JP Morgan’s chief executive, Jamie Dimon, faces embarrassment after it emerged that the bank’s fund management arm takes investor voting advice from a firm at the centre of his attacks on “lazy” and “irresponsible” shareholders.
Advice from Institutional Shareholder Services is regularly taken by JP Morgan Asset Management, which looks after $1.7trn (£1.1tn) of investments for clients, the investment division confirmed. Its recommendations are only overridden in a “low number” of cases.
The admission, made after JPMAM’s voting history was leaked to Responsible Investor magazine, comes less than three weeks after Dimon’s outburst.
Speaking to an investor conference in New York, the investment bank boss said: “God knows how any of you can place your vote based on ISS or Glass Lewis [a competitor advisory firm].
“If you do that you are just irresponsible, I am sorry. And, you probably aren’t a very good investor, either. I know some of you here do it because you are lazy.”
His bad tempered remarks were made in the wake of JPMorgan’s annual shareholder meeting a week earlier in Detroit, where Dimon faced heavy criticism of his own pay arrangements. Many shareholders had been moved to vote against his pay at the meeting, in part on advice from ISS.
Leaked JPMAM voting records, shown to Responsible Investor, revealed votes against boardroom pay arrangements at five international companies during the first three months of the year — in each case, in line with advice from ISS.
The five companies were Swiss specialist piping supplier Georg Fisher, US drug firm Arrowhead Research, South Korea’s Lotte Chemical, French caravan maker Trigano and Chinese glassmaker Xinyi Glass.
Many controversial votes over pay and governance issues are reviewed by Robert Hardy, head of corporate governance for JPMAM in Europe. But his team of three are responsible for votes at about 5,000 meetings each year, making it useful to draw on the recommendations of so-called proxy voting agencies such as ISS in many instances.
“The industry as a whole has gravitated to the use of proxy voting agencies for a reason. They are a cost-effective and efficient means of collating and assessing large amounts of voting information in a timely and consistent way, and to enable us to focus on names and issues which have material impacts on our clients.”
He said that, so far this year, JPMAM had overridden advice from ISS on “a relatively low number” of votes. Hardy suggested this was largely because JPMAM’s own corporate governance policy was based on the same best practice prinicples as ISS guidelines.
Three years ago, JPMAM had written to European regulators in support of the role played by proxy advisers. “The evidence clearly suggests that the major proxy voting agencies have an important role in modern cross-border voting activity, and have the potential to influence voting outcomes,” wrote JPMAM.
“Whilst institutional asset managers should not absolve themselves of their duty to their clients by outsourcing their proxy voting activity, it is absolutely appropriate that companies … should be encouraged by their owners to aspire to international governance principles and greater standards of corporate governance, and it is our view that proxy advisors play a key role in helping to facilitate this.”
JPMAM told regulators it had overridden ISS recommendations on 834 votes in 2011, or 4.3% of the time. So far this year, the fund manager said it had overridden ISS on 82 occasions. Last month 38.1% of votes at JPMorgan’s annual meeting failed to support a controversial $20m pay deal for Dimon, including $7.4m in cash.
Dimon’s 2014 pay award was made despite JPMorgan paying about $1bn in penalties to regulators to settle foreign exchange rigging allegations during the year. ISS’s objection to his pay, however, had concerned the large cash bonus component, described as having been granted “without compelling rationale”.
JPMorgan’s senior non-executive and chair of the executive compensation committee, Lee Raymond, had told last month’s investor meeting that directors “acknowledge the importance of the question” being raised over Dimon’s pay and promised to review the arrangements. Raymond himself was among America’s best paid boardroom bosses before he retired as chief executive of Exxon ten years ago.
The issue of pay is not the first over which Dimon has crossed swords with ISS. In 2013 Dimon had resisted shareholder efforts to strip him of the role of chairman, which he holds in addition to his position as JPMorgan chief executive. Efforts to award the chairmanship to an independent board member were defeated, despite support from ISS.
This article was written by Simon Bowers, for theguardian.com on Monday 15th June 2015 19.27 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010