JPMorgan Chase Chairman and Chief Executive Officer Jamie Dimon apparently thinks the buck stops below him when it comes to wrongdoing at his firm.
He reaps the rewards of underlings when they pump up profits through questionable means and supervisors look the other way – a situation that occurred in JPMorgan’s chief investment office, which could result in trading losses totaling nearly $7 billion. Yet Dimon feels no pain when they get caught.
Jamie Dimon, Chairman and CEO of JPMorgan Chase (Photo: Wikipedia)
The three traders directly involved in the trading fiasco were forced out and penalized two years of compensation, the maximum clawback allowed under JPMorgan’s employment terms, the company said.
And JPMorgan’s former chief investment officer, Ina R. Drew, resigned and will voluntarily return the equivalent of two years compensation because of the scandal, the company said. That amount could equal nearly $30 million as her compensation in 2010 and 2011 was $15.9 million and approximately $14 million, respectively.
But so far there is only speculation about consequences for Dimon. Media reports say JPMorgan’s board may exercise the company’s clawback provisions against Dimon and other company officials. Given Dimon’s apparent failure to create a risk management function robust enough to properly oversee and identify the enormous risk of the trades, clawbacks at the operating committee level – including Dimon – fall squarely within JP Morgan’s clawback policies.
But Dimon shouldn’t wait for board action. He should hold himself accountable for not just employee actions that cost the firm billions and misled investors, but also for his and others’ failures to implement proper oversight of the CIO’s trading activities, as well as for his own misjudgments in handling the scandal from the time concerns about London office trades first surfaced in April. At that time, he dismissed the matter as a “tempest in a teapot.”
Contrast that with his most recent comments: "I was dead wrong," and “This has shaken our company to the core.”
Dimon is one of the best compensated bankers in the U.S. Last year, JPMorgan paid him $23 million in pay and bonuses. He received $1.5 million in base salary, plus $17 million in restricted stock and options and a cash bonus of $4.5 million. His total compensation in 2010 was slightly higher at $23.4 million: $1 million in base salary, $17.4 million in restriction stock and options and a $5 million cash bonus.
Whatever Dimon says about the losses and the traders involved, it is his actions—or lack of action – that send the strongest message.
He needs to set an example that there are consequences not to just being grossly reckless but also to creating an atmosphere that allows such recklessness to thrive. To do that, he should offer the company two years of his own past compensation in line with JPMorgan’s clawback policy.
Dimon noted during a meeting with analysts last week that Drew acted “with integrity and tried to do what was right for the company at all times, even though she was part of this mistake. In that spirit, Ina came forward and offered to give up a very significant amount of her past compensation, which is equivalent to the maximum clawback amount.”
Dimon should do the same.
