Jamie Dimon - Chairman and CEO
Steve Cutler - General Counsel
Lisa Lindsley - AFSCME
Michael Garland - New York City Comptroller's Office
Father Seamus Finn
Eric Cohen - Shareholder
Michael Mayo - CLSA
William Patterson - CtW Investment Group
Michael Pryce-Jones - CtW Investment Group
Alan Fisher - California Reinvestment Coalition
Leon Kamhi - Hermes Equity Ownership Services
Andrew Pittman - Shareholder
Manuel Isaza - Hermes Equity Ownership Services Inc. London
George Bolus - Shareholder
JPMorgan Chase & Co (JPM) 2013 Annual Shareholders Meeting May 21, 2013 10:00 AM ET
Good morning, it's my pleasure to call the annual meeting of the shareholders of JPMorgan Chase and Company; we welcome all of you here. I'm Jamie Dimon Chairman of the Board and Chief Executive Officer and the Chairman of this meeting. I do want to take one moment to say something about the tragedy in Oklahoma. We have 540 employees who live there, and more than 700,000 customers. Firstly all of our employees are safe, but we know that many people are not and our thoughts and our prayers are with the victims and those who left their homes. As we do in many disasters, we will ensure that we (waive fees) and go the extra mile to show our customers, see how they are faring in the aftermath.
Now, before I get into details of the meeting I would like everybody to watch this video produced by JPMorgan Chase, it gives you a different point of view about the company that I love so much.
(Audio & Video Presentation)
That is your company and the company that I’m so proud to work for. With me today is Steve Cutler, our General Counsel. And Steve will serve the sector of the meeting and will lead us through the agenda.
Thank you, Jamie. I’d like to add my welcome to everyone here today. I know that many of you are customers as well as shareholders. So, before we turn to the business of today’s meeting I’d just like to mention that if you have any questions about the services we provide, we have a team from our executive office and a team of mortgage specialists with us today, who’ll be happy to assist you.
I know that Patty Baker, our Head of Consumer Services is here and I’d ask her to stand there. She is in the room, there’s Patty. So I’d encourage you to stop by the customer service tables in the lobby, ensure your comments or questions after the meeting with her and the other representative here today. Also as a reminder, the use of cell phones or other equipment to record photograph or video tape the meeting is prohibited.
Now, let’s turn to the business of the meeting. We have here today the affidavit of mailing of notice for the meeting, the proxy statement, the formal proxy and the annual report. The shareholder list is available for inspection and representatives of IVS associates have been appointed to service as inspectors of election. The meeting is properly convened, a quorum is present and the proposed resolution set forth in a proxy statement will be filed as a part of these proceedings.
The polls are open and will remain open until the conclusion of the meeting or we announce that they’ve been closed. We’ll see proxies up until just before the beginning of the meeting representing over 84% of the outstanding shares eligible to vote and these have been voted in accordance with shareholder wishes.
If there are shareholders present who have not yet submitted their proxies and would like to do so, we’ll collect them after all the proposals have been submitted and they will be reflected in the final vote results.
Remarks today may contain forward-looking statements. Please refer to agenda into our Annual Report on Form 10-K with the SEC for our disclaimer regarding such statements. That completes the necessary formalities. Jamie will next introduce the Directors and make some brief remarks.
Point of order please? (ph)
We are going to take up items in the order of the agenda and we’ll recognize you later, sir.
No sir. We’re going to proceed with the agenda and we’ll recognize you later. Jamie.
No, we have not. You can raise your point later, sir. We’re going to proceed with the agenda.
I would first like to recognize our directors who are here. I would like to ask each director to stand when I introduce you. Please hold your applause after all the directors have been introduced. Your directors are James A. Bell, Retired Chief Financial Officer of Boeing Company; Crandall Bowles, Chairman of Springs Industries; David Cote, Chairman and Chief Executive Officer of Honeywell International; Stephen Burke, Chief Executive Officer of NBCUniversal; James Crown, President of Henry Crown and Company; Timothy Flynn, Retired Chairman of KPMG International; Lab Jackson, Chairman and Chief Executive of Clear Creek Properties, Inc.; Lee Raymond, Retired Chairman of Board and Chief Executive Officer of Exxon Mobil Corporation; and Bill Weldon, Retired Chairman of Board and Chief Executive Officer of Johnson & Johnson; Ellen Futter, President and Trustee of American Museum of Natural History cannot be here with us today.
I am proud to tell you with the dedication and commitment your directors have played and they have played a huge part in making this a great company. Thank you all for being here.
Let me now turn to my remarks. We’re delighted to be here in Tampa, Florida at our Highland Oaks facility which is a key operating center of our corporate and investment bank. I’d like begin with an overview of your company performance over the previous year. JPMorgan Chase earned a record $21.3 billion of net income and revenues of $97 billion in 2012. It was the third consecutive year of both recorded income and in return on tangible common equity of at least to 15%.
Our financial results reflect strong underlying performance across all of our businesses fueled by strong lending and deposit growth. We’ve also maintained our leadership positions and continued to gain market share in key areas of our franchise. This financial performance has resulted in good stock performance for stock shareholders over the years as well.
An insight of our financial performance, to the better part of this decade, our company has been doing great things. And during this period of economic volatility and social and political change around world, our work matters more than ever. As much as any other company, JPMorgan Chase is positioned to help individuals, businesses of all sizes, governments, not-for-profits and other partners see the opportunities and respond to the challenges of our times.
We can do it because of the strong company we have built, global reach with as many people expertise, capabilities, relationships, and capital at the scale required to do important things.
During the course of 2012, JPMorgan Chase provided credit and raised capital of over $1.8 trillion for our clients this includes lending $20 billion for small businesses originally almost 1 million mortgages, providing credit cards to 6.7 million people and raise in capital providing credit of approximately 85 billion for nearly 1500 not-for-profit government entities including states, municipalities, hospitals and universities.
Additionally, as a part of the 100,000 jobs mission we helped launch in early 2011. We’ve hired nearly 5000 U.S. military veterans and members of National Guard and Reserve. And through not-for-profit partners, we provided mortgage-free homes for 386 deserving veterans and their families.
Another example of our support to local communities came at the aftermath of Superstorm Sandy. We dispensed more than $1 billion in cash. We sent mobile branches and drove portable ATMs to the rockaways and deeper damaged parts of Brooklyn, Staten Island and New Jersey. We made $5 billion incremental capital available to impact the small and middle market companies. We allowed mortgage and credit card customers to delay payments without penalty. We directly donated 10 million to charities and individuals in needs and we guaranteed pricing on $2.6 billion bond issue for the State of New Jersey to ensure that it accessed the desperately needed funds at that time.
Through the turbulence of recent years, we’ve consistently earned a fair profit for shares and we never stopped serving clients in investing in the future of our business, opening new offices and branches, and in key bankers and key markets innovating and gaining market share. Our capital strength and earnings power is as strong as they’ve ever been. Challenges will exist and there is always room for improvement but if we look ahead we remain proud of these accomplishments and optimistic about the future.
There are a few things that occurred in the past that we were not proud of. Our biggest problem of the year, the London Whale episode was widely chronicled. This episode now encloses money, it was extremely embarrassing or it was up to severe criticism, damaged our reputation and resulted in litigation investigation that is still ongoing.
While we knew that we will solve the CIO problem, learned a lesson from the experience. It would have been a terrible shame if that one issue was allowed to damage the company from doing all the great things that they continue to do. Fortunately, that did not happen. Our people took the great credit, continue to do their jobs, serve our clients and keep the company on track. I'm very charged with fixing the CIO problem, mitigate the impact and manage the exposure down.
In addition to the CIO issue, we see regulatory orders were quite improved, performance to multiple areas including more in foreclosures, anti-money laundering procedures and others. And unfortunately, we expect we may have some more. You should rest assure that we're doing all necessary to complete the needed improvements identified by regulators.
As I said in my (shareholders) letter a control and regulatory agenda is our number one priority. We are re prioritizing many major parts initiatives, we're making change to organizational structure and so we get this done properly and quickly. Our operating committee members are deeply engaged and now responsible for specific initiatives and the lease of the controls and compliance agenda, have you started to make decisions and top down commended controlled fashion, similar story operate when we undertake a major acquisition.
