November 22, 2017

DealBook: JPMorgan Shareholders Are Denied Access to Results

Jamie Dimon, chairman and chief of JPMorgan Chase.J. Scott Applewhite/Associated PressJamie Dimon, chairman and chief of JPMorgan Chase.

When it comes to shareholder votes, the running tallies are a closely guarded secret. Only a handful of parties get a peek into how these corporate battles are shaping up.

Now, in the midst of one of the most closely watched investor votes in years — over whether to separate the roles of chairman and chief executive at JPMorgan Chase — that protocol has changed. The firm that is providing tabulations of the JPMorgan vote stopped giving voting snapshots to the proposal’s sponsors last week. The change followed a request from Wall Street’s main lobby group, the firm says.

The pension fund shareholders that are promoting a split at the top of the bank are crying foul. Knowing the current tally is critical for both sides in shaping their campaigns, they say — cutting off access to them gives JPMorgan, which is getting frequent updates, an upper hand.

“They have changed the rules in the middle of the game and it has created an unfair advantage,” said Michael Garland, assistant comptroller who heads corporate governance for the New York City comptroller John Liu. “It’s like playing a game where only the home team gets to know the score.”

JPMorgan declined to comment.

The results of the shareholder vote will be announced on Tuesday at the bank’s annual meeting in Tampa, Fla. This week, the shares of a number of big investors were voted. It is not known, however, how the vote is trending.

A majority vote in favor of stripping Jamie Dimon of the chairman’s job, while not binding, would be a heavy blow to the influential chief executive. Last year, a similar proposal garnered the support of 40 percent of the shares.

Broadly speaking, the ability to get real-time voting information is crucial for both Wall Street firms and the shareholders sponsoring proposals. A losing side may decide to pour more resources into its campaign, making additional calls or send additional correspondence to shareholders.

“It’s a critical part of the process,” said Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. He noted that “if you feel you need to win by shutting off information, it calls into question the strength of your arguments.”

Lyell Dampeer, a senior executive at Broadridge, said his firm was required to give real-time results to companies, and for years Broadridge gave that same information to proposal sponsors. But late last week, he received a call from an employee of the Securities Industry and Financial Markets Association, Wall Street’s main lobby group, requesting that Broadridge cut off access to organizations that are sponsoring proposals, he said. Sifma represents JPMorgan and other big banks and brokerage firms.

Broadridge is a little-known firm that distributes materials on behalf of banks and brokers and provides voting tabulations. Mr. Dampeer said the brokerage firms were his clients so he was “contractually obligated” to comply with their request. “It was a short call,” he said.

“We don’t have a view on this but we are caught in the middle,” Mr. Dampeer added. He said neither securities laws nor client contracts said Broadridge had to give information to the sponsors of proposals. “We act at the behest of our clients,” he said. And publicly traded companies are entitled to updates on shareholder voting.

Sifma declined to answer questions. In a statement, the lobby group said one of its working groups had concerns about “the authority of a vendor to release confidential information” and that group asked Sifma to pursue the issue. Executives at some banks were concerned, according to people briefed on the matter, that shareholder groups were leaking early vote tabulations.

The decision by Broadridge sheds some light on the usually obscure world of shareholder voting. Mr. Dampeer did not know how many other shareholders had been cut off from access, but he said the new policy would apply to countless other votes around the country.

Broadridge informed the Securities and Exchange Commission on Monday of its decision because the agency regulates brokerage firms. A spokeswoman for the S.E.C. declined to comment.

“If they aren’t providing results to one side, they shouldn’t give it to the company,” said Brandon Rees, acting director of the A.F.L.-C.I.O. Office of Investment.

For shareholders sponsoring the proposals, the tallies are particularly important at companies’ annual meetings, one of the few times when a broad swath of investors have access to management and board members. William Patterson, the executive director of the CtW Investment Group, which represents union pension funds and owns six million shares in JPMorgan, said that when deprived of the initial tallies, shareholders were at the whim of management.

“If you go in blind,” Mr. Patterson said, “you can’t really make an informed case to management” at the annual meeting about voting results “and hold them accountable.”

In the case of the JPMorgan vote, the stakes for both sides are high.

