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May 11, 2012
Shareowners Renew Call for Improved Governance at JPMorgan Chase
    by Robert Kropp

After the bank reports $2 billion in losses on risky trading, the American Federation of State, County & Municipal Employees calls for the appointment of an independent Chair, stating that the stakes are too high to leave CEO Jamie Dimon unsupervised.

Yesterday's disclosure by JPMorgan Chase that its London-based investment office had lost $2 billion in risky proprietary trading rightly shocked investors and led to a nine percent decrease in the company's stock price overnight.

Jamie Dimon, JPMorgan's Chairman and CEO, attributed the losses to "flawed positions on synthetic credit securities that remain volatile and may cost the lender an additional $1 billion this quarter or next," according to Bloomberg.

Dimon has been harshly critical of efforts to regulate the financial sector in the aftermath of the financial crisis, going so far as to personally criticize Paul Volcker, the architect of the proposed Volcker Rule currently being negotiated by regulators. Earlier this year, Dimon told Fox Business, "Paul Volcker by his own admission has said he doesn't understand capital markets. He has proven that to me."

Sustainable investors have consistently called for more effective regulation of banks, including the implementation of a Volcker Rule that prevents banks from making the proprietary bets with their own money that led to JPMorgan's losses. In the aftermath of JPMorgan's announcement, it would seem that calls for meaningful regulation may yet outweigh the machinations of industry lobbyists seeking to weaken the rules that are to be issued.

Senator Carl Levin, the Chairman of the Permanent Subcommittee on Investigations when it issued its report on the financial crisis last year, said in a statement, "The enormous loss JPMorgan announced today is just the latest evidence that what banks call 'hedges' are often risky bets that so-called 'too big to fail' banks have no business making. Today's announcement is a stark reminder of the need for regulators to establish tough, effective standards."

In a conference call with analysts, Dimon said, "It plays into the hands of a bunch of pundits but you have to deal with that and that's life," according to The New York Times.

Shareowner activists need not wait for the issuance of a final Volcker Rule to ensure that corporate governance at JPMorgan Chase improves. The bank's annual general meeting will be held on May 15th, and shareowners will vote on a resolution filed by the American Federation of State, County & Municipal Employees, (AFSCME), calling for the appointment of an independent director as Chair of the Board.

"JPMorgan's CEO James Dimon also serves as chairman of the Company's board of directors," the resolution states. "We believe the combination of these two roles in a single person weakens a corporation's governance which can harm shareholder value."

JPMorgan's board has recommended that shareowners vote against the proposal, arguing that "the Firm's board leadership structure already provides the independent leadership and oversight of management sought by the proponent."

Following yesterday's revelations of JPMorgan's losses, AFSCME President Gerald McEntee issued a statement which read, "Wall Street greed and conflicts of interest drove our economy into a ditch. JP Morgan Chase shareholders need to act together and tell the board that we want meaningful controls over risk and real oversight of management. We need an independent chairman of the board. The stakes are too high to leave Jamie Dimon unsupervised. Dimon denied that the 'London Whale' was making risky bets, and now that this has turned out to be a fish story, shareholders need to step in."


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