Proxy Advisers Recommend JP Morgan Investors Split Chair and CEO Roles

ISS and Glass Lewis, which provide voting advice to large fund managers, have recommended that JP Morgan investors support a shareholder resolution calling for the separation of the chair and chief executive positions as soon as possible. The vote is scheduled for the bank’s annual general meeting on 19 May.

The bank’s leader has held the chief executive role since 2006 and the chair position since 2005. The individual is estimated to be worth $2.6 billion. ISS stated in its report that the size and complexity of JP Morgan make it difficult for one person to manage both the company and the board.

ISS added that the board is responsible for overseeing management and that conflicts of interest may arise when one person holds both positions. The firm said effective board oversight may be enhanced by independent leadership. Glass Lewis stated that an independent chair would be better able to oversee executives and set a pro-shareholder agenda.

Morgan is urging investors to oppose the proposal, which was brought by an individual retail investor. The bank has sent public letters to ISS and Glass Lewis asking them to reverse their recommendations. It said there is no evidence that companies with independent chairs perform better than peers and pointed to its record of strong financial performance under the current structure.

The bank added that suggestions an independent chair would improve oversight omit any reference to its outperformance versus peers. It told Glass Lewis that the recommendation would undercut the board’s flexibility to design a leadership structure for orderly management succession.

A spokesperson for JP Morgan said the bank had no further comment.

Combining the chair and chief executive roles is widely frowned upon in corporate governance, particularly in Europe, though it is not banned in the United States. JP Morgan’s board has said it intends to separate the roles after the current leader steps down.

ISS noted a clear possibility that the leader could remain as chair, which could limit the effectiveness of a lead independent director. The two proxy advisory firms have previously faced criticism from the bank’s leader, who has questioned their influence on shareholders regarding social and environmental issues.

The leader has also noted that neither firm is American-owned.