JPMorgan CEO Jamie Dimon has criticised on May 28 shareholders who use proxy advisers as ‘lazy’ and ‘irresponsible’. The chief executive of JPMorgan Chase told investors that shareholders should make up their own minds rather than use the recommendations of ISS or Glass Lewis, the main US proxy advisers. “God knows how any of you can place your vote based on ISS or Glass Lewis,” Mr Dimon said at the Sanford Bernstein conference. “If you do that, you are just irresponsible, I’m sorry. And you probably aren’t a very good investor, either. And you do. Believe me. I know some of you here do it because you’re lazy.”
Mr Dimon was clearly unpleased with the turnout of the Say on Pay vote on his 27 million 2014 pay. Only 61% of shareholders supported the bank’s 2014 compensation packages, which included a $7.4 million cash bonus for CEO Jamie Dimon for a total which some one total to 20 up to 27 million according to the Fortune magazine.
Many active and engaged shareholders might feel extremely insulted by Mr Dimon’s suggestions at lack of professionalism; indeed his accusation, offered without evidence base is itself professionally questionable.
Jamie Dimon raises however good question widely discussed as it rare to see an issuer calling so abrubtly his sharehodlers, and it opens an opportunity for dialogue about the state of stewardship. It is true that there are some investors who are more interested in voting as a compliance issue and who have become, to all intents and purposes, zombie voters. That is not a model we support at ECGS.
Rather we see that governance and voting should be integral to the core fund management process and our research is one tool amongst many which helps inform fund managers points of view.
Two years ago JP Morgan interfered in the vote counting process on the contentious vote regarding his separation of chair and CEO in such a way that the Council of Institutional Investors was forced to write to the SEC to demand a review:
https://www.thecorporatecounsel.net/blog/2013/05/survey-results-end-user-exception-for-swaps.html http://www.cii.org/files/issues_and_advocacy/correspondence/2014/03_06_14_CII_letter_SEC_proxy_distributors.pdf
Remuneration is not solely an issue of quantum, it’s an issue of performance and accountability; it’s the “window on the corporate soul”.
We are always a bit confused when fund managers say that reading annual reports is “too complicated”. Stock selection research is complicated, it’s what fund managers are paid to do. Where governance isn’t integrated into the investment process then there can, it’s true, be resourcing issues, it’s not reasonable to ask 1 or 2 people to read 200 annual reports a week without some form of assistance. No fund manager I know would make investment decisions without the kind of research and tools available from Thomson Reuters, Bloomberg, FactSet et al, not to mention the billions that are spent on sell side research.
ECGS members, Proxinvest as Manifest in the UK are only paid by investor clients to research the issues which matter to them and present findings in an easy to digest, robust and comparable format. In some cases the simple facts and figures are sufficient to inspire the vote as we can observe from the Say on Pay votes :
ISS and GlassLewis are competitors of us but they have a right to do their job. The fact is also that there are many shareholders who do not want to see egregious pay for under-performance and they do want performance to be sustainable. Many also see the joint chair/CEO appointments as a red-line issue going back a quarter of a century at least.
The final question on JP Morgna is stated by Sarah Wilson of Mnaifest : is Jamie really in touch with his shareholders? Does he understand what they do or is he just listening to what his advisors are paid to tell him?
It’s much easier for an advisor to blame someone else than it is to have that tough conversation about what they don’t like. Most importantly, what does his outburst say about his views on accountability? I think he’s done everyone a great favour by opening up a really important debate.
Bu on one thing we agree with Jamie : the right thing for investors is not to rely on any one source to make key decisions about the companies they own. A cheap services on proxy voting can turn out to be very expensive for their users while reputations are priceless.
