Forum Home Page [see Broadridge note below]

 The Shareholder ForumTM`

Fair Investor Access

This public program was initiated in collaboration with The Conference Board Task Force on Corporate/Investor Engagement and with Thomson Reuters support of communication technologies. The Forum is providing continuing reports of the issues that concern this program's participants, as summarized  in the January 5, 2015 Forum Report of Conclusions.

"Fair Access" Home Page

"Fair Access" Program Reference


Related Projects 2012-2019

For graphed analyses of company and related industry returns, see

Returns on Corporate Capital

See also analyses of

Shareholder Support Rankings


Forum distribution:

Hiding instead of responding to investor questions about long term value

Source: The New York Times | Fair Game, March 1, 2014 column

Business Day

Break Up the Bank? It’s Not for You to Ask

MARCH 1, 2014

JPMorgan Chase is trying to put its troubles behind it. Having agreed to pay a $13 billion settlement to the government for its past mortgage-lending misdeeds, it wants to move on. At the big “Investor Day” meeting with shareholders last week, Jamie Dimon, its chief executive, and his top lieutenants extolled the bank’s strong and diversified position in its four main businesses. “I am so damn proud of this company,” Mr. Dimon exclaimed.

But not so fast. Proxy season is around the corner. And, behind the scenes, a skirmish is flaring over what will be put to an investor vote at the bank’s annual shareholder meeting this spring.

Such private battles rage every year in companies across the country, pitting shareholders, who want to hear other owners’ views on topics related to management, against company officials who’d rather not. The Securities and Exchange Commission adjudicates these disputes, deciding which shareholder proposals must be included on a company’s proxy.

Among the more interesting proposals this year is from Michael C. Davidson, a tax accountant and individual investor in Portland, Ore., who owns about 300 JPMorgan Chase shares. The S.E.C. hasn’t yet ruled on whether it will require the bank to have shareholders vote on the idea.

While Mr. Davidson, 72, is new to the shareholder proposal business, the topic he has seized upon is a venerable one — specifically, how to resolve the problem of financial institutions that are too big and interconnected to be allowed to fail.

This threat was supposed to have been eliminated by the Dodd-Frank law of 2010. But it wasn’t, as a throng of experts has acknowledged. Among them are Ben S. Bernanke, the former Fed chairman; Janet L. Yellen, the current Fed chairwoman; William C. Dudley, the president of the Federal Reserve Bank of New York; and Richard W. Fisher, the president of the Federal Reserve Bank of Dallas.

In Mr. Davidson’s view, it’s high time for big-bank shareholders to weigh in on this crucial issue. His proposal, should the S.E.C. allow it to stand, recommends separating JPMorgan’s commercial bank operations from its investment banking and asset management units, similar to the way banks operated after the Glass-Steagall law was passed in the 1930s. The proposal asks the company’s board to create a committee of independent directors “to develop a plan for divesting all noncore banking business segments” and to report to shareholders on that plan within 120 days.

Mr. Davidson said in a recent interview that between the $13 billion settlement paid by shareholders and the nice raise the board gave to Mr. Dimon, “I really think they’re not looking out for investors’ interests.” He added: “I hope the proposal is allowed to appear because I think there should be some kind of debate going on among shareholders on this.”

JPMorgan, of course, disagrees. Its lawyers have argued at length to the S.E.C. that the proposal should be excluded from its proxy. The main reason, the bank contends, is that the proposal involves “ordinary business” or “routine matters,” which under S.E.C. rules can be exempted from a shareholder vote.

To represent it in this matter, JPMorgan has hired an expert who is steeped in the proxy process. He is Martin P. Dunn, a lawyer at Morrison & Foerster who spent 20 years in high-level positions at the S.E.C.’s division of corporation finance, the unit that determines whether a shareholder proposal makes it onto a corporate proxy. Mr. Dunn did not return a phone call seeking comment, and a spokesman for the bank declined to comment further on the proposal.

But Cornish F. Hitchcock, a lawyer in Washington who represents Mr. Davidson and his proposal before the S.E.C., said the agency typically rejects a shareholder proposal if it involves aspects of company business that according to its rules are “mundane in nature and do not involve any substantial policy or other considerations.” But the debate over too-big-to-fail institutions is about as substantive a policy matter as exists today, he said.

“The philosophy is that ordinary business matters are best left to the management and board, but some situations raise a significant policy issue on which it is appropriate for shareholders to advise,” Mr. Hitchcock explained. “The classic example from many years ago was whether electric utilities should not invest in nuclear power. In that case, the S.E.C. said nuclear energy raises significant policy issues and shareholders have the right to advise.”

Even if the S.E.C. allowed the proposal to be put on the proxy and a majority of shareholders supported it, JPMorgan wouldn’t have to abide by its terms. As a so-called precatory proposal, it is not legally binding on the company.

Still, JPMorgan wants to keep it off the ballot.

Proposals like Mr. Davidson’s get shareholders talking about issues, which, in turn, forces company insiders and directors to listen. According to Georgeson, a provider of shareholder consulting services, shareholders of large companies voted on 263 proposals on a variety of corporate governance issues in the first six months of 2013. Many of these — 109 — came from pension funds and labor union investment funds. But even more — 129 — came from individual investors.

Among the topics broached in these proposals were executive pay, disclosures surrounding a company’s political contributions and the repeal of classified boards, where director elections are staggered to protect against the ouster of an entire board at one time.

Mr. Davidson says he thinks his proposal is important, and not only because it would let shareholders express their views on an issue affecting the entire economy. He said JPMorgan shareholders would be better off if the bank was broken up because the individual parts could be more valuable than the combined entity. As precedent, he points to the early 1980s, when AT&T was broken up into regional telephone companies.

“Looking back at the AT&T breakup, the shareholders made out like bandits because the thing was worth a lot more in pieces than whole,” Mr. Davidson said. “JPMorgan is identical — it’s got this banking side and risk-taking side. If you break it in half, it’s going to be worth more to shareholders.”

Top bank officials reject this thesis. Mr. Dimon and his associates contend that the size and scope of JPMorgan’s businesses strengthen rather than weaken the institution. And as for too-big-to-fail, Mr. Dimon said in his letter to shareholders last year that new regulations were well on the way to eliminating the problem. “Clearly more work needs to be done, but we are collaborating closely with the regulators to accomplish this goal,” he wrote.

Nevertheless, given some of the management missteps at JPMorgan in recent years — most notably the London Whale mess — and its regulatory run-ins, it certainly seems appropriate to ask shareholders whether they think the institution is too big to manage. Even as simply a point of information, such a vote could be revealing.

A version of this article appears in print on March 2, 2014, on page BU1 of the New York edition with the headline: Break Up the Bank? It’s Not for You to Ask.

© 2014 The New York Times Company


This Forum program was open, free of charge, to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the purpose of this public Forum's program was to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant was expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

This Forum program was initiated in 2012 in collaboration with The Conference Board and with Thomson Reuters support of communication technologies to address issues and objectives defined by participants in the 2010 "E-Meetings" program relevant to broad public interests in marketplace practices. The website is being maintained to provide continuing reports of the issues addressed in the program, as summarized in the January 5, 2015 Forum Report of Conclusions.

Inquiries about this Forum program and requests to be included in its distribution list may be addressed to

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.