bank and its supporters disagree. NPR's Yuki Noguchi reports.
YUKI NOGUCHI, BYLINE: Days before last year's shareholder vote on splitting the two roles, JPMorgan dropped a bombshell: Its UK office had lost billions of dollars on a risky trading strategy known short-hand as the London Whale. But by then, many shareholders had already cast their votes. Despite that, the measure won more than 40 percent approval. Lisa Lindsley says had the company disclosed its soured trades a few days earlier...
LISA LINDSLEY: I think that might have changed the vote.
NOGUCHI: Lindsley is director of capital strategies for the American Federation of State, County and Municipal Employees, which introduced the shareholder proposal.
LINDSLEY: The job of the board is to represent shareholders and to supervise the management of the company. And when you have a member of management running the board, he or she is effectively their own boss.
NOGUCHI: Separating the CEO and chairman jobs might have created more incentives to reduce risk, she says, and two shareholder advisory firms have recommended shareholders pass the proposal. Lindsley says companies in Europe and most other parts of the developed world have separated these tasks. Executive search firm Spencer Stuart says 43 percent of S&P 500 companies had split roles as of last year, up from 35 percent in 2007.
LINDSLEY: We never intended this proposal to serve as a referendum on the job that Jamie Dimon is doing as CEO of the company. It's been Jamie Dimon who's made this personal.
NOGUCHI: In a letter to shareholders earlier this month, JPMorgan argued splitting the roles is both unnecessary and disruptive. The bank said the shareholder advisors focused too narrowly on the $6 billion in failed investments last year in their recommendations, and did not focus on the broader success of the bank during Dimon's tenure. The letter also cited Enron and WorldCom, both of which collapsed, despite having a split governance structure. And it also cited academic research showing companies can actually be hurt when the roles are split. Aiyesha Dey is a professor at the University of Minnesota who wrote a piece for the Harvard Business Review based on her research that showed some firms do worse under split roles.
AIYESHA DEY: When firms were forced - particularly those firms that were larger, more complex, whose CEOs had a proven track record, you know, they had shown performance consistently, had longer tenures. So firms like that, when you forced them to split, they performed worse.
NOGUCHI: Dey says that might be because communication can break down between the CEO and chairman. In any event, she says just because a company has a separate chairman can't ensure bad things won't happen.
DEY: Even in a bank like this, I mean, you take risks, and sometimes, things go wrong.
NOGUCHI: If stripped of the chairmanship, Dimon has suggested he may consider leaving JPMorgan. Yuki Noguchi, NPR News, Washington.
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