Friday, May 10, 2013

Jamie Dimon's Lament

Shareholders will vote soon.  Right.  Wrong.  Shareholders typically have no idea that they are shareholders.  Shareholders' agents -- pension funds, endowments, foundations, money managers -- these folks vote the shares, acting as agents for shareholders.

What do these agents think?  They think that capitalism is fundamentally flawed and that corporations spend too much time seeking profit opportunities.  Instead, public companies should be more concerned with 'activism.'

How does this help the ultimate shareholders?  It makes them poorer.  Retirement income is lowered and assets are frivolously wasted by the so-called agents.

But, what do the agents care.  It doesn't affect them in the slightest. 

In the name of corporate governance reform, these 'agents' are trying to impose an outside (of the company) Chairman of the Board for Citigroup, replacing Jamie Dimon and pushing Dimon to a subsidiary role.  This would recreate the corporate governance structure that prevailed at Enron (and others) before they famously slid into a scandalous bankruptcy.

JP Morgan is one of the best performing large financial institutions in the world.  Shareholders have been richly rewarded for the past five years by owning stock in JP Morgan.  So, what to do? 

Make a mountain out of a mole hill out of a $ 6 billion hedging loss by the great whale!  What a waste of time!  That loss did not keep JP Morgan from producing huge income and income growth, even in the same time period as the $ 6 billion loss!

So, what's the right answer? Decapitate JP Morgan.  Maybe, we can create another Enron.

The move to replace JP Morgan as Chairman is anti-shareholder.  If successful (and it will be ultimately), it will weaken JP Morgan, make retirees poorer and less able to cope financially, and enrich politicians and wealthy social activists (and their foundations and endowments).  It will also serve to continue to undermine free markets and common sense.


2 comments:

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Dr. Worden said...

What is very dangerous is the conflicts of interest both in the campaigning and the Chair/CEO duality itself have been treated by Dimon, the board, and now even a significant number of the bank's stockholders as irrelevant or nugatory. The assumption that a good CEO nullifies the risk in the conflicts of interest is dangerous because the CEO may not actually be good (e.g., a huge trading loss and loss of regulators' confidence). For more, see http://www.thewordenreport.blogspot.com/2013/05/jamie-dimon-as-chair-and-ceo-conflict.html