Saturday, April 6, 2013

Split the Chairman and CEO Roles at JP Morgan Chase: No Excuses

The discussion about splitting the Board Chair and CEO positions has become a referendum on the popularity of Jamie Dimon, or a stroking of his ego by another less-than-stellar board.  More and more companies are splitting the roles: it is clearly not a one-off measure aimed at Dimon.

Our post after reading the London Whale report shows the reasons, based on the board's own discussions,
"The J.P. Morgan Chase board of directors rightly concluded that the CEO should be able to rely on the competence and ethics of his direct reports.  However, it also said that "...he (Dimon) could have better tested his reliance on what he was told."  The board had no choice but to take the approach of "the buck stops here" with CEO compensation, and it did." 
The CEO would be in a much better position to test the veracity of what he is being told by self-interested lieutenants, and to enlist the help of internal audit or whomever he wants if he were not required to be busy planning and running board meetings.

After re-reading the Whale report, it is even more laughable than the first read.  Really, a systemically important institution that can't even measure its own risk profile, turns to some unknown British "mathematician" called "the modeler?"  Getting a handle on these issues requires the CEO's attention to focus his own management team, and this is not the work of the board, except insofar as it forms its own independent view through the audit committee.

Separate the roles and don't make a big deal out of it.  The SEC and the New York Fed should also weigh in through their back channels and insist on the change.

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