Asset Management

11:57 AM
Connect Directly
Facebook
Google+
LinkedIn
Twitter
RSS
E-Mail
50%
50%

The End of Dimon, Blankfein & Co

It’s “proxy season” again, that time of year when shareholders, at least lately, have been shaking things up.

The era of the domineering chief executive, whose first name alone, a’ la Lloyd or Jamie, can easily be equated with the Wall Street institution they guide, is nearing an end, according to a Wall Street Journal article.

The actions of the top bosses of Wall Street banks have been scrutinized more closely than ever before in the aftermath of the financial crisis. And now, it’s“Proxy season” again, that time of year when shareholders, at least lately, have been shaking things up.

Last April, the annual series of shareholder meetings that give investors an opportunity to question managements and boards, focused on executive compensation: One meeting saw Citigroup shareholders reject a board-approved compensation package for chief executive Vikram S. Pandit which boosted his pay to $14.9 million from $1 the previous year.

During what was soon dubbed the ‘Shareholders’ Spring’, 37% of shareholder votes at UBS were cast against the Swiss bank’s pay proposals, while 54% voted against life insurer Aviva’s compensation policies.

This year, as “proxy season” begins, observers firmly expect the focus to be on splitting the role of an institution’s chairman and CEO, and the role of directors in policing management.

As such, shareholders are expected to cast a make-or-break vote over whether Jamie Dimon should split his role as chairman and CEO of JP Morgan. Last week, Goldman struck a deal, agreeing with a union-backed investment group to increase the powers of its lead director, James Schiro, such as enabling him to set the board's agenda, not just approve it. As such, the Wall Street firm fended off a shareholder proposal that would have stripped chief executive Lloyd Blankfein of his chairman title. But Goldman’s defense move certainly seems to be a sign of things to come.

From the Wall Street Journal:

On the chairman/CEO debate, there is little evidence that having one of each, as is the norm in countries such as Britain, is better for shareholders. But one thing is clear, the current Wall Street incumbents are likely to be the last ones to hold a dual role.

J.P. Morgan may succeed in shielding Mr. Dimon from the humiliation of relinquishing the chairmanship at the May 21 meeting. And Goldman deftly defused the issue by giving more powers to its lead director in a quid-pro-quo with union pension funds last week.

Regardless of the end vote and its impact on Dimon, as investors continue to demand more transparency, most observers believe that the current Wall Street chiefs will be the last to enjoy an imperial role at their financial institution. Their successors will likely only take on the CEO position while relinquishing the Chairman role, thereby allowing more oversight over their activities.

"If you have the person who is the top manager also running the board, he is his own boss and there is no oversight," Lisa Lindsley, director of capital strategies at the American Federation of State, County and Municipal Employees, told the Wall Street Journal.

The halls of power are likely to sound a little more empty when Blankfein and Dimon click their heels and close their Wall Street firm’s door behind them for the last time. Of course, beyond solid returns – and a number of mind-boggling snafus (think the London Whale), their rule over Wall Street has certainly provided some light entertainment for industry observers.

Dimon in particular has blasted governments and regulators for slowing the global economic recovery, and replied to attacks on the role that banks play in the broader economy by telling his investors that" if it weren't for the capital investment, innovation and productivity of American business, we all still would be living in tents and hunting buffalo.” Blankfein notoriously let the world know that “investment bankers are just doing God’s work.”

Still, in investors’ eyes, this is certainly a time for more oversight, more transparency, and less hubris. And that will soon mean a change of guard at Wall Street’s top institutions. Or at least a change in the way the current leaders are allowed to run their firms.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Top Quotes of the Week
Top Quotes of the Week
It wasn't all bad luck for the capital markets this week: Hedge funds had a decent first quarter despite a slowdown in jobs numbers, BlackRock might be heading into new territory as hedge fund managers take a hard look at their counterparties, and the head of the IMF didn't pull any punches when assessing today's global economy. At least we can admire the nice weather and some of the best quotes of the week.