JPMorgan 2020

JPMorgan 2020 Financing Climate Destruction

JPMorgan 2020 annual meeting is 5/19/2020 at 7AM Pacific virtually. Presumably we will be able to vote by entering our 16-digit control number found on the proxy card. To enhance long-term value: Vote AGAINST Burke, Pay, Auditor, #8. Vote FOR other directors, other shareholder proposals.  See list of all virtual-only meetings maintained by ISS.

JPMorgan Chase & Co. operates as a financial services company worldwide. It operates in four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM).  Reading through more than 100 pages of the proxy takes too much time for most. However, your vote could be crucial. Below, how I voted and why.

If you have read these posts related to my portfolio and proxy proposals for the last 24 years and trust my judgment, skip the 10 minute read. See how I voted in my ballot. Voting will take you only a minute or two. Every vote counts.

I voted with the Board’s recommendations 56% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A). 

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.

JPMorgan 2020: ISS Ratings

From the Yahoo Finance profile: JPMorgan Chase & Co.’s ISS Governance QualityScore as of December 5, 2019 is 3. The pillar scores are Audit: 5; Board: 2; Shareholder Rights: 3; Compensation: 4. Corporate governance scores courtesy of Institutional Shareholder Services (ISS). Scores indicate decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. We need to pay close attention to the auditors and compensation.

JPMorgan 2020 Proxy Voting Guide: Board Proposals

1. Union Pacific 2020 DirectorsEgan-Jones

Egan-Jones Proxy Services recommends AGAINST 1B) STEPHEN B BURKE. According to Egan-Jones’ Proxy Guidelines a director whose tenure on the Board is 10 years or more is considered affiliated, except for diverse nominees. Board committees namely Audit, Compensation and Nominating committees should be comprised solely of Independent outside directors for sound corporate governance practice.

Vote: AGAINST 1B) STEPHEN B BURKE

2. Executive Compensation

mylogiq_logoJPMorgan 2020 Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO/Chair James Dimon at $31.6M. I’m using Yahoo! Finance to determine market cap ($282B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. JPMorgan is a large-cap company.

According to MyLogIQ, the median CEO compensation at large-cap corporations was $12.2M in 2019.  JPMorgan shares underperformed during the last one year, two year and five year time periods. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 393 to 1.

Egan-Jones Proxy Services writes:

We believe that the Company’s compensation policies and procedures are centered on a competitive pay-for-performance culture, strongly aligned with the long-term interest of its shareholders and necessary to attract and retain experienced, highly qualified executives critical to the Company’s long-term success and the enhancement of shareholder value. Therefore, we recommend a vote FOR this Proposal.

Sorry, given far above median pay, poor relative performance, high pay ratio, and my general concerns about inequality, I voted AGAINST.

Vote: AGAINST

3. Ratification of Independent Auditor

I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. PricewaterhouseCoopers, LLP has served more than seven years. No other issues appear significant.

Vote: AGAINST

JPMorgan 2020 Shareholder Proposals

4. Shareholder Proposal: Independent Board Chair

This good governance proposal comes from Kenneth Steiner. I voted FOR. An independent Chairman is best positioned to build up the oversight capabilities of our directors while our CEO addresses the challenging day-to-day issues facing the company. The roles of Chairman of the Board and CEO are fundamentally different and should not be held by the same person. There should be a clear division of responsibilities between these positions to insure a balance of power and authority on the Board.

Recently shareholders voted a majority of shares in favor of a similar proposal at Boeing,

Egan-Jones writes:

We believe that there is an inherent potential conflict, in having an Inside director serve as the Chairman of the board. Consequently, we prefer that companies separate the roles of the Chairman and CEO and that the Chairman be independent to further ensure board independence and accountability.

Vote: FOR

5. Shareholder Proposal: Oil and Gas Company And Project Financing Related to the Arctic and The Canadian Oil Sands

This proposal comes from Trillium Asset Management LLC, as agent for Oneida Trust Minors. Shareholders request the Board issue a report describing how JPMorgan plans to respond to rising reputational risks related to involvement in Canadian oil sands production, oil sands pipeline companies, and Arctic oil and gas exploration and production. That seems reasonable to me.

Egan-Jones believes the report requested by the proponent would not be a good use of company resources, so recommends against.