We are devoted to showing our systems; practice control, technology and culture meet the highest standards. Satisfying all the regulatory requirements, we will take a (building) effort and sustain it, after we’ll touch every part of the company. We are committed to make the necessary investments on risk, credit, finance, legal, compliance, audit, tech and operations to meet these requirements. At the end of the day we believe that all banks and all regulator share a common goal to ensure a strong, stable banking system that can help our company grow again.
Looking ahead, we do see many opportunities for business growth. The needs of the global economy are large and still growing and indeed your clients are substantial and growing. Corporate equity and debt issuant demand could grow 25-30% over the next five years and global investor client demand could also grow 20% to 25%.
JPMorgan is as well an underlying securities, a provider payment services as a mark to make a place right in the middle of key money flows. As during in loan balances for small and midsized companies are also expected to grow approximately 6% to 2020. And consumer financial assets have grown an average of 6% per year and its growth is expected to continue.
Banks especially large global banks with market ability to design, to serve the needs of global clients in particular will be essential to meeting these large growing and complex needs. We believe that we face the future with a strong (hand). We have extraordinary relation with the clients and customers. Across our wholesale business; we have 50,000 employees serving 7600 clients in more than 100 global markets.
We have relationships with more than 50 million U.S. consumers; consumer households, we have 2 million small business customers and 200,000 million market clients. We have also larger banks serving other banks in America carrying more than 800 community and regional banks as customers. Each of our businesses is among the best in its field and each gains strengthen from big part of the (hole).
Every single one of our business is growing, is profitable and is a strong competitor. Our each individual business gets competitive as we impart the whole; each business is able to offer more products at a lower cost to more clients as a result. The evidence is in the cross selling and it takes place across the company. We have raised an approximately 14 billion of revenues comes from cross selling and synergies across the businesses.
Presumably it costs us by additional (price loss) because they’re through to do so find easier and less costly, and we’re able to deliver that value of lower costs due to our approaching power and the high efficient user global data networks, data centers and other operating systems. We have maintained a reported balance sheet; our strong return in capital provides us excess capital to invest. The investments we made over the past few years have and will continue to drive results.
For example, in the last five years we build more than 800 new Chase branches. Since 2011, we've added 1200 Chase private prime locations in the United States and we continue to grow internationally in 2012, we open a new wholesale branch in Russia, our seventh branch in China, bringing our total of a102 wholesale branches and all these locations worldwide.
Just the beginning of 2010, we've hired 700 small business bankers, 500 private bank client advisors, 300 investment management sales people and investment experts and 400 people in the global corporate bank.
Overall, we invest for the long run and we manage risk accordingly. At JPMorgan Chase, we play a long game, we are not a fair weather friend. Clients, communities and countries want to know that we will be there for them particularly when times are tough. Europe is one example of this and Greece, Poland, Italy, a portion of Spain got in trouble we made a decision to stay the course. We know and said in terrible scenarios we could lose $5 billion or more, but we have been doing business in these countries for than 100 years, we try to help them in time of trouble and we hope to be doing business there a 100 years from now. We will never lose focus on the reason we are here to serve our clients. We reported safety in the last storm and the source of strength of the global economy. We will be reporting safety in the next storm.
This company has extraordinary capabilities technological, risk, credit, deep knowledge and relationships and we have a strong and capable management team. The individuals who manage our global business are exceptional they are experienced, knowledgeable and capable. These individuals have significant tenure at the company and they are focused on getting the right things done and done right and for the right reason. This is good a team as leaders as I have ever had the privilege to work with.
So let me close by thanking our more than 260,000 employees, day in and day out they are the people who serve the clients, communities and shareholders with distinction and dedication, I am honored to be their partner. The video you just watched at the beginning of this meeting is a prior review of JPMorgan Chase. It is not really the typical video that a bank would do, but is what we do as a bank and what we are all about. It reflects the diversity of our people, the common bond they share and the many ways, in which they make life better for each other, our clients and our communities, it is why I am proud to be at JPMorgan Chase. Thank you.
And now it is time to turn to the proposals that are in the proxy statement. I will introduce the management proposals and then invite the shareholder proponents to introduce their proposals. After all the proposals have been introduced, we will then have some remarks from our presiding Director Lee Raymond and then a general comment and Q&A period.
I now move all of the management proposals that is set forth in the proxy statement and these are for proposal number one; the election of directors, proposal number two; ratification of our independent registered public accounting firm, proposal number three; an advisory resolution to approve executive compensation, proposal number four; an amendment to the firm’s restated certificate of incorporation to authorize shareholder action by written consent and proposal number five; the re-approval of our key executive performance plan.
I will now ask the shareholder proponents to introduce their proposals in the order in which they appear in the proxy. Proponents we ask that you limit your time to three minutes and confine your comments to the subject matter of the proposal being presented to be sure that all of the proponents have an opportunity to present their proposals today.
We have a clock with buttons that will turn yellow after two minutes and red after three, there are two standing microphones after I have recognized you please proceed to the microphone nearest you. We ask that other speakers remain seated and wait until the general comment period before proceeding to a microphone and providing our comments.
Okay proposal number six was submitted by AFSCME Employees Pension Plan, we have been advised that Lisa Lindsley of AFSCME will present this proposal Ms. Lindsley I see her walking up to the microphone, will you go ahead and please present the proposal?
Good morning. My name is Lisa Lindsley and I move proposal number six which asks the Board to adopt a policy so that share will be an independent director. I speak on behalf of the AFSCME Employees Pension Plan and our co-sponsors the Connecticut Retirement Plan and Trust Funds, Hermes Equity Ownership Services and the New York City pension funds.
We believe a structure where the CEO runs the businesses and is a (cannibal) to a Board led by an independent chairman is in the best interest of JPMorgan Chase shareholders. We do have to see this measure as a panacea but rather a badly needed first step to strengthen the over-side of management by the Board on behalf of the shareholders.
An independent chair of the Board will eliminate the structural conflict of interest caused by the CEO being his own boss. This proposal was never intended as a referendum on this Mr. Dimon’s performance as CEO. Good corporate governance is not a personality contest and it tends to frame this proposal as such divert attention from the critical issue that this proposal addresses.
What is the best governance model for the Board? We realize the concept of independent share represents a culture shift for a Board first six out of the 10 independent directors has held combined shared CEO roles. The entire point of separating the roles of Chairman and CEO is that they have different responsibilities and duties, they are different jobs. The CEO is supposed to be the Chief Employee leading his or her organization to delivering the agenda and objective set by the board. The CEO is an operating executive. The chairman on the other hand is supposed to lead the board in setting the agenda, strategy and objectives of the corporation on behalf of, We, the shareholders. We see the role the board is doing for the firm and monitors the CEO and executive team, which naturally introduces a healthy tension into the governance of a complex organization such as JPMorgan Chase. Another key duty of the board with the chairman at its head is (oversized).
The board is supposed to monitor the performance of the CEO and Chief Executive, guide and supervise them to perform the way which achieves the objectives they have set within the constraints under which the firm must operate.
Having the chairman and CEO of a firm be the same person, collapses this crucial function into irrelevance. A third key duty of the board is succession planning. No one person should ever be indispensible. It’s for the job of the chairman and the board to ensure that the company is in good solid health for shareholders no matter what happens to the CEO and key management.
Obviously, we are disappointed in the London Whale and the company’s response to the London Whale as it highlights the lack of independent oversight of management. However, our concerns with the governance of company are much broader than this. The company’s legal and regulatory fiascos including illegally foreclosing on veterans, manipulating LIBOR, rigging the news for buyer market, manipulating power prices and more have crossed the company over $16 billion since 2009.
Just earlier this month the California Attorney General sued our company for abusive debt collection practices. Our company needs a new tone at the top and we urge shareholders to vote for this proposal. Thank you.
I understand that Michael Garland is here from the New York City Comptroller's Office, co-proponent of proposal number six, Mr. Garland?
Thank you Mr. Cutler, Mr. Chairman, members of the board; I am Michael Garland from New York City Comptroller, John Liu’s office and I am here to speak in favor of proposal six for an independent board chairman which Comptroller will co-sponsored on behalf of the city’s pension funds. The city’s pension funds are substantial long-term JPMorgan Shareholders, with 11.3 million shares valued at over $550 million.
