Strong Lobbying Helps Dimon Thwart a Shareholder Challenge

Haraz N. Ghanbari/Associated PressA proposal to separate the jobs of chairman and chief executive of Chase became a referendum on Jamie Dimon.

8:18 p.m. | Updated

Jamie Dimon and the 10 other directors of JPMorgan Chase had reason to be confident before they took private jets to Tampa on Monday, the eve of the bank’s annual meeting. Early indications were that a shareholder vote to split Mr. Dimon’s jobs as chairman and chief executive was heading to a resounding defeat.

There was just one problem: One director was not going to Florida.

Ellen V. Futter, a longtime member of the board’s risk policy committee who had come under fire over her lack of a background in finance, had decided at the last minute not to attend the meeting.

Ms. Futter, the president of the American Museum of Natural History, was sick of the swirl of negative attention surrounding her, worried that it needlessly detracted from JPMorgan’s strengths and that it might hurt the reputation of the museum, people briefed on the matter said. She wanted off the board.

A resignation by a bank director would have distracted from what was shaping up to be a victory parade for Mr. Dimon. The charismatic chief executive called her on Monday to try to convince her to stay, although he acknowledged that it was a personal decision, the people briefed on the matter said. That discussion was followed by calls from at least two other directors, the people said. They urged Ms. Futter to remain on the board, adding that her resignation would drag her back into the spotlight.

In the end, Ms. Futter, who narrowly eked out re-election, changed her mind.

JPMorgan’s Trading Loss

Mr. Dimon’s art of persuasion was also in evidence on Tuesday as nearly 70 percent of the shares were voted to reject decisively a proposal for an independent chairman.

The shareholder vote had shaped up to be a rare challenge to Mr. Dimon, who was widely praised for piloting the bank through the turmoil of the financial crisis. Since the crisis, three years of consecutive quarterly profits at JPMorgan have added to his laurels.

Yet a surprising multibillion-dollar trading loss last year — one that has helped drive top lieutenants from the bank and produced a range of investigations — has raised questions about the chief executive’s leadership.

The shareholder resolution, while intended to improve corporate governance by having an independent chairman as a counterweight to a chief executive, became a referendum on Mr. Dimon himself. It was a test he easily passed.

“To some extent this was a referendum on Jamie Dimon, and he is quite unique and special and no one can deny that,” said Marvin Schwartz, a portfolio manager at Neuberger Berman, which controls roughly 12 million shares and voted against the resolution. “To hold against him one unfortunate loss in the trading area, I think, is quite unfair.”

Even though some 40 percent of the shares last year had supported a similar proposal to split the top two jobs at the bank, this year’s resolution was supported by only 32.2 percent of the shares. The divide in the vote was apparent, with institutional investors like Neuberger Berman voting overwhelmingly against the proposal and pension funds voting for it, according to people briefed on the matter.

In an e-mail to employees after the annual meeting, Mr. Dimon wrote: “I love coming to work here every day — and hope to be doing it for years to come.”

Chris O’Meara/Associated PressStockholders arrived for the JPMorgan Chase annual meeting on Tuesday in Tampa, Fla.

Shares of JPMorgan rose as much as 2.6 percent on Tuesday, before closing up 1.4 percent, at $53.02.

The hearty endorsement of the chief executive — which was announced on his 30th wedding anniversary — came after months of behind-the-scenes lobbying by the bank.

At its Park Avenue headquarters, JPMorgan assembled a war room where executives kept close tallies as shareholder votes began streaming in, according to two people briefed on the matter. To sway investors, these people said, influential board members were paired with large shareholders.

Part of the message was to remind shareholders that the directors were already a powerful check on Mr. Dimon, noting that board had earlier moved to root out problems in the aftermath of the losses and to claw back $100 million from the traders at the center of the outsized wagers.

The bank held conference calls with several big investors, including Neuberger Berman. Mr. Schwartz said that during that call, which lasted roughly 40 minutes, Neuberger portfolio managers had a “frank give and take” with JPMorgan executives.

Still, roughly two weeks before the shareholder meeting, the proposal sponsors were winning, according to people briefed on the tallies. The vote was going against Mr. Dimon.

On May 6, Lee R. Raymond, the lead director of the bank’s board, and William C. Weldon, the chairman of the board’s corporate governance and nominating committee, met with officials from the American Federation of State, County and Municipal Employees, one of the main backers of the proposal to divide the roles.

A close ally of Mr. Dimon even tried to enlist former President Bill Clinton to help broker a compromise with Afscme, according to two people with knowledge of the discussion. Mr. Clinton declined.

“I think that given the resources that the management and the board threw at this, it’s not a surprise that the vote was lower than last year,” said Lisa Lindsley, the director of capital strategies at Afscme.

The bank pulled other levers as well, some shareholders said.

“First we hear Jamie might leave if things go against him and then people start talking about the damage to the stock price,” said one major shareholder, who asked not to be named because of a company policy against speaking to the media. “It was effective.”

People close to the bank say a turning point in the campaign came from an unexpected source, an influential shareholder advisory firm, Institutional Shareholder Services, which urged shareholders earlier this month to withhold their votes from three directors on the board’s policy committee.

In a scathing 33-page report, the firm faulted three directors, saying they lacked risk expertise. By zeroing in on the board members, several people close to the bank said, the advisory firm effectively gave shareholders an alternative. They could register their dissatisfaction with JPMorgan without going after Mr. Dimon, the people said.

Indeed, the preliminary vote totals for the three directors were effectively rebukes. Ms. Futter received just 53 percent of the voting shares, while the two other directors on the committee did only a little better: James S. Crown received about 57 percent of the vote; and David M. Cote received 59 percent. (In comparison, Mr. Dimon received 98 percent of the vote for his board seat, while Mr. Raymond, the lead director, received 95 percent.)

As a result of this sign of disapproval from shareholders, it is almost certain the board will make some changes. On Tuesday, Mr. Raymond told shareholders to “stay tuned” when he was asked if the board is planning to make changes to the risk committee. It is likely Ms. Futter will come off the risk committee, and the board may replace her or others with directors that have more knowledge of financial risk.

“The vote proved to be a referendum on the board’s oversight of risk rather than over whether to split the chairman/C.E.O. job,” said Michael Garland, an assistant comptroller who heads corporate governance for the New York City comptroller, John Liu, which co-sponsored the bill. “I don’t think this is a setback because it put a spotlight on the issue and the clock is now ticking on director reform.”

A version of this article appeared in print on 05/22/2013, on page B1 of the NewYork edition with the headline: Strong Lobbying Helps Dimon Thwart a Shareholder Challenge.