Insight: Dimon has big say over who serves on JPMorgan board

Thu May 16, 2013 12:51am EDT
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By Nadia Damouni, David Henry and Ross Kerber

(Reuters) - For years, JPMorgan Chase & Co Chairman and CEO Jamie Dimon and other executives have hand-picked new directors, in a practice that is now unusual for a major U.S. bank.

The JPMorgan board's governance committee, responsible for hiring new members, relies almost entirely on referrals from management to find director nominees, according to two sources familiar with the bank's practices and a review of bank regulatory filings. All of the other 10 largest U.S. banks say they use executive search firms, which have knowledge of a range of possible candidates.

An examination of the bank's selection process, which until now has been little known, could prompt questions about how much influence Dimon has over the largest U.S. bank's board. It comes ahead of a critical shareholder vote next Tuesday over whether the board should strip him of the chairman's title and give it to another director, which would increase oversight of Dimon's stewardship as CEO.

Selecting directors in this way can create the appearance that the board may be too close to Dimon and his senior management team, some corporate governance experts said.

"There is value in seeking input from others outside of the board room," said Ann Yerger, executive director at the Council of Institutional Investors, an association of pension funds, endowments and foundations. "The point here is you should be casting a wide net, especially at our most elite companies."

JPMorgan spokeswoman Kristin Lemkau said on Wednesday that the board has used executive search firms but has not found them useful. "Many of the director candidates for our board are names already well known to the business community," she said.

For example, Lemkau said, James Bell, who joined the board in November 2011 shortly before retiring as Boeing Co's chief financial officer, was known to the governance committee as a highly qualified director prospect for a number of years.

By most corporate standards, JPMorgan's 11-member board is strong - with a lot of business heavyweights - and is relatively independent. Ten directors are described by the bank in regulatory filings as independent from management, and Dimon is the only executive on the board. Former ExxonMobil CEO Lee Raymond is the lead independent director.   Continued...

JPMorgan Chase & Co CEO Jamie Dimon speaks about the state of the global economy at a forum hosted by the Council on Foreign Relations (CFR) in Washington October 10, 2012. REUTERS/Yuri Gripas