Like our co-sponsors, we too believe our interests are best served when a CEO runs a business on the one hand and reports to an independently led board on the other. The role of the board is to oversee the CEO in irresolvable conflict of interest arises when no those roles are reversed.
Independent board leadership is especially important at JPMorgan which is among the world’s largest and most complex financial institution, managing the bank which stretch the capacity of even the most talented CEO. It’s unrealistic and from the boards perspective and shareholders perspective imprudent to have the CEO also spent time running the board.
Share owners have been ill-served in recent weeks by those who thought to twist today’s vote into a referendum on your leadership. We appreciate that JPMorgan shares have outperformed its peers but the bank also weighs its peers in regulatory sanctions. It’s suffered a $6 billion London Whale loss and as you mentioned it’s under investigation by the State’s federal agencies.
Last month, officials from your primary regulator reportedly told you and the board that they don’t trust management citing a series of compliance and risk failures. This alarming loss of regulatory confidence has not only caused reputational harm, it impairs the bank’s ability to create value for share owners.
Regulators for example are reportedly making it harder for the bank to enter new markets and introducing products and we understand the bank is cutting back on initiatives in order to focus its time on the regulatory problems. The onus is on the board to demonstrate to both share owners and regulators that it is serious about strengthening its independence and oversight.
Naming an independent board chairman may not be a silver bullet but it is an important first step. We urge the board to take that step and we urge share owners to vote for proposal number six. Thank you.
Thank you Mr. Garland. Proposal number seven was submitted by Mr. Ray Chevedden. We have been advised that Father Seamus Finn will present this proposal, Father Finn?
Father Seamus Finn
Good morning, members of the Board, fellow shareholders, Mr. Dimon, Mr. Cutler. I am happy to present this resolution which would require executives to retain significant stock by Ray and Vincent Chevedden Family Trust of Los Angeles.
Resolved that shareholders request that our executive pay committee adopt a policy requiring that senior executives retain a significant percentage of shares acquired through equity pay programs until reaching normal retirement age. Normal retirement age shall be defined by our Company’s qualified retirement plan that has the largest number of plan participants.
Shareholders recommend a share retention percentage requirement of 25% of such shares. This policy should prohibit hedging transactions for shares subject to this policy. Hedging transactions are not sales, but reduce the risk of loss to executives. This policy shall supplement any other share ownership requirements that have been established for senior executives, and should be implemented consistent with our company’s existing contractual obligations and the terms of executive pay or benefit plan currently in effect.
Requiring senior executives to hold a significant portion of stock obtained through executive pay plans would focus our executives on our company’s long-term success. A Conference Board Task Force report on executive pay stated that the hold-to-retirement requirements give executives “an ever-growing incentive to focus on long-term stock price performance.”
Directors Dimon, Fuller, Jackson, Crown and Raymond each had 12 to 25 year long-tenure; such long tenure can seriously erode in an independent prospective, so valued for directors. Long-tenure directors Jackson and Raymond, also control the chairmanships of both the audit and executive pay committees.
In light of the resolved and the proposal presented by Mr. Chevedden and the family trust, we ask the shareholders to join in supporting this proposal, thank you.
Thank you, Father. Proposal No. 8 was submitted by Mr. William Rosenfeld. We have been advised that Mr. Eric Cohen will present this proposal. Mr. Cohen?
My name is Eric Cohen, a founder of investors against genocide. I am here to present the shareholder proposal which asks JPMorgan to avoid investments in companies substantially contributing to genocide.
This year marks 10 years of the genocide into our four and it’s the third year that JPMorgan has opposed genocide free investing. Suddenly, JPMorgan has now increased this portion in the worst company tied to genocide to 7% of the outstanding shares.
As a result, people investing with JPMorgan are still inadvertently linked to companies tied to the atrocities in Sudan. Investors against genocides and its many supporters are, at a loss to understand JPMorgan’s opposition to this proposal.
The company claims that it’s “business practices already reflect our support and respect for the protection of fundamental human rights and the prevention of crimes against humanity.” If so, then how can JPMorgan invest in a company so connected to genocide?
As a signatory to the UN principals for responsible investment, JPMorgan has agreed to incorporate ESG issues into investment analysis and decision and to better align investors with broader objectives of society. Well how can a company that accepts these responsibilities fail to act against genocide 68 years after the end of the holocaust and now 19 years after the genocide in Rwanda?
There is no compelling reasons for these investments, no fiduciary responsibility requires them, and avoiding the very small number of companies that are involved need not affect financial returns.
The company says that it holds securities in many different capacities implying that others are responsible for its problematic investments. This claim ignores JPMorgan’s role in selecting and recommending investments. Furthermore, why does JPMorgan not even act on the shares that it directly controls? If T. Rowe Price, TIAA-CREF, American funds , 30 states and 61 colleges and universities, can all take steps to avoid investments tie to genocide, why can’t JPMorgan? Since 1997, U.S. sanctions has prohibited American companies from doing business with Sudan’s oil industry. Therefore, Exxon Mobile is precluded from supporting Sudan’s oil industry. But JPMorgan has over $4 billion invested in foreign companies that provide these same services.
JPMorgan’s investments in companies such as PetroChina clearly conflicts with the spirit if not the letter of the law. In the video that opened today’s meeting, Mr. Dimon and other executives vowed to try to do the right thing.
I ask you know to live up to this pledge. I asked you to support the values of your customers who do not want their savings tied to genocide in Sudan today or anywhere else in the future. This proposal is not difficult to implement and is well within your abilities to do so. Surely, it is not too much to ask that JPMorgan make an afford to “avoid holding or recommending investments in companies that in management’s judgment substantially contribute to genocide against humanity, the most egregious violations of human rights”.
Moreover, in the phase of genocide, it’s the right choice, the right choice for your customers and the right choice for your business.
Thank you, Mr. Cohen. Proposal number nine was submitted by Sisters of St Francis of Philadelphia, we have been advised that Father Finn will present this proposal as well. Father Finn?
Father Seamus Finn
I’m happy to present this proposal on behalf of my colleagues at the interface center and corporate responsibilities, specifically the Sisters of St. Francis of Philadelphia, and Walden Asset Management.
We appreciate and they appreciate the informative dialogue that have been taking place between the company on political spending and lobbying disclosure. As you see in the proxy, the resolution seeks to expand our company’s disclosure on lobbying, describing what our lobbying priorities are, how much we spend on lobbying and how we lobby through trade associations or work to influence stake policies.
We’re happy to report that the Board and shareholders, to the Board and shareholders today is that JPMorgan Chase has moved into a new era of disclosure on political spending. We commend them for this forward motion.
We learn from our reports on political spending that no shareholder money has been spend on elections and our policy is to prohibit spending of corporate dollars for elections. And the trade associations where JPMorgan Chase is a member are told they can’t use our dues for election hearing purposes.
Finally, we also learned that JPMorgan Chase is not a member or contributor to ALEC, the controversial organization that approximately 50 companies now have withdrawn from, because of its active lobbying against issues like renewable energy and its anti-immigration steps.
Why then is the lobbying disclosure resolution before us today? Simply put, there is room for more to be done. For example, in our report there is no summary of the issues that JPMorgan Chase focuses on in lobbying. We don’t know what our priorities are. We also appreciate that JPMorgan Chase along with other companies files the quarterly report with the government detailing that quarter’s expenditures to influence legislation, but this is hard to decide for without direction.
But most importantly, JPMorgan Chase does not disclose the specific dollar amount of dues payments to trade associations that engage in lobbying and not the portion used for lobbying. For example about 50% of our dues to the U.S. Chamber of Commerce is spent on lobbying yet we’ve seen nothing about this.
The U.S. Chamber of Commerce is country’s largest lobbying group and between 2009 and 2012, spent more than $500 million on lobbying. This is an integrity problem for JPMorgan Chase, because the Chamber has an active champion opposing it’s effective environmental regulation, actually sued the EPA when it attempted to exercise its authority to regulate greenhouse gas emissions.
Furthermore, we don’t disclose our memberships in financial industry trade associations like the financial services for and what they lobby for. It is in the public interest for example to be consistently, is it in the public interest for instance for them to be consistently opposing parts of the Dodd-Frank legislation.
