JPMorgan Chase Chairman and CEO Jamie Dimon on Tuesday won a crucial shareholder vote rejecting a proposal to strip him of his chairman title, a big victory for the brash leader of the country's largest bank.
Thirty-two percent of shareholders supported the split in roles, down significantly from last year's tally of 40 percent on the same issue, a reversal that will emboldened companies that still embrace having one person serve in the chairman and chief executive roles.
Still, the 57-year-old Dimon must grapple moving forward with a third of his shareholder base who are dissatisfied with him, the bank's board structure and its directors. The heightened pressure could force Dimon to push in the short-term for significant changes to the board.
The scrutiny Dimon has faced in recent years is in sharp contrast to the praise heaped on him earlier for steering JPMorgan Chase successfully through the financial crisis when other institutions were chastised for receiving government bailouts. In recent weeks, Dimon even raised the possibility he would step down if his roles were split.
The bank's shares were up nearly 2 percent in trading Tuesday, to $53.50.
Surprising to some, the lower tally on the vote to split roles comes after a year in which investors were rankled over the $6.2 billion London Whale trading loss, which resulted in Dimon being summoned to testify before Congress.
The official vote tally was announced before a packed room of 300 in a Tampa, Florida, office park, after an often-contentious two hour meeting that was no frills this year with no food or drink was provided for shareholders. Interestingly, porta-potties were set up outside the meeting hall for protesters, but none showed up.
(Too see how it all went down in real time, check out John Carney's live blog.)
Management praised Dimon during the meeting. "We do believe the current governance structure, with Jamie Dimon serving as both chairman and CEO, and an independent minded board, has served the shareholders well and is right for the company at this time," said Lee Raymond, JPMorgan Chase's presiding director and the former CEO of Exxon Mobil. "All you need to know is that the board can fire management and management cannot fire the board."
Dimon, who appeared nervous initially at the meeting, did little chest-thumping about his record at the bank. After recapping the bank's business over the year, he said: "That is why I am proud to be a part of JPMorgan Chase." He added later in the meeting that ""the management team, I believe, is the best, most capable, highest caliber I've ever dealt with in my life.".
The much-publicized vote -- one of the most highly anticipated of this year's annual meeting season –may still provide momentum to governance activists who believe having the same person serve as CEO and chairman is bad for business, and bad for shareholders.
"This was a victory for Dimon, clearly, but you wonder if it was a loss, too, because of all the attention focused on him," said Charles Elson, a corporate governance expert and a business professor at the University of Delaware. "You have to think that 32 percent stays energized for next year."
Elson added that splitting chairman and CEO roles will become the "default position" for companies sooner or later. "That structure will outlive (Dimon) and that structure is what will protect investors."
Efforts to separate the roles of chairman and chief executive at public companies in the U.S. have been underway for years. The share of companies in the S&P 500 with a split structure has risen to 41 percent in 2011 (the most recent figures available) from 23 percent in 2003, according to a report by Deloitte last year.
While Dimon can claim victory, the risk committee of the board may not. The committee has taken heat for an alleged lack of oversight for the London Whale trading loss last year. The three members, Ellen Futter, David Cote and James Crown, for whom shareholder advocacy group ISS had urged shareholders to withhold support, garnered less than 60 percent support each. . Futter was a no-show at the meeting.
After the meeting, shareholder CtW Investment Group called for the resignation of Futter, Cote and Crown and for "an immediate overhaul" of the risk committee.
Raymond hinted at changes to the committee. "We are very mindful of what we've heard," he told shareholders during the meeting. He told them it is realistic for them to expect management to reflect on structure of board after the meeting is over. "Our reaction will be tempered analysis of what we've heard," he added.
Mike Garland, executive director of corporate governance for New York City Comptroller John Liu's office, which has a $550 million investment in JPMorgan Chase, said "it was a disservice to shareholders that the vote became a referendum on Jamie Dimon. I am sure that influenced the voting. This was really a referendum on the board's oversight of risk."
The meeting was not interrupted by much applause, but Andrew Pittman, a local Tampa shareholder, got the crowd going when he said he opposed the shareholder proposal to split the CEO and chair. "I wish the president of the United States would be more like Dimon," he said. Clapping followed.
As an added bonus for shareholders, the bank announced Tuesday it was raising its quarterly dividend to 38 cents per share, from 30 cents in the earlier quarter. The dividend is payable on July 31.
-- Additional reporting by Kayla Tausche and Margaret Popper.