JPMorgan Works to Avert Split of Chief and Chairman Roles

JPMorgan Chase is working behind the scenes to avert a major potential embarrassment.

In anticipation of a crucial vote at next month’s annual meeting, board members are planning to sit down with some of the bank’s biggest shareholders to make their case that JPMorgan’s influential chief executive, Jamie Dimon, should keep his chairman title, according to several people briefed on the plans.

The campaigning, which shareholders indicate is unusually proactive this year, reflects the growing worries within JPMorgan that investors may be dissatisfied with management because of the continuing fallout from a multibillion-dollar trading debacle.

In the past, such investors say they usually received only a phone call from executives in the investor relations department or met with them in person. Along with director meetings, the company this year is also contacting smaller shareholders who previously might not have heard from the big bank at all.

Voting to split the roles would send a powerful message. Few big banks have separated the chairman and chief executive positions. And when they do, it generally occurs during a broader management shake-up, as in the case of Bank of America and Citigroup.

“As we approach our annual meeting, we are conducting our normal shareholder outreach program, which offers an opportunity to review company matters with investors and which sometimes includes conversations with directors,” Joe Evangelisti, a JPMorgan spokesman, said. “As we mentioned in our proxy filed last week, a director can be available for discussions with major shareholders.”

A few big shareholders can make a difference in either direction. Last year, roughly 40 percent of the JPMorgan investors supported a proposal to split the roles.

Firms that advise some of the nation’s largest shareholders are expected to recommend again that JPMorgan separate the posts of chief executives. Other big investors, including some that voted to keep the roles together last year, remain undecided, according to a number of shareholders who spoke on the condition of anonymity because of policies against talking to the media.

“If you separate the roles, there is another set of eyes and ears,” said Michael S. Levine, a portfolio manager at OppenheimerFunds. “That is not a bad thing, because there is more accountability.” But in comparison to its peers, he said, JPMorgan has done “arguably the best job.” On proxy matters, Oppenheimer, which owns 20 million JPMorgan shares, typically votes in line with the recommendations of the advisory firm, Institutional Shareholder Services.

While a shareholder vote in favor of splitting the positions would not be binding, it would put pressure on the board to split the roles. Such an outcome would also indicate that many shareholders had lost faith in Mr. Dimon, 57, a precipitous fall for an executive who successfully steered the bank through the turmoil of the financial crisis.

If the vote goes against the company and the board decides to split the role, some board members and shareholders are concerned that Mr. Dimon might resign rather than accept what would most likely be regarded as an affront. Several shareholders have said privately that succession is a major factor in their decision-making process. In meetings with directors, the shareholders said they expected to ask about succession planning, and the board’s ability to exert influence on bank management.

In recent years, companies have been moving to split the role of chairman and chief executive, either proactively or at the urging of shareholders. The move is aimed at creating stronger, independent boards, to keep management in check. Last year, Citigroup’s board, let by a strong-willed chairman, Michael E. O’Neill, voted to oust the chief executive, Vikram S. Pandit.

In February, a group of JPMorgan shareholders filed a resolution to divide the chairman and chief executive posts. Since then, those investors have been working to gather support for the proposal.

“We don’t believe the person responsible for these costly mistakes should be overseeing reforms,” said Denise L. Nappier, the Connecticut state treasurer and a supporter of the proposal.

The board, including the lead independent director, Lee R. Raymond, the former chief executive of Exxon Mobil, has been trying to flex its muscle in recent months. In January, directors voted to slash Mr. Dimon’s pay by more than 50 percent to $11.5 million, in response to the trading loss.

But ultimately the board supports Mr. Dimon. In March, the directors indicated in the proxy filing that he should keep the chairman and C.E.O. titles, encouraging shareholders to vote against the proposal. “The board has determined that the most effective leadership model for the firm currently is that Mr. Dimon serves as both,” the board said in the proxy filing.

Now, the board is dispatching directors to meet with shareholders, according to people briefed on the board’s plans. While these meetings have yet to take place, shareholders say the board is likely to stress that they understand the investors’ concerns — and that the board is on top of the company’s problems. JPMorgan is likely also to emphasis firm’s strong profitability in recent years, despite its recent missteps.

It is hard to predict the outcome of the vote.

JPMorgan is owned by a wide variety of shareholders. Well-known institutions like Fidelity Investments and the Vanguard Group are among the biggest holders, collectively owning more than 6 percent of the company. Both firms have a history of following the board’s voting recommendations at JPMorgan, according to data compiled for The New York Times by the research firms Fund Votes and Disclosure Matters.

Still, other shareholders have switched their position, according to the data providers. Last year, American Funds voted to split the roles at JPMorgan, after having opposed it in previous years. Funds managed by Franklin Templeton voted against a split in 2007, but they have favored it in subsequent years.

“The top shareholders, BlackRock and Vanguard, decide the outcome 82.2 percent of the time, and both of them have previously sided with management on this vote,” said Travis Dirks, the head of Rotary Gallop, a firm that is often hired to predict the outcome of proxy fights. “That is hard to defeat,” he said, adding that it would take hundreds of smaller shareholders to tip the scales.

Last year, JPMorgan held its annual meeting in May, shortly after it disclosed the trading loss to investors. One shareholder, who asked not to be named because of a policy against speaking to the media, said that last year the loss was fresh and it wasn’t a big factor in how his firm voted.

This year, he said, the decision isn’t as clear. The continuing fallout from the trading loss, including the bank’s frayed relationship with regulators and concerns about its risk controls, will factor into his vote. But he added that splitting the role could create more problems than it solves, by adding to the management upheaval.

Several shareholders say the lack of a clear succession plan is a significant issue. In the last two years, Mr. Dimon has remade the upper echelons of the bank’s management. More than half of the managers who helped lead the bank through the crisis have left, including James E. Staley, the former head of the investment bank, and Barry Zubrow, once the bank’s top regulatory officer. Those who remain at the bank are mostly younger executives, many of whom are in their 40s and not necessarily ready to take the reins.

“It’s tricky,” said the shareholder. “The reward for a lack of succession planning isn’t to leave Mr. Dimon with both titles. Yet we are worried about what he happens if he leaves.”

A version of this article appeared in print on 04/06/2013, on page B1 of the NewYork edition with the headline: JPMorgan Works to Avert a Split of the Chief and Chairman Roles.