In summary as investors, we believe that enhance lobbying disclosure will provide better information and necessary information for us to evaluate any business risk associated with the company’s efforts to influence the regulatory and legislative process.
Thank you Father Finn. That completes the introduction of the shareholder proposals.
I’d like to second that proposal.
What we’ll do is we’ll recognize comments on this proposal and the others when we get to the general Q&A. So we’re going to adhere to agenda. So that does complete the introduction of these shareholder proposals we’ve posed for the reasons set forth in the proxy statement. We’re now pleased to have comments from the Boards providing Director, Lee Raymond, so I’d ask Mr. Raymond to come up to the desk.
Thank you Jamey and Steve, good morning. The first comment I’d like to make is it’s a privilege to serve on the Board of JPMorgan. As the Board’s presiding Director and in light some of the matters we’re considering at the annual meeting today, I thought it would be useful to give you very briefly, a sense of the Board’s perspective.
Let me start by saying we’re mindful of what some of the proxy consultants and others have said on the subjects of our Board composition and structure. We have had a number of discussions with shareholders and take their concerns, suggestions and feedback very seriously. But we do believe the current governance structure with Jamey Dimon serving as both Chairman and CEO, and an independent-minded board consisting of highly qualified directors and a strong presiding director function has served the shareholders well and is the right one for the Company at this time.
Whenever I think about the corporate governance, I always remember what Ken Jamieson who is Chairman and CEO of the Standard Oil Company of New Jersey told me many, many years ago. All you need to remember he said is two basic precepts. One, the board can fire management and management can’t fire the board. And two, the management can run the Company and the board can’t. Within this framework, ultimately, the board and management must work together in the best interest of the Company’s owners, you the shareholders. That’s how we think about the relationship between the board and management at JPMorgan and we believe it’s worked.
The Company’s recent and long term historical performance has been very strong on an absolute and relative basis. I won’t repeat all what Jamie has said today, but we’ve had record earnings for three years running, our major businesses have all achieved top two leadership positions. And during Jamie’s tenure our stock has outperformed the industry averages and most financial services companies.
I say that not to brag about the Company’s accomplishment or to diminish the mistakes we have made, the losses in CIO foremost among them, but to put the debate over our board composition and structure in context. This essentially is the same board strengthened further by two recent additions to the directors here today that help guide this Company through risks associated with the financial crisis and the better (returns) in Washington Mutual transactions without a single negative quarter.
We know we have much work ahead of us, but we think we have the directors the right leadership and an abiding commitment to get that work done. We don’t think this is time for disruption. First I’ll say a word about our directors. I’m not going to single them out individually, but they all have extensive diverse and accomplish background. They have led large complex organizations; have deep experience in corporate strategy, risk, accounting, finance, legal and regulatory issues. They have the integrity, experience and judgment and dedication you would want from your board.
Next let me say a little bit about the way our board operates. Other than Jamie the board is made exclusively of non-executive independent Directors. All of the boards key operating committees are chaired by non-executive independent Directors. The independent Directors meet in executive sessions without Jamie or other management in attendance at every regularly scheduled board meeting.
We regularly meet with company management, well beyond Jamie. And of course, we have a presiding Director who is annually appointed by the independent Directors. Our presiding Director approves the board's meeting agendas and schedules. He has the authority to call meetings of the independent Directors. And he approves the information that’s sent to the Board.
In my role as Presiding Director, I meet privately with Jamie after every regularly scheduled board meeting. Some of the shareholders with whom I have spoken have asked whether the CIO matter; isn’t the demonstration of the need to just put the Chairman and CEO roles. I will say it's just the opposite; that the strength and independence of the Board's over side role were demonstrated by what we did following the events in CIO.
We established an independent board review committee and ensured that those directly responsible for the losses; incurred over $100 million in compensation clawbacks and are no longer with the company. We also held senior management accountable, including cutting Jamie's compensation in half during the year in which the company achieved record earnings.
We know that some people believe that the Chairman and the CEO roles should be spilt at this and other companies no matter what the situation. But we believe it is critical for the board to retain the flexibility to adopt the most effective leadership structure. Sometimes as we did, when Jamie first became CEO and Bill Harrison served as Chairman, that's a spilt and in other times it's not.
It’s your board’s considered and unanimous view that the current governance structure with Jamie serving as both Chairman and CEO and an experienced capable and independent group of Directors is in the best interest of our company at this time. Thank you for your time, and Jamie, back to you.
Actually, I am going to take it from here Lee, thank you. We are now ready for any general questions or comments from shareholders after which we will close the polls and present the preliminary voting results. There are two standing microphones. If you wish to address the meeting, please proceed to the microphone nearest to you and take your place in line. When addressing the meeting, please state your name and whether or not, you are shareholder. As a reminder, we ask that you limit your time to three minutes each turn at the microphones to allow everyone an opportunity to speak, and there will be a total of time limit of ten minutes on any one topic.
Please direct your questions to our Chairman Mr. Dimon.
All right, at microphone number one?
Michael Mayo - CLSA
Hi Jamie, its Mike Mayo, I am here on behalf of a shareholder, I am also a security analyst for the last 25 years. My main question is why is the risk committee qualified to help oversee such a large bank? This question is in three parts, but do they have enough experience on the risk committee? I heard what you said, I have been doing this job full time for 25 years and sometimes when I take a look at the $2 trillion balance sheet, I don’t really know exactly what's going on. And I have access to the company, I appreciate that and I think the transparency of JPMorgan relative to the other $2 trillion banks is best in class but even still, I have difficulty, so why is the risk management committee qualified for that job?
I'll first point out to the risk committee is the same risk committee that helped guide this bank through the tumultuous financial crisis that has shifted in higher capital ratios, liquidity, consumer accounting and rigorous risk management despite the fact we made a mistake. Each of the committee members is widely experienced in financial services, is well-known, has deep integrity and has worked hard for this company.
I personally do not believe they could have or should have picked up a (inaudible) when we made that mistake. That was the management’s mistake; had not been reported to them and that's what we feel.
Michael Mayo - CLSA
Once again I appreciate the answers by you Jamie but if we could also hear from Mr. Raymond, especially why didn’t the Board follow feedback for an overhaul of the risk committee? JPMorgan changed its managers around all the time, why not do the same for the risk committee?
Well I think the, back to the point that Jamie made with regards to the risk committee, one of the items we looked at as the independent review Board was whether or not the information that you would expect would be available from the management to the risk committee in fact was available and the answer is it was not. Further, we concluded to some outside experts looking into exactly what happened in the CIO that the actual structure of what was the trades that were in the London office, that the people who actually put that particular trade together didn’t fundamentally understand to trade themselves because it was so complex.
So I think it is unrealistic to expect that the risk committee would have been able in its over-side role to be able to accomplish that. The current members of the risk committee are all qualified to be there and I would not necessarily conclude as you perhaps are implying that we have not been mindful of the members of the risk committee. And I would just say, on that subject, in terms of the composition of the risk committee, you should stay tuned.
Michael Mayo - CLSA
And just like one last follow-up. What is the day to day action like between yourself, Mr. Raymond and management or other independent directors and management? Is there that constructive tension that some governance experts say is needed and what sort of resources do you have to not be a rubber stamp as some might accuse the Board of being?
Well the first comment I would make about that Mr. Mayo is that it has been 50 years since I got out of graduate school and went to work for the Standard Royal Company in New Jersey. And this is the first time in those 50 years that anybody has ever said to me that perhaps I am not strong enough. At that 50 years of performance appraisals that probably said the opposite and I would say that that would apply to other members of the Board. They are leaders in where they have been and where they have come from and you don’t get to those leadership positions by being a wallflower. And they are not; they are very active in terms of access. I have access to anybody, anywhere in the organization I want to talk to about anything. And I don’t necessarily have to go through Jamie to do that. I can pick up the phone and call them. And I think that is true with any other director in the organization too and that is one of the great strengths of JPMorgan and it is one of the great strengths of Jamie Dimon that he has the confidence in his people to let us directly interface with them and have our own views.
Now I do not know exactly what the word creative tension means but I think what I.
Michael Mayo - CLSA
Lot of tension, sorry.
What I would say is the relationship that each of them, of the members of the Board and certainly in my own case, the relationship I have with the senior management, particularly with Jamie is one of continuous conversation, continuous discussion of views. And all of us, I think recognize that in the end, we have to work together to make the investments that the shareholders have made and after all they own the company, that is who we really are obligated to serve and we are trying to do the best we can to increase the value of their investment in the company.
