UPDATE 1-JPMorgan CEO should not be chairman-recommendation
* Firm urges shareholders to vote for separation
* Executive pay package gets another endorsement
By David Henry and Rick Rothacker
April 30 (Reuters) - Jamie Dimon's $23.1 million paycheck is OK, but he should not be both chairman and CEO of JPMorgan Chase & Co, an adviser to institutional investors said on Monday.
ISS Proxy Advisory Services said it has recommended that shareholders endorse the company's executive pay plan at the annual meeting on May 15, but urge directors to separate the roles of CEO and board chairman.
The views from ISS further reduce the chances that the company will suffer a rebuke over pay like that at Citigroup Inc two weeks ago, but could add to momentum for independent chairmen of public companies.
Another advisory firm, Glass, Lewis & Co, last week recommended the same votes on the issues.
Separately, Morgan Stanley issued a securities filing on Monday explaining why shareholders should back a proposal allowing the company to issue 50 million more shares as part of year-end 2012 employee compensation. The filing came after ISS opposed the proposal, saying it transfers too much value away from shareholders.
If shareholders reject the amendment to its equity compensation plan at the May 15 meeting, Morgan Stanley said it would be forced to issue more cash-based compensation, which would go against the guidance of regulators, who want pay more aligned with shareholder interests.
Morgan Stanley said it needs the 50 million shares in addition to the 14 million it currently has available for this year's compensation plans.
At the Wells Fargo & Co shareholder meeting last week, a proposal to split the chairman and CEO roles held by John Stumpf was backed by 38 percent of votes cast, up from 30 percent the year before. A similar proposal at JPMorgan last year received 12 percent of votes cast.
Some 19 percent of companies in the Standard & Poor's 500 stock index had directors who were not executives serving as chairmen at the end of June 2011, up from 16 percent three years earlier, ISS said. Proposals to separate the positions last year garnered an average of 33 percent of votes cast, up from 28 percent in 2010, according to the ISS.
The separation of the chairman and CEO positions gained renewed attention in March when a national union agreed to withdraw a similar proposal at Goldman Sachs Group Inc after the Wall Street bank created a lead director position. Lead directors typically can set agendas at board meetings, call meetings that exclude management and oversee corporate governance processes.
Among the four biggest U.S. banks, Bank of America Corp and Citigroup Inc have separate chairmen. Citigroup split the roles after suffering massive losses in the financial crisis. Bank of America split the positions after shareholders backed the move in 2009 as the company reeled from its troublesome Merrill Lynch & Co acquisition.
ISS said it generally recommends votes for shareholder proposals for independent chairmen.
JPMorgan's board, which opposes the move, said the bank's current structure provides "independent leadership and oversight of management," according to the company's proxy filing. An independent director is annually appointed to be the presiding director each year and more than 90 percent of directors are not executives, the board said.
Taking the chairmanship from Dimon "could cause uncertainty, confusion and inefficiency," the board said.
Dimon received $23.1 million in total compensation in 2011. ISS said the pay, essentially the same as the year before, was "reasonably aligned" with company performance.
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