If nothing else, last week's vote by JPMorgan Chase & Co.'s shareholders to allow Jamie Dimon to retain his duties as both chairman and chief executive illustrates the importance of proxy voting by all shareholders — big and small. Last Tuesday, 68% of the bank's shareholders voted to allow him to continue to run the firm's management team and its board.
Although the fact that one-third of shareholders voted against Mr. Dimon is worth noting, he clearly still has the confidence of the vast majority of shareholders, despite the controversy surrounding the bank's "London Whale" losses and federal investigations into its operations.
No doubt, some pundits will see his victory as a resounding defeat for corporate governance. Others will see it as a sign of the power held by JPMorgan's board, which lobbied hard — and some might even say unfairly — to let Mr. Dimon keep both titles.
In the end, however, his victory really is a testament to the influence that the proxy-voting process can have on a company's operations and corporate governance. After all, even though last week's vote was nonbinding, Mr. Dimon reportedly planned to resign if shareholders didn't vote in his favor.
No one knows whether he really intended to resign. And in the end, shareholders decided not to call Mr. Dimon's bluff.
By allowing him to retain both jobs, shareholders went against the advice of Glass Lewis & Co. LLC and Institutional Shareholder Services Inc., two influential proxy advisory firms, both of which called for an independent chairman.
In theory, splitting the roles of chairman and chief executive makes perfect sense.
After all, it is the responsibility of the board to look out for the interests of shareholders and hold top management accountable for its actions. How is that possible when the chairman and chief executive are one and the same?
That said, there is no compelling evidence to suggest that splitting the roles of chairman and chief executive significantly improves a company's stock price.
And let's not forget that there are plenty of examples of companies with split roles that have done wrong by shareholders. Anyone remember Enron Corp.?
POWERFUL REMINDER
As the proxy-voting season comes to an end, Mr. Dimon's battle to retain complete authority over JPMorgan and its board is a powerful reminder of the importance of voting proxies. Just as engaged U.S. citizens should vote in political elections, engaged shareholders should vote their corporate proxies.
Institutional shareholders — particularly public-employee pension funds — vote their proxies, and while they no doubt are concerned about a company's financial performance, they may also have other agendas.
In the proxy battle involving Mr. Dimon, several large institutions came out in favor of him at the 11th hour.
Before that, according to reports, the vote was considered quite close.
Individual investors shouldn't cede their ability to influence something as important as corporate governance at the companies in which they invest.
Financial planners and investment advisers can help by urging their clients to read their proxy statements and to cast their votes. They can go further and offer to help clients understand the issues discussed. They even can fill out the documents and mail them back before the deadlines, or submit them online or via e-mail.
One area to which planners, financial advisers and investors should pay particular attention is executive compensation. Shareholders can help rein in excessive executive compensation by voting yea or nay on the directors' recommended compensation for senior corporate executives.
If more individual shareholders vote their proxies, corporate governance in the United States, especially with regard to how executives are motivated financially to bolster performance, will improve.
That improvement, of course, won't come overnight, but it will come.
Mr. Dimon is already implementing a plan to strengthen JPMorgan's compliance and audit controls, according to published reports.
Although that effort no doubt was under way long before last week's shareholder vote, it suggests that the chairman and chief executive is taking seriously the dissent made clear in the proxy fight.
27 May, 2013
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Source: http://www.investmentnews.com/article/20130526/REG/305269985
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