Microphone number two.
William Patterson - CtW Investment Group
William Patterson with the CtW Investment Group, a shareholder of record. Today’s election of JPMorgan directors is the most widely followed, intensely analyzed shareholder vote of any company on record. The CtW Investment Group are echoing in the concerns of the previous speaker hold on shareholders who opposed the reelection of three directors on the risk policy committee. And these directors now are confronting a shareholder vote of no confidence. In the face of this historic shareholder vote, shareholders today need to hear from you Mr. Raymond, immediately after the voting results, on how the Board intends to respond to the vote, and if it is in fact a shareholder vote of no confidence, with a large opposition vote, what does the board intend to do going forward to respond to that vote? and would you commit to making such a comment Mr. Raymond, after the director votes?
Well, I think I can make the comment before we know the result of the director vote and that is that we are very mindful of what we have heard. Just what that all means and reflect on our judgments as to what we are going to do in relationship to the structure of the board after this election is over.
William Patterson - CtW Investment Group
You looked 1.00.07 (puckered) at the shareholder meeting earlier this year. Directors received large opposition votes of 45%, 46% and within 10 days directors had resigned, the board responded promptly. Does your period of reflection encompass rapid action, rapid response to today’s vote?
Our reaction will be one of tempered analysis of what we need and analysis of the alternatives.
Microphone number one?
(Brucel Lefang), shareholder. Mr. Dimon, I come today from New Jersey in a sense of urgency. In August 2008, JPMorgan redeemed in excess of $3 billion in auction rate securities, for more of its retail customers, plus in that same year you also redeemed auction rate securities from Bear Stearns that you also acquired in early 2008.
I invested in 2004, my hard earned money, my family’s hard earned money, in auction rate securities, a total of $325,000. And I chose the Pacholder High Yield Fund, amongst all other issues I could have selected, because JPMorgan was the investment advisor, administrator and custodian of the funds. (inaudible) today, you can't get a better name and a more prestigious name than JPMorgan.
My money now has been frozen for five years and three months. This was supposed to be a safe liquid investment, preservation of capital, seven to twenty eight day paper. Pacholder only has, that I have been to their two annual meetings last two years. Pack holder only has $43 million, a measly sum, as far as Wall Street standards. $43 million outstanding in auction rate securities and withdrawing that money 83% are held by two institutions; because $7 million left, and my $325,000 represents roughly 4%.
As of today, 90% of auction rate securities, auction rate preferred securities, 90% has been redeemed by issues. In addition, unfortunately, I have a gravely sick daughter who is suffering from advanced stage of Lyme disease. I want to get on with my life. This is taking a financial toll, I am stressed on my marriage, I have made this trip today. I only ask Mr. Dimon is that, for this small amount of auction rate securities that’s left, a little guy like me could just basically get on with my life, just wanted to maintain my simple life again. And you know in this country we believe in justice for all. And I really believe enough is enough, I have been held hostage.
It’s supposed to be a safe liquid investment; it’s been five years and three months. Just imagine sir, or anybody in this room, if your money was frozen for five years and three months and every single waking moment you have thought about this day after day walking around living, breathing. This is on your mind, day after day. I want my life back. In addition, I get Business Week, read the article, and in Business Week, Mr. Dimon you said, the question is what you look for in your leadership team, you said capability, character and how they treat people. I know you are reasonable man. I want to get on that plane tonight back to New Jersey, go back to my house. Took a lot for me to come here and speak up. I know that I just want to get my, I just want my normal life back. That’s all I want.
I appreciate all the things you raised in your coming down here, I don’t know the specifics the case, but we have Pattie Baker right there, who is an expert in digging into these things and trying to figure out what the right thing to do is, and she will help you.
Microphone number two.
Mr. Chair and members of the board, I am speaking in favor of resolution number six, I am (Suzanne Hapgood) and I am here on behalf of Denise L. Nappier, Treasurer of the State of Connecticut. She is the primary fiduciary of the $26 billion Connecticut Retirement Plans and Trust Funds which hold a million and half shares of JPMorgan Chase stock and $38 million in bonds. As a primary fiduciary, the treasurer’s share shall go, Mr. Chair, as JPMorgan Chase being a long term, strong performing company. As a fiduciary however, Connecticut is concerned about your filing the roles of two separate positions. Both of which have become increasingly complex during the time of unprecedented challenges. Your position as CEO, Mr. Chair, is a great importance to the financial world, shareholders and to the global bank for which you are responsible.
Separately, Mr. Chair, the job of chair has become increasingly complex and time consuming in the role of overseeing with the performance as the CEO and the company overseeing CEO succession, strategy and risk and managing the board. We hope you will agree, Mr. Chair, that this is in the best interest of the bank, the shareholders and even you for the board to elect a highly competent board leader as independent chair, so you can focus your extraordinary talent on the very difficult responsibilities you have in running a complex institution critical to the world’s financial markets.
The Treasurer wishes you and JPMorgan Chase great success Mr. Chair, thank you.
Thank you (Ms. Hapgood) and microphone number one.
My name is (Eugene Falik), I am a shareholder and these comments are addressed to the board.
First of all, I want to say that I thought that video at the start of the presentation was fantastic. I think it’s unbelievable that a chairman of the major company would make those statements, unbelievably good.
On the other hand, I have some serious questions about the board. First of all, as I raised on point of order, there is no requirement that I am aware of, the people have ID to buy shares in this company. And Mr. Dimon, as a New Yorker, you know perfectly well that there are many, many people in this city who don’t have ID. That should not be a requirement to attend the meeting.
Let me go on and talk about compliance with the law. I came down here and I drive into the parking lot. The parking lot is a flagrant violation of Federal and state law. You are not allowed to use yellow, except to separate traffic in opposing directions. Why does the Chase refuse to comply with the law on Chase’s parking lot? And why does the board not see if the law is enforced?
Let me bring up another point. I saw that it was fantastic, well let me back up; I previously discussed unauthorized ESP transactions, and Mr. Dimon you said that they hadn’t reached the point where we needed to be concerned about it. I was very happy to see when the question of payday loans came up, you were the only banker who got out in front and said it was wrong and you are going to stop it.
But the fact is that the bank itself conducts unauthorized ESP transactions. I sent in a check to my home equity’s credit line with a notice not authorized for ESP, the check was stamped that way, and yet I did not get the check back. And when I call up I am told tough noogies. I think it is time; it is the responsibility of the Board to see that the company complies with the law. If the Members of Board can’t do that or they’re unwilling to do that, they should resign. And for that reason I call upon all of the members of the Board to submit their resignations today and not accept reelection if they are reelected.
Microphone number two.
Michael Pryce-Jones - CtW Investment Group
Hey, Michael Pryce-Jones from CtW Investment Group. Now, to bring about shareholder accountability, the Board is always like David versus Goliath. And last week, I think you probably aware of these questions to lee Raymond is the shareholders were cutoff at the urging of SIFMA, Securities Industry and Financial Market Association, to prevent shareholders having access to preliminary vote tally which is obviously as we know in our national elections a critical aspect on finding the way you are when you’re going into the meeting.
Now, there are reports, that this was at the urging of the SIFMA, and that JPMorgan is one of most powerful drivers behind SIFMA. The timing of it very suspect, you’re facing one of the closest elections this year. We’re going to see slim majorities for a number of your Directors most likely. And so, what we’d like to ask you is whether, and this is for the Board, and maybe I'll address it to Tim Flynn because he is the most recent Director, and I think he might have the most credibility in shareholders eyes on it going to undertake an independent review to see any executives of JPMorgan of SIFMA deny access by Broadridge to shareholder who only have access to the preliminary proxy.
And could you also use your pressure access mark to reverse this policy, it’s a critical part of the shareholder franchise to do this, mix the flank of its bounce back, that will be fantastic.
Let me ask our General Counselor to respond to that.
We’ll be very happy to work with the industry to come up with a reasonable framework that works across the industry on our accounts are distributed. We are now going to recognize microphone number one.
