* Directors warn shareholders not to vote against board, CEO
* Seven-page letter defends directors on risk policy panel
* Directors say company results transcend "London Whale"
By David Henry
NEW YORK, May 10 Two ranking JPMorgan Chase & Co
directors issued a letter to shareholders on Friday
arguing against recommendations by proxy advisory firms to split
the duties of Chairman and CEO Jamie Dimon and vote against some
The board is unanimous in its view that it is best for Dimon
to hold both roles and the current governance structure "is
working effectively," according to the letter signed by
presiding director Lee Raymond and William Weldon, who is
chairman of the corporate governance and nominating committee.
The letter warned that a vote against current directors or
to split the CEO and chairman roles "could be disruptive to the
company and is not in shareholders' best interests."
The letter is a direct response to reports in the past seven
days from advisory firms Institutional Investors Services and
Glass Lewis & Co. The firms concluded that investigations of the
bank's $6.2 billion loss on the "London Whale" derivatives
trades showed the board had failed in its oversight of JPMorgan
The incident is cited in policy debates in Washington as
evidence big banks need to be broken up or required to hold much
more capital for the safety of the financial system.
Both advisory firms recommended JPMorgan shareholders vote
against re-election of three board members who served on the
board's risk policy committee when the losses occurred.
The advisory firms generally take the view that having a
board chairman who is separate from the CEO in a company leads
to better oversight. They said the London Whale episode showed
that JPMorgan was no exception.
The board letter on Friday said the firms "and others have
incorrectly and unfairly characterized management's mistakes as
a failure by the risk policy committee."
The letter was issued ahead of the bank's annual meeting on
May 21 when shareholders will vote on the board's recommendation
that all 11 directors be re-elected for another year.
The ballot also includes a non-binding resolution proposed
by some shareholders that calls on the board to have a chairman
who is independent from the CEO.
The vote on splitting the roles has come to be seen as a
referendum on Dimon, 57, who was widely praised for leading the
bank profitably and safely through the financial crisis and then
saw that reputation tarnished by the trading debacle.
The seven-page letter came one year to the day after the
company announced it was losing billions of dollars on the
trades. Dimon had previously dismissed news reports of possible
losses as a "tempest in a teapot."
The letter said the advisory firms focused "too narrowly" on
the losses and a broader view of the company's performance shows
Dimon and all of the board members should be supported in the
The company reported record earnings and scored well on
measures of profitability, including 15 percent returns on
tangible common equity, every year for the last three years, the
"We highlight the performance of the Company not to diminish
the events of last year or the lessons learned from them, but to
provide important context," the letter said.
The letter defended by name the three directors on the risk
policy committee who ISS said should not be re-elected. It said
the three directors--David Cote, who is also chairman and CEO of
Honeywell International Inc, James Crown, who is
president of private investment firm Henry Crown and Company,
and Ellen Futter, who is president of the American Museum of
Natural History--had worked diligently and have "accomplished
The letter said there was no reason that the trio should
have seen that a trading strategy which had successfully hedged
the bank's credit risk had turned into a losing bet.
The directors said it depends on the situation whether it is
best to have one person or two as chief executive and chairman.
They noted that the board had split the roles when Dimon first
became CEO and when his predecessor, William Harrison, first
became CEO under another chairman.