Jamie Dimon is one of the most iconic — and some say divisive — figures on Wall Street. But based on the current news, there’s no guarantee the bank exec will be around to admire or admonish before long.
Shareholders of JPMorgan Chase (NYSE:JPM) will vote later this month at their annual meeting whether the chairman and chief executive roles should be unlinked at the banking behemoth. Dimon currently holds both roles, and recently told The Wall Street Journal that he would sooner quit than relinquish power.
The motives for the vote are, on the surface, obvious — a $6 billion trading loss last year by the “London Whale” made some wonder about who was really running the show and whether JPM needed more oversight.
“Dimon has either failed to supervise, failed to tell the truth, or both. Pleading ignorance doesn’t help,” Tufts University business professor Amar Bhide told Eleanor Bloxham in a recent Fortune article.
That just about sums things up.
However, the idea of a vacuous move like stripping Dimon of his chairmanship just to send a message about “oversight” seems both myopic and ineffective.
Consider that a host of companies with separate CEOs and chairmen have crashed and burned. How about Chairman Thomas Engibous of JCPenney (NYSE:JCP), who presided over the Ron Johnson debacle, joining the board in 2012 just to watch the retailer driven into the ground? The stock is down 50% and the brand might be forever ruined … so much for strategic oversight thanks to a second set of eyes, right?
Furthermore, as CEO of JPMorgan since 2005, Jamie Dimon has a longer-term track record that sets him far above peers in the financial sector. If they can even be called peers, that is. Ken Lewis was quickly pushed out at Bank of America (NYSE:BAC) for his failure to mitigate risk in the bank’s mortgage business, and though Vikram Pandit was forced out at Citigroup (NYSE:C) more recently, his track record was equally ugly.
JPM, on the other hand, has emerged bigger and more dominant than ever thanks to its Washington Mutual acquisition and thanks to a much healthier balance sheet than its peers.
JPMorgan stock is back to 2008 levels, while Citi and BofA are down 80% and 65%, respectively. It boasts a 3% yield and has buybacks approved by the Federal Reserve while Citi and Bank of America pay a mere penny per quarter for a measly yield — and lately, they haven’t even had the confidence to request an increase, let alone get one denied.
JPM is well capitalized, a model of profitability and dominance, and even in the face of trading losses that could climb to $9 billion, it manages to beat earnings expectations.
You want to get rid of this guy, shareholders?
I don’t contend that JPMorgan stock owners should be desperate for him to stay. There undoubtedly are some culture problems at JPM, and the divisive nature of Mr. Dimon could certainly cause more harm than good in some circles.
But you have to wonder who wins if Jamie Dimon gets fired from one post, or decides to quit both.
The bottom line is that most shareholders vote with their wallets … and love him or leave him, Jamie Dimon has been good for JPM stock in the last few years — London Whale and all.
- Worth noting: Dimon left the New York Fed earlier in 2013, in part because of controversy about the London Whale. (Dealbook via NYT)
- The Wall Street Journal opinion page editors say the Dimon ouster plan isn’t about shareholders at all. (WSJ)
- Though a bit old, 10 interesting facts about Jamie Dimon. (Politico)
- James Altucher asks, “Where were (crusading investors) in 2007 on Lehman Brothers when shareholders actually needed them?” (Breakout via Yahoo! Finance)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.