Alan Fisher - California Reinvestment Coalition
Good morning members of the Board, fellow shareholders. I’m Alan Fisher, Executive director of the California Reinvestment Coalition. I come to speak in support of proposal six and with some examples that I think will demonstrate the need to separate the positions of CEO and Chair of the Board.
These come from our ninth survey of counselors and attorneys around the issue of mortgage, for closures and loan modifications, we surveyed 84 counselors and attorneys in California and I just want to speak to a couple of things on it. One is that JPMorgan Chase continues to dual track, in others words folks who are talking about loan modifications are getting (foreclosure).
The single point contact among the five big servicers, JPMorgan was seen as the worst by counselors. And JPMorgan Chase was seen as rarely or never notifying in a timely manner home owners of the documents needed. On limited English proficiency which is a huge issue in the state of California, many languages that people speak quote from a counselor, “most common problem encountered is that Chase does not accommodate non-English speaking clients.”
I think this illustrates the need to separate the positions; I think the bank needs to more serious and responsive on loan modifications, record earnings to me mean that there are funds to be able to make this happen in a way that is not this sloppy or unresponsive.
And I worry as a shareholder that this opens the door to more lawsuits and reputational risk. We’re now six years into the housing crises and Chase is not alone with these problems. But I think this bank can be better. And would ask Mr. Dimon to come to California and talk with counselors and I would like to leave our survey with someone so that you can take a look at it.
We’ll have to take the feedback and try to get better all the time. Patty, can check the survey and what you should do also is get direct relationships in California peoples and your attorneys has specific comments who will do it directly in lighter way.
The number of years of direct relationships, but still this is still going on.
Microphone number two.
Leon Kamhi - Hermes Equity Ownership Services
Good morning everyone. My name is Leon Kamhi I work with Hermes Equity Ownership Services based in London. We represent about 33 major institutional investors all around the world and represent $195 billion of assets. So, very pleased to be here and to join you today. As you know we are also co-founders of resolution six, in terms of looking for independent share.
My question though and if I could ask it, if William Weldon, in his position as Chair of the corporate governance and nominations committee, our question is around the risk committee and released in two parts, the first part is in your view what has been the contribution of each member of the risk committee over the last few years and what experience do they bring to that committee. And the second part of the question in light of what happened in the CIO office last year, what changes to the way that committee operates in terms of overseeing the managements of risk under Jamie Dimon and his colleagues, what changed and what plans are there for change further?
We’ve very, we are not going to speak about individual directors. I think we’ve already made the statement that each contributes a lot and they have their full tenure here. We put their buyers in the proxy they’re well known you’ve talked to people know them well you know well about their integrity, their brains, their capability, their work ethic and the real lessons learned from the whale, those lessons be applied throughout the company and we’ve also obviously tried to improve their function to risk committee. Just a very quick response to that I mean obviously I asked it as a question because on paper and we obviously all the members of the boards are our representatives of the company and so of it is a questions on paper is very hard to see what individuals bring to that and what experience they bring and that’s why it’s really important for us to understand and whether that carrying out that overexciting and appropriate way on behalf of the funds we represent.
Thank you, microphone number one.
Good morning. My name is Alexis Iwanisziw. I’m here from New York with the Neighborhood Economic Development Advocacy Project. We’re resource and advocacy center for community groups in New York City. And we’re here to support proposal number nine around lobby and disclosure and we’re very concerned as shareholders, we have been shareholders for a number of years the Chase is putting itself at serious risk of reputational damage with its current lobby and practices and lack of disclosure. In 2012 as presented well (ph) trade was coming too late and the losses were coming too late. Chase was out lobbying hard against the Volcker rule, a rule that was designed to intervene in risky proprietary trading by banks. And that just positioned of the lobbying and Chase’s failure to manage the unfair really may clear the reputational dangers and the lobbying when the bank is engaged in.
Shareholders deserve to know what the bank is spending on lobbying on the 60 lobbyist that out there in DC working on the half of the bank. And this particularly important in light of all of the issues that have been coming to light today. The mortgage servicing problem that Alan Fischer mentioned though there endemic in New York as well and are compounded by problems from Superstorm Sandy. There are serious problems with JP’s debt collection practices as again this exposed from the lawsuit in California and also just problem serving low income customers and communities in general. From problems with electronic funds transfer and illegal debiting by payday lenders to Chase disclosing small business accounts for small community development credit union in New York City that are able to serve communities that Chase doesn’t reach and Chase is now similarly closing accounts for a number of those credit unions in New York. So my question to the board and to Mr. Dimon is would you commit to better lobbying disclosures to say what this lobbying on and how much spending in total?
You know Chase operates in 100 countries and 50 states; we do a little bit lobbying in each state we do disclose the amount as $12 million. We lobby across hundreds of different issues and you misinformed about the Volcker bill, we didn’t lobby against in fact publically said we don’t discretely intend to hit, it just very important that they like that or written to maintain the widest deepest best and most transparent capital markets the world ever seeing which is right here in America that’s all we said. We have the right of voice heard as part of amendment to Bill of Rights Amendment number one.
Microphone number two.
Eric Cohen shareholder. JPMorgan statement of opposition to proposal number eight on (inaudible) reinvesting notes that to maintain consistently with human rights statement, the company has chosen in some cases not to pursue business with certain companies and in other cases to engage in a discussion with the management of companies whose businesses have raised concern. So my question to Mr. James Dimon is why you haven't you chosen to not pursue business with PetroChina. And this instead you have chosen to engage with the PetroChina CNBC group. What results have you seen over the last many years, since these concerns were brought to your attention?
Obviously, we don't support genocide and what you think each company does, may not be we think each company does, I don’t know they're specific but PetroChina, we worked very hard about how we do business and who we do business which is a regulatory way.
Could I have a follow-up if not now, after the meeting about what JPMorgan does believe about China?
We took to Patty right behind you; you can have a direct conversation with people who actually make that decision, why they distribute the deal.
Hi I am Lisa Lindsley representing the AFSCME Employees Pension Plan, proposal number nine, asked its company to disclose its state level wellbeing and also its contributions to trade associations and shareholders such as the AFSCME Employees Pension Plan, I have supported these types of proposals at other companies because we believe that there is serious reputational and litigation at business risks associated with lobbying and that shareholders deserve to know about this.
But for the first time in my experience, we are seeing that trade association contributions are being used to subvert shareholder rights. So, SIFMA has previously stated, as has Broadridge to stop giving shareholders vote tallies in the middle of our campaign around the proposal to separate the roles of Chairman and CEO. So my question is how much of the company contributed out of corporate resources to SIFMA over the past year?
We don’t need those public.
Hi I am (inaudible) with GCIU pension plan and my question is for Mr. Flynn. As the sole member of the risk policy committee not tainted by the London Whale, please describe what steps you will take to ensure effective over side of risk management by the board?
We actually direct questions to me or Lee Raymond up here.
Mr. Raymond then please.
Well if the independent review committee of the board to look into all the issues related to CIO; the report that I think is about 20 pages long from the independent review committee that are related to the risks policy committee if you would treat that you would see specifically what actions we suggest should be taken with regard to the risk policy committee and how they discharge their duties.
Andrew Pittman - Shareholder
Hello my name is Andrew Pittman. I am a stock holder, I live here in Tampa, Florida and I am against item no.6 of requiring the separation of chairman and CEO; again I am against that. In light of the London Whale incident, Mr. Dimon I think you handled that in a better fashion than anybody else up and down The Wall Street could have or would have been willing to do. You took a very hard issue, you looked American populists in the face and told us and acknowledged that the bank have made an error on that. And steps would be taken to prevent it again. And I found it very refreshing frankly. And I wish the President of the United States and the leaders of our Congress would do the same. I think there is a great lesson there for them to learn.
Two comments I want to make independent of my previous presentation of the resolutions, one has more to do with the systematic question on risks. Last year at this time, I think we had just learned about the CIO London trading issue. And I was happy to follow Ms. Drew’s appearance before the Permanent Subcommittee on Investigations and thank you Mr. Cutler for showing up in support of her and you are right behind the camera there quite often.
But I think what it unveiled to me was the larger question I think because they were a lot of regulators at that hearing as well, it is a question of the culture in the financial services sector. And the culture in terms of any number of broad issues that we try to deal with because right after that I think we had the question about the manipulation of the LIBOR rate which continues to unfold. And number of institutions has been implicated under investigation still in that area. There is also such things, as tax evasion and tax havens that I followed pretty closely now for about 30 years.
