JPMorgan’s Dimon Problem: A $20 Billion Gamble?
When shareholders of JP Morgan Chase (JPM) huddle in Florida this weekend for their annual meeting, they'll find themselves about 35% richer than they were in 2012, despite enduring a crisis-filled year of turmoil, regulation and investigation. But instead of celebrating Jamie Dimon's achievement and management dexterity, they'll be voting on whether to demote the bank's hard-charging chairman and CEO.
Predictably, this type of professional affront and disrespect has not sat well with the man who has, by most accounts, capably run the nation's largest lender for nine challenging years. Officially, investors will be given the chance to defy the bank's board of directors and strip Dimon of his chairmanship duties, while installing an unknown entity in his place to oversee him.
While the shareholder vote is expected to be defeated again this year, as it was last, the lead up to the balloting has been anything but salutary. And as my co-host Jeff Macke and I discuss in the attached video, while it is understandable that investors are angry about the $6 billion in so-called "London Whale" losses incurred from a high-risk hedging program being run in the UK, they're taking an even bigger risk if they alienate the 57-year-old leader.
In fact, CLSA banking analyst Mike Mayo has just published a report that says if Dimon is rebuffed or riled enough to walk away from both jobs, shares of JP Morgan would likely drop by 10% or about $20 billion. Not only would it cause a tumultuous transition with no successor in place, but Mayo predicts subsequent executive departures would cause additional hardship.
To be sure, Dimon has been a large target within financial circles even prior to the crisis period of 2007 and 2008, as his plain-spoken demeanor and self-assuredness have rubbed many the wrong way. And yet, throughout his entire tenure atop JPMorgan, performance is the one thing that no one is complaining about.
