JPMorgan succession rekindles US debate over ‘imperial’ CEOs
The most important of all follow-up questions on Wall Street is what will happen if Jamie Dimon leaves the top job at JPMorgan. Last week, the bank offered a rare look at its preparations in a filing securities that said a “significant majority” of investors wanted him to stay on as non-executive chairman when he steps down as chief executive.
If he continues, it would be the first time JPMorgan has split the roles of chairman and CEO since 2006, when Dimon added the role of chairman of the board to the responsibilities he took on when he took over a year earlier. CEO of the bank was appointed. †
JPMorgan did not disclose whether such a split would be permanent, although it did say many of its shareholders had a “general preference” for the role to be split. If the lender were to re-combine roles in the future, it would go against the prevailing trend in corporate America, where investors increasingly demand that a strong individual act as a non-executive chair to counterbalance the CEO.
American companies were outliers among their multinational counterparts because they allowed so many top executives to also chair the boards of directors to which they report. As late as 2017, most S&P 500 companies combined the positions of CEO and chairman, giving the US a reputation as all-powerful “imperial CEOs.”
That figure fell to 43 percent in 2021, a record low, according to the Conference Board. Meanwhile, the number of independent chairmen — those who had not previously served as CEO of the same company — reached an all-time high at 36 percent.
Charles Elson, a corporate governance expert at the University of Delaware, described the dual role shift as “historic,” noting that since the Great Depression, many CEOs have treated business leaders as de facto advisors. But after years of investor pressure, “the split trend will prevail,” he said.
The US is still significantly behind Europe, according to ISS Corporate Solutions, a data provider. Of the companies it covers in Western Europe — mainly large-cap groups in Belgium, France, the Netherlands and Luxembourg — 29 percent do not share the role. In Germany, Austria and Switzerland it is only 2.7 percent, while in the UK and Ireland it is 2 percent.
And combining the roles of CEO and chairman is still the dominant model at Wall Street banks. JPMorgan’s main rivals – Morgan Stanley, Bank of America and Goldman Sachs – all have boards of directors chaired by the CEO.
In recent years, JPMorgan has fend off investor pressure to split the roles of chairman and CEO. In 2021, 48 percent of JPMorgan investors supported a proposal from shareholders calling for separate roles, including major asset managers American Funds and Invesco. That was more than 42 percent who approved a split in 2020.
Timothy Smith, a senior advisor at Boston Trust Walden, a US asset manager with a stake in JPMorgan, said the bank had “consistently resisted the proposed change to separate the roles of chairman and CEO,” adding: ” It is significant that the board states in the proxy [filing] that they are considering making the change.” JPMorgan declined to comment outside of the filing.
Bank of America kept the roles combined after seeing a significant investor revolt in 2015, while Wells Fargo separated its chairman and CEO roles in 2016 following a fake account scandal.
Jeffery Harte, a senior research analyst at Piper Sandler, said most bank investors would prefer to see the roles segregated “just for a conflict of interest standpoint” and that he expects things to change. “I think many banks [separating] or will look into that once the current CEO is out of the picture.”
Investor pressure is not the only factor driving the shift. Expanding the responsibilities for CEOs, from the demands of day-to-day management to making decisions about whether or not to take a stance on social issues, makes it more difficult for top executives to also find time to address the board of directors. said Jane Edison Stevenson, the vice chair for board and CEO services at Korn Ferry, a consulting firm. “The role of the CEO today is a meat grinder,” she added.
Companies with a joint CEO and chairman are increasingly considering splitting roles when transitioning to a new CEO, Stevenson said. Another option is for the outgoing CEO to transition to the executive chairman, while “someone will be ready to take over the role of chairman once that transition has taken place,” she said. “Those are the two trends that are starting to emerge.”
Religious groups, environmentalists and progressive activists with interests in US multinationals have traditionally led the way in advocacy for split chairman and CEO roles.
But more and more conservative activists are joining them, using the same tactic of filing shareholder proposals to push for the split. Conservative organizations have tabled proposals this year to demand a split of the chairmen and CEOs at Coca-Cola and Goldman Sachs.
Pressure from conservative activists has baffled proxy advisers, some of whom are concerned that such groups may want to water down other investors’ environmental, social and governance agendas. Glass Lewis has advised shareholders to abstain from this year’s conservative proposals calling for the positions of chairman and CEO to be separated from Coca-Cola and Goldman Sachs.
“In general, we would advise shareholders to vote in favor of this resolution,” Glass Lewis said in a report last week. But in this case “we are concerned that support for this resolution would support the arguments of its proponents and . † † presenting a narrative that may contradict that of investors concerned about the ESG performance of companies.”