Andrew Pittman - Shareholder
And so I guess it comes to the question Mr. Dimon of confidence in Chase and in the system and in terms of what main street and ordinary customers and clients are looking for? How do you think we will be able to tell when the things that were happening in the manipulation of the LIBOR rate for instance when those have been addressed across the sector and where it can be assured that they are not going to be surfacing again in the near future, when the drive for profit and greater deal making. That impacts enormous numbers of lives across the world because we know how many different rates are set and connected to that rate.
I can tell you about JPMorgan Chase. Well I think we are popular with people of integrity capability they are trying to do the right thing for their communities, their clients, their countries. I can’t tell you that we don’t make mistakes. I can’t tell you there is not a bad apple among them but we try to admit our problems, fix them and move on. I personally think that you should remember United States does have the best deepest, widest most transparent scheme of mortgage that are part of the engine that built this country of ours.
Right now is the need to be fixed but let us not throw the bait out of the bath water.
Andrew Pittman - Shareholder
But this LIBOR rate question continues to go on and we don’t think they have come to a resolution on a new front where do we end up on.
I am not going to comment on LIBOR in particular because that is obviously in the course at this point.
Andrew Pittman - Shareholder
But I mean resounds to the reputation of the industry.
It resounds the reputation of some people in the industry.
Andrew Pittman - Shareholder
A large number.
We're not going to proceed to microphone number one, Mr. Mayo.
Michael Mayo - CLSA
Yes I wanted to follow up proposal number six the splitting of the CEO in Chairman role that is not my issue but I can see how that would become more of an issue if there is not an adequate successor if there is a degree of large management turnover at the presiding director isn’t as strong as it needs to be no I am not making a judgment Mr. Raymond. Can you reassure us once again that you always think you are in place that is not obvious successor in my mind? I have covered your company a long time Jamie and I think there is a lot of talk by managers I am not sure if anyone is ready to step in your shoes right now. So that raises more concerns about the Chairman and CEO role as the report says there has been a lot of management turnover so that makes it tougher for someone who is stepping in your role right now. And Mr. Raymond if you could give us some insight how much longer do you intend to stay the presiding director?
Let me comment first. So the management team I believe is the best and most capable highest (inaudible) personal life. You know many of them first hand. You are known in this room to people like Mike Mayo and other analyst spend significant amount of time with our people individually. And seven hours on Investor Day et cetera. So you are seeing first hand their capabilities, their knowledge their brains and there has been a little bit more turnover than normal. A part of that was driven by the Whale; part of it was driven by the Board asking constantly pressuring us to make sure putting people who can succeed me in the big tough jobs because the Board wants to see them in action all the time. And so we feel very good about that management team. While there has been turnover I want to point out to the people in the room, it is very different when you see this turnover and it is a whole bunch of people you don’t know, almost every single person and that almost, every single person who has put a new job was basically promoted up the job and everyone in the company already knows about the character and capability.
So there were no quantities to most people at the company, including the Board. And the Board was involved in a way of every major management change.
Michael Mayo - CLSA
And it is related to Mr. Raymond how much longer does he intend remain the presiding director?
That is a position that is dealt with by the Board annually. And I serve at their pleasure.
Michael Mayo - CLSA
And Mr. Raymond’s answered that question too about the degree of management turnover and I appreciate your answer Jamie but as an independent director is he comfortable with that degree of change? And also that there is an adequate successor or you could stepped in immediately?
I think if I would go back just a few years shortly after Jamie became the Chairman and CEO, the Board made it clear to Jamie that his first priority was to develop successors. And we have done a lot of work, he has in terms of the process, we are doing that, and potential identification of people. And we are pleased with the progress that is being made and working on that whole problem and we intend to have a confident and capable successor to Jamie. But I will have to say I hope that time is much into the future and I have no illusions that we will be able to clone Jamie.
Manuel Isaza - Hermes Equity Ownership Services Inc.
Manuel Isaza from Hermes Equity Ownership Services Inc. London. We have been engaging with JPMorgan and with its global peers on the topic of leadership structures and board structures more generally. Naturally as part of these processes we have had conversations with the companies when these proposals have been filed in the past. This is the first time that we take a more active approach as cosponsors of the proposal.
And the reason why we are doing that is as a way of escalation on our engagement on these topic, we have had some discussion about the attributes of the board members but one attribute that we haven’t discussed very much in detail and we think is as important as the technical expertise of each of the directors is the board responsiveness to shareholders concerns. This proposal received 40% support last year. We believe that this year the engagement around this proposal has gathered as much attention if not more than in the years past. And my question is where is the board going to do forward to reassure investors that their concerns have been listened to proactively.
I think we have already stated that we are going to listen and have conversations and I think one of the good outcomes for this public debate was that a lot of investor (inaudible) were involved in this very important issue.
George Bolus - Shareholder
My name is George Boles, I am shareholder of a 1,000 shares, I own shares in a 100 different companies and your report is very good, and Jamie is doing a good job. You should raise his pay again. He got us out of the rut. Did he get us out of the rut? So he deserves that and I will show that you should listen to Bryan Sullivan from CNBC when this debacle is over, take your family go on a trip to the Greece Islands.
George Bolus - Shareholder
I like this company because it has got a lot of women power. They got a lot of women in key positions, and that’s the good thing that Jimmy is doing. It’s not easy, two years old to retire, like I have been trying to get the guy retire at McDonalds and he lost the second guy, then they went to Wall Greens. And the stock went up $30 and the McDonalds is struggling. Nobody wants to eat the Big Mac anymore.
Good morning Jamie, Mr. Raymond, Mr. Cutler; welcome to Tampa. My name is John Grandoff. I am a lifelong generation wise resident of Tampa and Florida. (Inaudible) who just spoke a few minutes ago, is a friend of mine, we did not compare notes before the meeting. But we urge you all to continue to hold the meeting in Tampa, in our fair city. We welcome you here every year. We have a beautiful facility and we hope you will think about it again.
I am vehemently against proposal number six and merely have to recite the metrics that Jamie provided at the beginning of the meeting. I started writing them down at the back of the proxy. I ran out room. Those are all the positive things about the company that people need to remember. And I whole heartedly endorse your leadership, the leadership of the board and hope that they are reelected and continue to do the good work. Our families are firm believers in JPMorgan Chase for years and my firm is blessed to have JPMorgan Chase as a client from time to time and we thank you very much for your leadership and you're visiting our fair city.
Mike Collins from New York Comptroller John Lui’s Office again, in addition to being the proponent of proposal six which is not a referendum on your leadership, I actually want to follow up on something that Mr. Cutler said earlier, said I would address this to all of you, but given the intensity with which in the period leading up to this vote, I think shareholders are entitled to a fuller explanation than we just received with respect to the (inaudible) and the Broadridge issue. Now let me just give a little context.
For many years it has been common practice for shareholders, not shareholders who file shareholder proposals but shareholders who engage and exempt solicitations and distribute our material to our fellow shareholders through Broadridge are entitled to the preliminary vote tally. but now Broadridge exists in large part to ensure level playing field between companies, issuers and their shareholders and while we execute a confidentiality agreement with Broadridge, it is one being my understanding that under the Federal Securities Laws, we would be prohibited from disclosing those votes and Mr. Cutler I know you in the previous slides, had responsibility enforcing those laws, on May 8 was the last time we ever saw tally all of the sudden we were shut down in response to this call from (inaudible).
Now, in recent weeks I have read in the newspaper preliminary votes of funds disclosed by sources close to whomever, only one site is getting the information so I ask who is leaking the information, are they subject to federal securities laws, certainly this is an issue that has provoked a response from the council of institutional investors, from the New York state attorney general, so I think it’s fair that we get a little bit more color about what happened because it seems to me in your response that Mr. Cutler you have acknowledged familiarity with the circumstances.
I think, we are going say, I think you have got your facts wrong. Okay, we are going to recognize the next speaker as microphone number two.
