WASHINGTON, Jan. 17, 2012 /PRNewswire/ -- The AFSCME Employees Pension Plan ("the AFSCME Plan") today announced it filed a shareholder proposal asking JPMorgan Chase & Co. (JPM) to adopt an independent board chair.
(Logo: http://photos.prnewswire.com/prnh/20120117/DC35913LOGO)
The AFSCME Plan, an institutional investor with more than $850 million in assets and a long-term shareholder of JPM, submitted the shareholder proposal for consideration at JPM's 2012 annual meeting. The AFSCME Plan views the proposal as an important way to protect and enhance the economic value of its long-term investment in JPM and sees the proposal as a way to refocus the company on better managing its economic risks and protecting and improving the value of its shares.
"Jamie Dimon has gone from the 'Last Man Standing(1)' to 'the Most Dangerous Man in America(2)'," said AFSCME President Gerald W. McEntee, "and it is high time that the board of directors stepped in to manage risk at JP Morgan."
JPM shares have declined almost 20% relative to the S&P 500 over the past year as the firm has faced significant additional legal and reputational risks(3). According to Bloomberg, bad mortgages and foreclosure abuses have already cost JPM $16.3 billion(4). In addition to the serious financial consequences of the foreclosure fraud debacle, JPM has suffered reputational damage due to:
- alleged involvement with Bernie Madoff(5);
- foreclosure actions taken against six active duty military personnel in violation of the Servicemembers Civil Relief Act(6);
- charges of having participated in an unlawful payment scheme to win business with Jefferson County, Alabama(7); and
- SEC enforcement actions leading to a settlement over allegations that JPM had misled its clients regarding a collateralized debt obligation (CDO)(8).
During this period, JPM CEO Jamie Dimon has also been acting as the board chair at JPM; Dimon has filled both roles for JPM since 2006.As Chairman of the Board, JPM CEO Jamie Dimon presides over the directors who establish his compensation. Dimon's pay increased from $1.3 million in 2009 to $27.8 million in 2010(9).
JPMorgan has been at the center of controversy surrounding improper mortgage documentation. The Congressional Oversight Panel reported that for the critical 2005-2007 period, JPM and its subsidiaries constituted the third largest originator of US Mortgages and the largest underwriter of non-agency mortgage-backed securities(10). FBR Capital Markets analyst Paul Miller estimates that JPM faces losses of over $21 billion due to mortgage "putback" litigation(11).
The AFSCME Plan believes that adoption of its proposal to require an independent board chair would be an important first step towards refocusing JPM on curing these problems and improving its economic performance.
"An independent chair would get JPMorgan executives focused on generating long term value for shareholders, rather than empire-building and big bonuses," added McEntee.
Separation of the chair and CEO positions is a reform increasingly supported by both directors and institutional shareholders as instrumental in protecting the value of publicly held companies. In 2009, the Chairmen's Forum, a group of more than 50 current and former board chairs, directors, chief executives, investors and governance experts hosted by Yale's Millstein Center, endorsed the voluntary adoption of independent, non-executive chair of the board, finding that "[t]he independent chair curbs conflicts of interest, promotes oversight of risk, manages the relationship between the board and CEO, serves as a conduit for regular communication with shareowners, and is a logical next step in the development of an independent board." Additionally, the number of U.S. companies moving to separate the chair and CEO positions has been increasing. Forty percent of S&P 500 companies now split the chair and CEO roles.
AFSCME's 1.6 million members provide the vital services that make America happen. With members in hundreds of different occupations - from nurses to corrections officers, child care providers to sanitation workers - AFSCME advocates for fairness in the workplace, excellence in public services and prosperity and opportunity for all working families.
(1) http://www.amazon.com/Last-Man-Standing-Ascent-JPMorgan/dp/B003STCKN0/ref=ntt_at_ep_dpt_1
(2) http://baselinescenario.com/2010/04/03/the-most-dangerous-man-in-america-jamie-dimon/
(3) Decline relative to S&P 500 was 19.52%. CapitalIQ as of January 9, 2012.
(4) http://www.bloomberg.com/news/2011-09-16/mortgage-debacle-costs-u-s-banks-66-billion-as-bad-home-loans-sap-profit.html
(5) http://www.sec.gov/Archives/edgar/data/19617/000119312511212045/d10q.htm
(6) http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=112_house_hearings&docid=f:65867.pdf page 28
(7) http://www.sec.gov/news/press/2009/2009-232.htm
(8) http://www.sec.gov/news/press/2011/2011-131.htm
(9) Institutional Shareholder Services report on JPM, May 13, 2011, page 13.
(10) http://cybercemetery.unt.edu/archive/cop/20110402010313/http://cop.senate.gov/documents/cop-111610-report.pdf
(11) http://www.thestreet.com/story/11239620/1/stop-bashing-the-banks-analyst.html
SOURCE American Federation of State, County and Municipal Employees
