JPMorgan Chase shareholders have signed a billion-year contract to join the Cult Of Jamie Dimon. For better or worse.
With their overwhelming vote on Tuesday to let Dimon keep both his chairman and CEO titles at the biggest U.S. bank, shareholders proved themselves vulnerable to incessant warnings from the bank, Dimon's fellow CEOs and board members, and the financial media that Dimon is indispensable, that no other human being on the planet could possibly lead JPMorgan.
This is a dangerous message to send, to Dimon and the rest of Wall Street.
"JPMorgan should be a machine, not the expression of one man's individual genius," said Bart Naylor, financial policy advocate at the nonprofit group Public Citizen.
The shareholders trying to take away Dimon's chairmanship weren't trying to take the job of running JPMorgan away from him. They just wanted to give the board's oversight function to somebody else -- they didn't want Dimon being his own boss, in other words. But even this minor tweak to Dimon's job function would have been such an outrageous affront to Dimon's royal personage that he might have taken his indispensable skills away from the bank forever, causing the stock price to collapse, or so the bank reportedly warned shareholders in private.
"If you voted for Dimon to lose chairmanship, you voted for a lower stock," CNBC shouty man Jim Cramer tweeted on Tuesday morning before the final tally. "Who in heck would every [sic] do that."
Cramer joined Warren Buffett and many more VIPs in singing Dimon's praises and warning of the woe that would befall shareholders if they chased him back to Mount Olympus. The media played along, helping the bank successfully carry out what New York's Kevin Roose described as something "more like a presidential campaign than a normal lobbying effort" to help Dimon keep both of his jobs.
Virtually ignored in the debate about Dimon's indispensable leadership was the fact that Dimon and his compliant board have left JPMorgan -- again, the biggest bank in the United States, with more than $2 trillion in assets -- without a potential successor should Dimon ever get hit by a bus, God forbid, or take his talents to the Federal Reserve. As Slate's Matthew Yglesias points out, picking a successor is a key responsibility of a chairman of the board -- Dimon's job.
"It highlights the failure of this board to act as a check on Mr. Dimon and to fulfill their most fundamental duty to the bank: ensuring that there is someone capable to run the bank if the current CEO isn’t there for whatever reason,” Dennis Kelleher, president of Better Markets, a nonprofit group advocating for financial reform, said in an emailed statement.
Splitting the chairman and CEO roles is not necessarily the secret of sound corporate governance or stock performance -- as former Enron shareholders could tell you, if you could get them to stop weeping long enough. But if you could have independent oversight of corporate management, then why wouldn't you? Aside from stroking the ego of corporate management, that is?
Dimon's many defenders note that he steered the bank safely through the financial crisis, opened up to shareholders about the bank's $6 billion "London Whale" trading loss, and guided the bank to record profits despite that loss. But then, he also let the bank get itself into those London Whale trades in the first place, taking unnecessary risks to keep boosting profits. He has been at the helm as the bank has wandered into one regulatory rat's nest after another and as the Office of the Comptroller of the Currency cut its rating of the bank's management to "needs improvement."
Splitting the CEO and chairman roles shouldn't necessarily have been some kind of punishment for these failings. It's just good governance. And it is certainly not the end of the world that Dimon has held onto both of his jobs. But the manner in which Dimon won, terrorizing shareholders into believing that catastrophe will follow his departure, is a dangerous precedent.
The hubris of JPMorgan's management was already on full display in the recent Senate report on the bank's London Whale losses. Dimon & Co. ignored warnings about the risks they were taking and defied regulators and media prying into their business.
Rather than humbling Dimon, JPMorgan shareholders have declared, loudly, that Dimon alone should hold their fate in his hands. They had better hope it doesn't go to his head.