Hi, my name is Steve Dennis, I live in Sarasota and I am retired, shareholder and pretty impressed with the board of directors. I mean Honeywell's had a hell of a year. Exxon Mobile okay, Johnson & Johnson pretty good, I used to live in New Jersey so that’s a big deal in New Jersey. However, I got to say I know a little bit about auction rate securities, having read about auction rate securities, and I am surprised to hear the gentleman before thought he is going to have an nervous breakdown and I can feel for that because I could have been in auction rate securities myself, I have been retired about 10 years, I would have been stuck with him also. And I read quite a bit about it and I just suddenly hope that considering all the integrity key things floated around, I certainly hope that whatever is involved with him gets settled and that that man gets his money back I. I didn’t follow all that, but his daughter certain, I think hopefully that gets followed up. I mean I know a big cooperation and it’s a little something like that is going to get lost. So, again I just hope Mr. Dimon that is followed up and taken care of. And have a great year!
I do want to raise again the issue on the Broadridge issue because I do think shareholders deserve a fuller discloser than we are getting on that subject is now being raised by a number of people. And there are some suspicious and unanswered questions you may say that they have different facts than you have but I think the only way we judge that is if we have your facts and theirs together. But I rise simply to raise a question about the company's CRA rating in January 2013. I see we dropped from the top rating that we had to satisfactory which I think is of great concern. It’s of concern to me particularly because I work closely with a number of folks who have lost their homes in Prince William County in Virginia and so we have been working over there for four or five years now to either get people to stay in their homes, to find some other ways in terms that may address some of the issues involved and Chase was a significant participant in that conversation for a while but has recently drawn back from the subordinated loan fund, commitment to the CDFI that we have asked and problem is we are working with Chase, General Electric, Bank of America and General Electric has now made its contribution dependent on the contribution from Chase. and I know we always want to look to the horizon and to the future and where we are going to save the world but I think we still need to realize that there are enough lot of folks out there who are without adequate shelter, who have lost homes, who have lost equity and our company needs really to continue to put the kind of resources and personnel into those questions and those issues to make those people again able to have the security of a home to live in and raise their families and I would ask Chase to reconsider its present position in relationship to the revolving loan fund in Prince William County in Virginia.
Unidentified Company Representative
So for the folks in the room we are one of the biggest CRA lenders in the nation. In fact this year we finished an $800 billion 10 year program, that range is not representative of our heart or intent that is a little bit like an audit. We do an extensive amount of intercity lending, mortgage lending. As you mentioned, corporate development type lending, I don’t know the particular fund you’re talking about. We are required to do certain things, underwrite certain funds but our thought in that specific fund, Paddy can take that and we’ll get back to you directly on it and if we have problem and we know exactly why.
Eric Cohen, I was struck by Mr. Dimon’s response to my prior questioning on PetroChina. If he didn’t know the specifics of PetroChina, so as I have a follow up question for Mr. Raymond asking to speak on behalf of the rest of the Board. The shareholder proposal number eight on genocide for investing users PetroChina is the example of the kind of problem company that's tied to genocide and the shareholder proposal specifies some details about how that’s the case.
It’s been on the ballot here at JPMorgan Chase for three years, this is the third year. Each year the Board has recommended against the proposal. So, Mr. Raymond could you help me understand what the Board understands about PetroChina and its $2 billion investment in that company and PetroChina’s relationships to mass tragedies in Sudan and giving your level of understanding about PetroChina, how did you come to the conclusion to recommend against the proposal asking not to invest in such a company?
I would echo what Jamie had to say about it and specifically as it relates to PetroChina, I just frankly would be on the position at this point to make no comment.
My question, I’ll ask Jamie Dimon if he has been in the military.
No, I have not.
Okay. And the other question I have…
But you should know JPMorgan Chase has hired 5,000 veterans in the last 18 months.
But I don’t want to mention the other topic about the 700 that lost their homes. So, let's not go into that. Let's go on the good side of Chase and my other question is, how come your private clients account don’t get extra premiums that they pay infidelity and to the marriage rate.
I would have to look in for that.
If I bring million dollars into Chase, I mean through years they don't give me a cup of coffee like you did here and a glass of water. I would give …
I will give you a donut too.
But the competitors give it and I told them that they said, yes you have to talk to Jamie, he pays out the money. The other question is, you know Warren Buffet and the company, right?
Your meeting doesn’t compare all of to him, a glass of water, that's a three day affair. You want to be like Warren Buffet, put out the door for the shareholders, it doesn’t cost that much and come back to Chicago with the shareholders meeting. We need you there. It took me two hours to find this place. You are like the big boys of whole foods, way out where you can't find it and they don’t like it when I go there.
Mike, this will be the last question.
This is a real basic question, can you price yourself for having best in class corporate governments, we’re striving to have best in class corporate governance. So, how does the board, the independent directors of the board measure and report success to shareholders.
So, whether the misconception here is it a board is kept apart from us. I mean our board meets multiple eight times a year probably lot more. They have access to all the senior management people, they don’t get dog and pony shows. we have 11 human beings sitting around the table, talking about the company, its issues, its problems and its people. When I look at results, believe it or not, it’s not just financial results, its products, services, competitors, technology, systems, country by country, its training programs, its marketing programs, its strategic programs, it’s the openness and integrity of our people. They look at the whole thing when they evaluate it and they have complete access to the people and any ideas. It is 11 human beings sitting around the table talking about very openly all the issues the company faces and the company is never, I don't think any CEO of the company could ever say they are not going to make mistakes. What they can say is we strive to do and if we do make mistakes, we at a minimum try to become better for it.
And just the follow up, if Mr. Raymond could respond also again how does the board independent of management know if it’s doing a good job? With the value added to board Jamey you and your team have delivered record results last three years. There are some issues with the lending way we know that but the value add from the board, the independent directors of the board, how do you know they’re doing a good job?
I don’t think you can isolate it. you’re acting like you can take the independent board as a group and management as another group and try and scribe some particular value to it. that’s not the way we look at how we manage the company. We look at the totality of it and each group has a role and how that is done. and as a matter of fact if you try to separate it, you’re going to destroy what is the relationship between the board management because all the way the board management together that have to manage the company.
Thank you, Mike. Our discussion period is now concluded. I’ll ask that you submit any remaining ballots and proxies by holding up your ballot and some will now come to collect it.
It is now 11:45 am and I declare the polls closed. We have concluded the formal portion of our meeting and we’re moving to agenda item number five the report on results of voting. I will now read the preliminary vote results that were received immediately prior to the meeting. The final voting results will be reported on a Form 8-K that we will be filing with the Securities and Exchange Commission and also with the minutes of the meeting.
With respect to the election of directors, all the directors were elected and each director received the majority of the votes cast for and against, I’ll read the percentages for each director based on votes for and against, James Bell, 93.5%; Crandall Bowles, 91.5%; Stephen Burke, 97.7%; David Cote, 59.3%; James Crown, 57.4%; Jamey Dimon, 98.0%; Timothy Flynn, 99.4%: Ellen Futter, 53.1%; Laban Jackson, 91.7%; Lee Raymond, 95.0%; and William Weldon, 96.7%.
With respect to the other proposals today the results I read will be the percentage voted for each proposal based on shares marked for against or abstain. The vote for ratification of our independent register public accounting firm proposal number two was 97.1%. Proposal number three, the votes for the approval of the advisory resolution to approve executive compensation was 92.2%. Proposal number four, the vote for the proposal regarding amendment to the firm’s restated certificate of incorporation to authorized shareholder action by written consent was 97.0%. Proposal number five, the vote for the proposal regarding re-approval of key executive performance plan was 92.6%. Proposal number six, the vote for the proposal regarding the separation of Chairman and CEO was 32.2%. Proposal number seven, the vote for the proposal requiring executives to retain significant stock into reaching normal retirement age was 8.2%. Proposal number eight, the vote for the proposal regarding adopting procedures to avoid holding or recommending investments that contribute to human rights violation was 8.1%. Proposal number nine, the vote for the proposal regarding disclosing firm payments used directly or indirectly for lobbying including specific amounts and recipient names was 8.2%.
Unidentified Company Representative
So we greatly appreciate the views of all our shareholders and how thoughtful many of you were and engaging us in this process. The entire board takes their feedback very seriously and will continue incorporate shows input and to how we govern the company as we continue to build towards being the best in class in corporate governance. I think that concludes all the business Jamey, if you want to call to adjourn the meeting now is the time.
This concludes the business, I call for adjournment. It’s adjourned, thank you.
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