If shareholders vote to sever the positions, it would be a major victory for the sponsors and big shareholder advisory firms like Institutional Shareholder Services and Glass, Lewis Company, which have urged investors to vote for the split. Some of the big groups sponsoring this proposal have likened this effort to a presidential campaign and they say a vote in the favor would set the tone for dozens of other similar votes around the country.

For JPMorgan, a yes vote would put pressure on JPMorgan’s board to split the two roles. Management would not be required to do anything with the results, but failure to take some course of action could lead to more unrest at the bank. Over the last year, JPMorgan has been struggling with the fallout from a multibillion-dollar trading loss.

Behind the scenes, JPMorgan has been working to persuade shareholders to support having Mr. Dimon keep both the chairman and chief executive titles. He has been chief executive since 2005 and chairman since 2006.

Article source: http://dealbook.nytimes.com/2013/05/15/jpmorgan-voters-are-denied-access-to-results/?partner=rss&emc=rss

DealBook: JPMorgan’s Board Uses a Pay Cut as a Message

After the board of JPMorgan Chase halved the salary of Jamie Dimon, the chief executive, he said, I respect their decision.J. Scott Applewhite/Associated PressAfter the board of JPMorgan Chase halved the salary of Jamie Dimon, the chief executive, he said, “I respect their decision.”

Shortly after the markets closed on Tuesday afternoon, an emissary from JPMorgan Chase’s board of directors walked two flights down to the 48th-floor corner office of the bank’s chief executive, Jamie Dimon, to deliver a stark message. The board had voted to slash Mr. Dimon’s annual compensation for 2012 by half.

At first blush, the move appeared to be a stinging rebuke of Mr. Dimon for his failures of leadership that contributed to the bank’s multibillion-dollar trading loss last year.

But the pay cut was actually a message from the board to regulators and worried investors that it was a strong watchdog over the nation’s largest bank, according to several people with knowledge of the matter.

Related Links

After facing criticism for its lax oversight, the board wanted to assert its position as a check on top management, according to the people, who declined to be named because the discussions were not public.

Mr. Dimon, who was the highest paid chief executive at a large bank in 2011, was unfazed when he heard the news. On Wednesday, Mr. Dimon said the board “had a tough job” in assessing how to reduce his total compensation for the year. He called the trading episode an “embarrassing mistake” and said, “I respect their decision.”

The decision came after back-to-back board meetings earlier this week where the head of the board’s compensation committee, Lee R. Raymond, the former chief executive of Exxon Mobil who is known for his no-nonsense style, made a compelling pitch to his fellow directors. The group, Mr. Raymond argued, needed to take swift, decisive action.

While a few members were initially skittish about the depths of the proposed cuts, the board voted unanimously to reduce Mr. Dimon’s pay to $11.5 million from $23.1 million a year earlier, according to the people. The directors also voted to release the results of internal investigations into the trading losses, which largely fault other top executives for the problems.

The extent of the cut took some JPMorgan executives by surprise when news of the compensation was disclosed on Wednesday along with the bank’s earnings, which surged to an annual record of $21.3 billion.

“Mr. Dimon bears ultimate responsibility for the failures that led to losses,” the board said in a statement. It added that upon learning the extent of the losses, he “responded forcefully.”

Still, the trading losses, which have swelled to more than $6 billion, have cast a long shadow over the board and management of the bank. Many of JPMorgan’s hallmarks that Mr. Dimon has trumpeted, from its deft management of risk to a deep bench of executive talent, have been partially undercut by the trading fiasco and ensuing upheaval.

Despite the board’s move on pay, some federal regulators are skeptical that the directors have prowess to adequately police risk, according to several current and former regulators with knowledge of the matter. Mr. Dimon, 56, who successfully steered the bank through the turbulence of the 2008 financial crisis relatively unscathed, still maintains a tight grip on the bank.

Some federal regulators worry that the board, which largely exonerated themselves in their internal investigation of the losses, cannot sufficiently push back against the hard-charging Mr. Dimon. Others, the regulators said, are concerned that the directors lack the financial acumen to rein in risky activities.

