A Modest Proposal for RI Pension Fund

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Jamie Dimon, as much as any of the Wall Street kingpins famously tagged by Matt Taibbi as “vampire squid” sucking the life out of the American economy, never ceases to astound.  Several years after helping to bring us to the brink of a global financial meltdown, Dimon prospers in an interesting dual role at JPMorgan Chase as CEO of the company and Chairman of the Board.

Why is this role a problem?  Mike Stocker and Christine Azar of Labaton Sucharow, a law firm that represents clients on corporate governance matters, put it quite nicely in a recent commentary piece which appeared in American Banker:

As chairman of the JPMorgan Chase board, Dimon is charged with supervising the senior management of the venerable investment bank: reining in excessive risk-taking by executives, determining whether compensation is fair and aligned with corporate needs, and looking out for the interests of the company’s thousands of shareholders.

Anyone at the helm of JPM’s board in the last year would certainly be taking the company’s senior management to the woodshed. The investment bank’s CEO has admitted to being gravely wrong in his dismissal of concerns over trading practices that have led to billions of dollars in losses, conduct that has led to a lacerating series of public hearings and widespread denunciations in the press. The problem, of course, is that the CEO is also Jamie Dimon. 

Problem?  I’m sure Dimon has given himself at least one or two stern talking-tos over some of the well-publicized trading losses and government probes that have happened on his watch.

Well, maybe not.  JPMorgan shareholders took a pass on even offering the mildest of rebukes to Dimon, failing to approve a non-binding resolution that would have split the CEO/Chairman of the Board roles.  Perhaps its time for other more courageous souls to take up the battle for transparency and conflict-free corporate governance at the banking giant.

In recent months, the Employee’s Retirement System of Rhode Island has not been shy about flexing its muscles as a significant institutional investor.  Last year, after the Newtown tragedy, Rhode Island was one of a number of states which expressed an interest in divesting from any investments with gun manufacturers.  And, more recently, General Treasurer Gina Raimondo followed the lead of her colleague in Oregon by calling on TPG Partners to share some of the millions in “transaction fees” they took from Caesar’s Entertainment Corp. as part of an equity financing deal.  (Interestingly enough, neither of the Treasurers objected to these excessive fees in and of themselves.  They just wanted a piece of the action.)

Clearly, the stewards of the state pension fund are comfortable playing a more activist role when it comes to promoting public policy outcomes or demanding better behavior from private equity firms.  So with the state pension fund having committed some $70M to two different JPMorgan Real Estate Partnership Investments–JPMorgan Strategic Property Fund and JPMorgan Alternative Property Fund–maybe our state can lead the charge in terms of pushing the banking giant to reign in Dimon and ease JPMorgan’s adversarial relationship with federal regulators seeking to protect the interests of investors.

Leveraging our investment to improve corporate governance at a major American financial institution would send a strong message that the Rhode Island pension fund isn’t just dumping money with the big boys of Wall Street and turning a blind eye to their bad behavior.  What a great way to go on record and put JPMorgan on notice that as investors, we are watching you and we expect better than engaging in shaky trading practices or possible market manipulation.

Now that would be newsworthy…

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