Jamie Dimon Faces His Critics in Crucial Shareholder Vote
The majority of the largest shareholders—representing more than 26 percent of the voting power in the company—have unified executive chairman. Each of the five biggest shareholders—Blackrock, Vanguard, State Street, Wellington, and FMR—have chief executives who are also chairman.
This is what we might call a revealed preference. The top shareholders apparently think that having CEO chairman is a good idea. They are very likely to vote not to split the roles.
Around 45 percent of the top holders, however, reveal the opposite preference. They divide the roles. Together they control around 11 percent of the voting power.
This is where the weird role of a mostly unknown organization called Governance for Owners comes into play. The organization is a self-styled shareholder activist—although not in a loud and pushy sort of way. Governance for Owners says on its website that its activism is "constructive and discrete."
Although Governance for Owners runs a small fund of its own, that's not why it is important here. What makes it important is that Blackrock, the largest holder of JPMorgan stock, has delegated its voting power to Governance for Owners, according to the New York Times. It had to do so because of a provision in the Bank Holding Company Act, which applies to Blackrock because of PNC Financial's 21 percent stake in the asset manager.
Last year, Governance for Owners voted against the proposal to divide the chairman and chief executive roles. But because shareholder advocate types are really enthusiastic about having splitting the roles, there is at least some chance it will vote with other shareholder adviser groups.
Governance for Owners is holding its cards pretty close to its vest, refusing to say how it will vote. But if its task is to represent the interest of Blackrock here, you'd think Blackrock's entrusting the chairmanship to its chief executive Larry Fink would count in favor of letting Dimon hold on to both roles.
Calpers—another large institutional holder—Is expected to vote in favor of splitting the chair and CEO. The California public pension voted in 2011 to split them. And then, of course, there are the AFSCME Employees Pension Plan, the Connecticut Retirement Plans & Trust Funds, Hermes Equity Ownership Services and the New York City pension funds that have already indicated support for a split.
The last time around, 40 percent of the shareholder vote went for splitting the roles. If a smaller share votes for the split this time, that will be a major victory for Dimon. If a significantly larger share votes to split, Dimon will at least have suffered a setback. Which means that if Governance for Owners changes the Blackrock vote and all others remain the same, Dimon will be seen as having been rebuked.
A majority vote against Dimon would almost certainly spur the board to reconsider the current structure, despite the fact that the vote is only advisory.
When asked what the biggest downside to splitting the roles would be, Dimon replied that it might result in him leaving the company. That wasn't really a threat. It was more of a prediction by someone who understands himself very well. Dimon does not need the money he gets from running JPMorgan—he's been paid quite enough over the years to have amassed a fortune larger than he or his progeny will ever need. So if shareholders rebuke him too strongly, he may well decide they'll have to make do without him.
At this point in his life, he doesn't need to put up with a scolding by the assistant headmistress.
_By CNBC's John Carney. Follow him on Twitter at @carney.