At the time of the losses, the board’s risk committee had three members, a smaller group than many of its major Wall Street rivals. Also troubling, the regulators said, the three included executives with little banking experience: the president of the American Museum of Natural History, Ellen V. Futter, and David M. Cote, the chief executive of the manufacturer Honeywell. Since the losses were disclosed, Timothy P. Flynn, formerly the chairman of the auditing firm KPMG, joined the risk committee.

Joseph Evangelisti, a JPMorgan spokesman, said, “This is the same board that brought us through the worst financial crisis in our history with flying colors.”

Since revealing the trading losses in May from a soured bet on complex credit derivatives, Mr. Dimon has exerted his powerful influence over the shape and direction of the bank. He has reshuffled the upper echelons of its management, claiming the jobs of some of his most trusted lieutenants. Two notable casualties are Douglas L. Braunstein, who ceded his role as chief financial officer in November, and Barry L. Zubrow, a former chief risk officer, who resigned as head of regulatory affairs late last year. Mr. Braunstein is a vice chairman reporting to Mr. Dimon.

Adding to the turmoil at the top of the bank, Ina R. Drew resigned as head of the chief investment office shortly after the trading losses were announced. Her precipitous fall was followed this year by the departure of James E. Staley, once considered a potential heir to Mr. Dimon.

To replace them, Mr. Dimon has elevated a group of younger executives, most of whom are in their 40s. Some bank analysts and executives at JPMorgan worry that the group does not yet have the institutional knowledge or experience of their more seasoned predecessors, according to several people with knowledge of the matter.

At a conference in San Francisco earlier this month, Mr. Dimon called the current group of executives “the strongest leadership team we have ever had in place.” He mixed his praise, however, with a sharp criticism of others at the bank in the aftermath of the trading losses. “Instead of helping, they were running around with their head chopped off,” he said. Some “acted like children” and wondered “What does this mean for me personally? How’s my reputation?”

At the same time, Mr. Dimon has emerged relatively unscathed. While critical of Mr. Dimon, an internal report, led by Michael J. Cavanagh, a head of the corporate and investment bank, leveled its most scathing attacks on the executives who directly oversaw the London traders who made increasingly outsize wagers in the bank’s chief investment office. “Responsibility for the flaws that allowed the losses to occur lies primarily with C.I.O. management,” the report, which was released on Wednesday, said. Also ensnared are Mr. Zubrow and Mr. Braunstein.

The cuts target Mr. Dimon’s bonus compensation. While his salary remained the same from a year earlier at $1.5 million, his bonus was whittled down to $10 million, paid out in restricted stock.

Still, Mr. Dimon has accumulated much wealth in his years at the bank. He owns bank shares valued at $263 million.

Ben Protess contributed reporting.

A version of this article appeared in print on 01/17/2013, on page A1 of the NewYork edition with the headline: JPMorgan Uses Big Cut in Pay To Send Signal.

Article source: http://dealbook.nytimes.com/2013/01/16/morgans-board-uses-a-pay-cut-as-a-message/?partner=rss&emc=rss

DealBook: ConocoPhillips to Split Into Two Businesses

A ConocoPhillips refinery in Wilmington, Calif. The nation's third-largest oil company is spinning off its refining and marketing segment.Jonathan Alcorn/Bloomberg NewsA ConocoPhillips refinery in Wilmington, Calif. James Mulva, chief of ConocoPhillips, plans to retire once the transaction is complete.J. Scott Applewhite/Associated PressJames J. Mulva, chief of ConocoPhillips, plans to retire once the transaction is complete.

ConocoPhillips said on Thursday that it would break itself into two companies, spinning off its refining business to shareholders by the first half of next year.

ConocoPhillips would hold onto its higher-margin exploration operations, and would seek acquisitions to expand that business.

The plan is to let each division focus on its core businesses as a way to bolster the ConocoPhillips stock price.

Shares in the company have risen 42.3 percent in the last 12 months.

“We have concluded that two independent companies focused on their respective industries will be better positioned to pursue their individually focused business strategies,” James J. Mulva, the ConocoPhillips chairman and chief executive, said in a statement.

Mr. Mulva plans to retire once the split is completed.

The plan does not require approval from shareholders.

Article source: http://feeds.nytimes.com/click.phdo?i=12ff61789ed712a709819f9236cddd26