Calpers Calls JPMorgan’s Combined Top Roles a ‘Fundamental Conflict’

As shareholders consider whether to press for splitting JPMorgan Chase’s top two roles, one big investor has made it very clear where it stands.

Calpers, the big California public pension plan, plans to vote in favor of a nonbinding proposal to split JPMorgan’s chief executive and chairman roles, both of which are now held by Jamie Dimon.

To Anne Simpson, the pension plan’s director for corporate governance, the move is rooted in the belief that systemically important institutions need plenty of oversight. And it is a conviction that developed even before the country’s two biggest proxy advisory firms â€" Institutional Shareholder Services and Glass, Lewis â€" recommended that shareholders vote in favor of a split.

“There’s a fundamental conflict in combining the roles of chairman and C.E.O.,” she told DealBook in an interview on Tuesday. “It’s all thrown into stark relief when you’re dealing with a company that’s too big to fail.”

Both proxy advisory firms also recommended withholding votes for or voting against several of JPMorgan’s directors, particularly those on the bank’s risk committee. Ms. Simpson said that Calpers is reviewing its potential votes on the matter.

The issue of a split at the top has been a chief concern for Calpers for some time. To Ms. Simpson, the board’s single most important job is to oversee its chief executive. Vesting one person with both roles weakens that mission.

“If the person leading that oversight is the overseen, it’s a fundamentally flawed system,” she said.

It is of special importance when the chief executive is as confident as Mr. Dimon, Ms. Simpson added.

Calpers first met with him to discuss splitting the roles in 2010. At that meeting and in other conversations, JPMorgan stressed that it had top-notch risk management systems that would keep the business in check.

Nevertheless, Calpers voted to split the JPMorgan roles at last year’s shareholder meeting â€" which took place even before the disclosure of the multibillion-dollar trading loss at the bank’s chief investment office. That incident, which racked up about $6 billion in losses, has only reinforced the need for tighter oversight in Calpers’s view.

The trading loss also reinforced to Ms. Simpson another belief: that the nation’s biggest banks must have tighter oversight in the wake of the financial crisis. The possibility of a large institution risking collapse, even despite new rules meant to forestall another 2008-type government bailout, means that bank boards must be strengthened significantly, she said.

Calpers hasn’t focused solely on JPMorgan. It has held conversations with several large institutions, including Bank of America and Goldman Sachs. The former now keeps the chairman and chief executive roles separate; the latter reached a pact with shareholders earlier this year to keep the status quo.

“This is simply an inappropriate model for a major financial institution,” she said. “This is something of systemic importance.”