The resignations of David Cote and Ellen Futter as directors of JPMorgan Chase (NYSE: JPM) hardly came as much of a surprise. The two directors won re-election to the board at the bank’s annual meeting in May, but received relatively low numbers of votes after a hotly contested battle over governance.
Futter, the president of the American Museum of Natural History, didn’t even attend that meeting and won only 53 percent of the votes cast on her board membership; Cote, CEO of Honeywell International, fared better with 60 percent, but that’s still a far cry from the tallies that most directors get. (Dimon, meanwhile, won a major victory in his battle to keep the titles of chairman and CEO.)
The bank’s lead director, Lee Raymond, had alerted the world to the probability of changes in the makeup of the risk committee, on which both Futter and Cote sat. That risk-management function attracted the ire and anxiety of institutional investors and shareholder advisory firms ahead of the meeting, given that it was under their watch that the so-called London Whale’s trading activities left JPMorgan Chase with a $6 billion loss.
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Proxy advisor Glass Lewis had urged shareholders to vote against both Futter and Cote as well as a third member of the risk committee, James Crown, and three other of the bank’s directors. Veteran institutional investors publicly voiced their anxiety about whether the board was up to the task of supervising the bank. Certainly, Anne Simpson, senior portfolio manager at CalPERS, told Bloomberg Television that this isn’t a job for “the well-meaning amateur.”
CEO Jamie Dimon, in a statement announcing the retirements, praised Futter and Cote: "We have learned a great deal from both of them and will miss having them as members of our board."
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In all probability, JPMorgan Chase will fill the two vacancies on the four-member risk committee with banking veterans who can also boast a track record in risk management. Then a new challenge will emerge: ensuring that those directors are able not just to understand what kind of risks exist in the bank’s increasingly complex array of businesses, but anticipating what might go awry with them. Odds are, this will be a thankless task.
The timing of the move – as JPMorgan Chase is in the midst of trying to resolve another apparent misstep within its energy trading division – may be sheer coincidence, but it may help convince the Federal Energy Regulatory Commission that the bank is sincere in any pledges to be more vigilant in overseeing its employees in future, and that won’t hurt.