In the wake of ongoing mismanagement (within JPMorgan), a coalition of investors, including the American Federal of State County and Municipal Employees (AFSCME) and the NYC Pension Funds, put forward a shareholder proposal to split the chairman-of-the-board role from the CEO. The board of directors is responsible for overseeing JPMorgan’s CEO, so allowing a CEO to chair its own board is an egregious conflict of interest, and yet one that remains prevalent in American corporations. So prevalent, you need look no further than JPMorgan’s own eleven-member board, which includes three members (four if you count Dimon himself) who served as CEO and chairman of their firms: David M. Cote of Honeywell, Lee Raymond of Exxon and William C. Weldon of Johnson & Johnson.
When two shareholder advisory firms came out in support of the proposal, it appeared Jamie Dimon was vulnerable. So JPMorgan changed the rules of the game. A couple of weeks prior to the annual meeting, groups advocating the split stopped receiving current vote tallies from Broadridge, the company supplying the results. JPMorgan was still receiving those tallies, so it now had inside information, giving it an edge to lobby behind the scenes and compel key shareholder groups to vote in Dimon’s favor.
But JPMorgan didn’t even have the courage to make this demand for opacity itself. Instead, it sent its favorite front group, the Securities Industry and Financial Markets Association (SIFMA). SIFMA does everything from draft lengthy letters to federal agencies asking them to soften regulations on Wall Street to suing regulators on behalf of Wall Street to overturn new rules. SIFMA sued—and won—a case to overturn Position Limits—a part of Dodd-Frank meant to curb speculation that drives up prices in commodities like gas. And in a disgusting example of Washington’s well-greased revolving door, it just scooped up former Republican Senator Judd Gregg to serve as its CEO. But SIFMA also does JPMorgan’s dirty work: it was SIFMA who called Broadridge to demand it stop giving vote tallies to groups sponsoring the proposals.
But even before JPMorgan called in SIFMA, the game was already rigged. Because this was a shareholder proposal, even if it passed it would be non-binding. In corporate governance, only proposals put forward by management are binding. Management is at liberty to reject any shareholder proposal, regardless of how the shareholders vote.
Yet, JPMorgan’s management felt compelled to wage a fierce fight against this shareholder resolution anyway. To do so, the company enlisted 1 percenters like Warren Buffet, Michael Burns (vice chairman of Liongate) and Ken Langone (financier of Home Depot) to tell the press just how important their dear friend Jamie is. Then Dimon complained to investors that should he be forced out as chairman, he would resign. Such a threat is the ultimate crystallization of Dimon’s deeply juvenile attitude: if you force me to play by the rules, I’m taking my ball and I’m going home!
The tactics enlisted by JPMorgan in this fight are familiar territory for it. JPMorgan lobbies Congress in the same way: with threats, with inside information, with SIFMA serving as their attack dog. But while JPMorgan has now dodged accountability from both regulators and shareholders alike, it is important to note that the fight to hold it accountable is alive and well—in the American public.
Alexis Goldstein is with Occupy the SEC. The above is an excerpt of an article published in The Nation.
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