JPMorgan Chase Vote Tests Stockholders’ Power

Jamie Dimon and the 10 other directors of JPMorgan Chase take the stage in Tampa, Fla., on Tuesday, to face shareholders who can take comfort in a rising stock price and a prospering bank.

But those same shareholders may also deliver a humbling rebuff to Mr. Dimon and the bank’s board.

If shareholders vote to separate the jobs of chairman and chief executive â€" positions that Mr. Dimon has held since 2006 â€" it would signal a shift in the balance of power in corporate America, an inflection point in shareholders’ push for greater say in the boardroom.

Shareholder protests at large companies are usually successful only at those that are troubled or whose stock price has disappointed.

But JPMorgan, even after suffering a multibillion-dollar trading loss that exposed weak risk controls and spurred federal investigations, is minting profits quarter after quarter. And its stock price is up 19 percent this year.

A victory against a bank that prides itself on its “fortress balance sheet” would go a long way toward proving that shareholders can push for changes even at strong companies.

“It’s a fascinating moment in the arc of corporate governance, where shareholders are poised to get a lot of power,” said Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.

Raising the stakes, of course, is the presence of Mr. Dimon, the brash chief executive who successfully piloted JPMorgan through the tumultuous 2008 financial crisis. For better or for worse, Mr. Dimon, 57, has come to epitomize the American banker atop an institution that is too big to fail.

If JPMorgan shareholders reject the proposal â€" which would not require the bank to act in any case â€" it will be a powerful endorsement of Mr. Dimon and his leadership.

In addition, it will help JPMorgan, which has been aggressively working behind the scenes to avert defeat, to move beyond the fallout from the trading loss.

Regardless of the outcome of the fight, it is likely that the JPMorgan board will make some changes, possibly by shaking up its risk committee or giving its lead director greater power.

Last week, shareholder groups sponsoring the split were cut off from crucial preliminary vote tallies by the firm that provides them, causing the sponsors to cry foul.

New York State’s attorney general, Eric T. Schneiderman, late on Friday sent a letter to Stephen M. Cutler, JPMorgan’s general counsel, that raised serious concerns about why the tallies were cut off, according to two people with knowledge of the matter.

After a series of conference calls on Saturday between lawyers for JPMorgan and the attorney general’s office, JPMorgan agreed to direct a firm that provides early tabulations to restart the tallies.

For investors who argue that an independent chairman is a vital counterbalance to a chief executive, defeat of the resolution would be a significant setback.

After receiving the backing of 40 percent of shares for a similar proposal last year, a small group of JPMorgan shareholders was emboldened to introduce a new resolution in February.

Since then, support for splitting the positions has grown, stoked in part by revelations of JPMorgan’s continued regulatory missteps.

A Senate hearing and a 300-page report on the multibillion-dollar trading loss at the bank’s chief investment office in London last year accused the bank of misleading investors and regulators about the botched trades.

In addition to the investigations into the trading losses, there have been inquiries into whether JPMorgan failed to fully alert authorities to suspicions about Bernard L. Madoff and into the bank’s trading practices in two electricity markets.

In January, one of its primary regulators, the Office of the Comptroller of the Currency, took an enforcement action against the bank over weak controls against money laundering, faulting JPMorgan for failing to report suspicious flows of money.

Now, the agency is considering fresh enforcement actions against JPMorgan over the way the bank goes after customers for overdue credit card bills. All told, at least eight federal agencies are investigating the bank.

The regulatory tangle puts Mr. Dimon and JPMorgan, which used to hold special sway in Washington, in a tough position.

Even Mr. Dimon’s contrite tone â€" he apologized in a recent letter to shareholders for letting “our regulators down” and pledging to “do all the work necessary to complete the needed improvements” â€" hasn’t seemed to slow the effort by shareholders supporting the proposal for an independent chairman.

A steady stream of departures from JPMorgan’s upper ranks has also proved to be a boost for the shareholders pushing for a split. The most recent high-level departure came in April, when Frank J. Bisignano, JPMorgan’s co-chief operating officer and an executive hailed within the bank as an operational wizard, left to become chief executive of the First Data Corporation.

Some executives have been driven out by the trading loss, while others have simply departed. The outcome, though, is the same. Mr. Dimon’s inner circle, the group of lieutenants that helped him steer the bank through the financial crisis, has been significantly winnowed down: only three remain from the crisis era.

Even as Mr. Dimon has taken an apologetic tone with regulators, he continues to emphasize JPMorgan’s strength and the qualities of its upper management, according to investors who have met with him in recent weeks.

The board, however, may decide that changes are needed, and move to overhaul its risk policy committee. Led by Lee R. Raymond, a former chief executive of Exxon Mobil who acts as the lead director, the board has so far fended off calls from major investors for such a shake-up.

But those calls gained strength when an influential shareholder advisory firm, Institutional Shareholder Services, or I.S.S., urged shareholders to withhold support for three directors who serve on the risk policy committee â€" David M. Cote, James S. Crown and Ellen V. Futter.

The directors, I.S.S. said in a report released this month, “lack robust industry-specific experience” and the mishaps that have accumulated during the last year have only “demonstrated their unsuitability.”

JPMorgan and Mr. Raymond have vigorously defended the three directors, noting that they had served on the risk committee when the bank navigated through the financial crisis. In a previous statement about the losses in its chief investment office, JPMorgan said: “While the company has acknowledged a number of mistakes relating to its losses in C.I.O., an independent review committee of the board determined that those mistakes were not attributable to the risk committee.”

Still, the recommendation from I.S.S. held particular force, some investors say, because the advisory firm noted in its report that it opposed directors only in “extraordinary circumstances.”

It is also possible the board will move to bolster the powers of Mr. Raymond, as Goldman did with its lead director this year. This will assuage some shareholders seeking a stronger counterbalance to Mr. Dimon and could take some of the air out of any attempts next year to split the roles.

“You have to do something to appease shareholders,” said a person close to the board. “Otherwise there will be more trouble down the road.”