Since the reputational risk is great compared to the cost of the report, I voted FOR.

Vote: FOR

6. Shareholder Proposal: Climate Change Risk Reporting

As You Sow, on behalf of Brian Patrick Kariger Revocable Trust, submitted this proposal. I also signed onto this proposal. We request a report outlining if and how JPMorgan intends to reduce the GHG emissions associated with its lending activities in alignment with the Paris Agreement’s goal of maintaining global temperature rise below 1.5 degrees Celsius. As the largest source of fossil fuel financing globally, JPMorgan contributes significantly to global climate change. That funding creates systemic portfolio risks.

Egan-Jones recommended FOR:

Acknowledging climate change as an inevitable factor, and recognizing the need to adapt, involves bold decisions by business. Therefore, we believe that companies should review how climate change impacts the economy and portfolio companies and evaluate how shareholder resolutions on climate change may impact long-term shareholder value as it votes proxies.

From the proposal: “Recently, 215 global companies reported almost $1 trillion at risk from climate impacts, with many likely to occur within five years.” There is no time to delay.

Vote: FOR.

7. Shareholder Proposal: Amend Shareholder Written Consent Provisions

This good governance proposal from John Chevedden seeks to remove a current hurdle JPMorgan included in its bylaws to begin the process of collecting written consents. To do so, currently requires agreement from shareholders holding 20% of shares, contrasted with no such requirement at other companies.

Egan-Jones recommends voting FOR and writes:

We believe that enabling to fix a record date will make the right to act by written consent more meaningful… we determined that the proposed resolution contemplated thereby is advisable, substantively and procedurally fair to, and in the best interests of Company and its shareholders.

Vote: FOR.

8. Shareholder Proposal: Charitable Contributions Disclosure

Thomas Strobhar submitted this proposal which requests the Board disclose on the Company website any recipient which receives $1,000 or more of direct contributions, excluding employee matching gifts. Strobhar is the chairman of Life Decisions International, an organization that has helped convince over 200 companies to stop giving money to Planned Parenthood.

$1000 seems like a low threshold and the proponents provides no evidence of bad faith or self-dealing related to the company’s charitable contributions.

Egan-Jones recommends voting AGAINST. “We do not believe that implementing the proposal would justify the administrative costs and efforts, nor would it provide a corresponding meaningful benefit to the Company’s shareholders.”

Vote: AGAINST.

9. Shareholder Proposal: Gender/Racial Pay Equity

Arjuna Capital, on behalf of three independent shareholders, filed a proposal requesting a report on risks related to emerging public policies regarding the median gender/racial pay gap including attraction and retention of diverse talent.

Egan-Jones recommends voting FOR and writes: “The report as requested in the proposal will enable the Company and its shareholders evaluate the fairness of its pay policy and practices to ensure that proper oversight is exercised on pay equity.”

Vote: FOR.

JPMorgan 2020 CorpGov RecommendationsProxy Insight

Proxy Insight reported no votes as of when I last checked. They may have updated by the time I post this.

Looking up a couple of funds announcing votes in advance, NYC Pensions voted FOR all items except Raymond, Written Consent, Charitable Contributions Disclosure, and Gender/Racial Pay Equity Report. Trillium voted AGAINST all directors (except Rometty), Executive Pay, Written Consent, and Charitable Contributions Disclosure.

CorpGov Votes:

  1. Directors: AGAINST 1B) STEPHEN B BURKE
  2. Executive Pay: AGAINST
  3. Auditor: AGAINST
  4. Independent Board Chair: FOR
  5. Oil & Gas Finance Report: FOR
  6. Climate Change Risk Reporting: FOR
  7. Amend Written Consent: FOR
  8. Charitable Contributions Disclosure: AGAINST
  9. Gender/Racial Pay Equity Report: FOR

JPMorgan 2020: Mark Your Calendar

Shareholders who wish to present proposals for inclusion in the proxy materials to be distributed by us in connection with our 2021 Annual Meeting of Shareholders must cause the proposal to be received by the Secretary of JPMorgan Chase no later than December 7, 2020. Such proposals must comply with all requirements of Rule 14a-8 promulgated by the Securities and Exchange Commission.

Warnings

Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” chosen by aspiration. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.

   

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