Jamie Dimon is the 57-year old banking mogul whose been running JPMorgan Chase (NYSE: JPM) since 2005, and he decisively won a shareholder vote yesterday to keep both his chairmanship and chief executive officer (CEO) titles at the nation's largest bank.
But don't celebrate yet.
Sure, only 32.2% of shareholders voted for a proposed resolution to split the company's two top jobs. And that may sound like great news (for him) but the winner wasn't Jamie Dimon, it was the Cult of the CEO.
The losers in the vote? You, me and the American public at large.
The Cult of the CEO is not a new order. It is, and has been, the religion of American business, which is all well and good when businesses are small or even medium sized.
But when businesses become behemoth corporations, especially in the case of too-big-to-fail banks, it makes sense to separate the CEO and chairman of the board jobs.
That rarely happens. It's almost always the CEO, not the chairman, who not only runs the company, but runs the chairman and the board of directors he's supposed to answer to.
It's a cult because the CEO usually hand picks his board of directors. If he's powerful enough, or clever enough, the CEO offers friends seats on his company's board. Directors are voted on by shareholders, who almost always rubber stamp choices based on what they believe is a group decision made at the board level.
The board of directors, headed by the chairman of the board, is supposed to pick the company's CEO and oversee the business of the company as it is managed by the CEO and the executives the CEO enlists to help him run the show.
Consolidating Power Corrupts
A powerful CEO, especially one who makes the company tons of profits and raises its share price, often vies for the chairman of the board gig to consolidate and aggregate his power, and he usually gets it.
Or, in the case of a merger or the buyout of another company, to make the marriage friendly, roles are usually negotiated before a deal is consummated.
That's how Jamie Dimon got his job as chairman of Chase. He negotiated it before he sold Bank One to Chase in July 2004, where he was then-CEO of the nation's fifth largest bank.
Upon the sale, Dimon became president and chief operating officer (COO) of JPM. A year later, he was named CEO, and just another year later he was named chairman of the board.
What's wrong with the CEO getting to hand-pick the directors of the company he's being paid a lot of money to run and then having them vote him to be their chairman?
There's no accountability. And we've seen what happens when financial institutions have little accountability.
Ask Yourself the Tough Questions
How is Jamie Dimon, the chairman of the board, effectively going to judge Jamie Dimon the CEO, who answers to the board?
How is Jamie Dimon, as chairman of the board, going to make sure that the board he runs has an effective succession plan to replace Jamie Dimon the CEO (who doesn't want to ever give up his job as the most powerful banker in America), when he fails or needs to be replaced for any other reason?
How is Jamie Dimon, as chairman of the board, going to manage the suspect legal and ethical questions that the CEO (Jamie Dimon) is responsible for saddling the company with?
What ethical and litigation questions? They're there in the litigation section of company's latest quarterly filing, all 18 single-spaced pages of them.
How is Jamie Dimon, as chairman of the board, not responsible for demoting the CEO, who prides himself in his risk management skills, for taking full responsibility for the billions of dollars in losses the bank suffered when the CEO's top lieutenants blew a bunch of hedge trades in the suspiciously hidden London office?
How did the CEO not get fired for lying to the board of directors about the extent of the losses, which he only told them about because other traders in London were gloating over harpooning Chase's so-called London Whale?
How can a power hungry cult figure run a bank with 256,000 employees and $2.4 trillion in assets, threaten to quit the bank if the non-binding vote (non-binding meaning the shareholder vote meant nothing and imposed no legal requirement to actually split the two top jobs) called for him to resign one of his two positions?
He threatened to leave in order to frighten institutional shareholders (who would likely lose money if the stock fell as the result of the leader of the bank left) into voting against the resolution.
It worked. As noted, only 32.2% of shareholders votes were for the resolution this year.
Last year, the same resolution garnered 40% "yes" votes to split the two jobs. That vote took place immediately on the heels of the London Whale news, which was played down by the chairman and CEO before the real truth was made public.
There are no checks and balances when the CEO is the chairman and controls the board.
There are only captured and beholden boards and non-binding resolutions, and more schemes to make more profits to keep the crown on the head of the King of the Cult.
And that makes JPM less secure in the long run than more secure.
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Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
He helped develop what has become known as the Volatility Index (VIX) - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
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