Wall Street Finds New Way To Put Investors Second

Agenda-Setting Financial Insight.
Jan. 25 2013 3:14 PM

Wall Street Finds New Way To Put Investors Second

98844843
Goldman Sachs and JPMorgan are now trying to stifle investors from voting on legitimate matters at their upcoming annual meetings

Photo by Chris Hondros/Getty Images

Wall Street has found a new way to put shareholders second. While many banks are finally bowing to pressure to restrain compensation, Goldman Sachs and JPMorgan are now trying to stifle investors from voting on legitimate matters at their upcoming annual meetings.

Goldman asked the Securities and Exchange Commission for permission to omit a proposal that would require it to appoint an independent chairman. JPMorgan, meanwhile, wants the regulator to let it remove from its proxy an initiative to have the board of directors explore “extraordinary transactions that could enhance stockholder value” - in other words, a breakup.

Advertisement

Both suggestions are rational topics for debate. Calling for a bank to split the roles of chairman and chief executive is hardly a new concept. Last year, Goldman and Lloyd Blankfein, who holds both titles, negotiated their way out of putting the issue to shareholders by striking an agreement with aggrieved investors to revise slightly board oversight of executives.

Meanwhile, shareholders seeking ways to improve returns aren’t revolutionary either. Headline-making activists like Bill Ackman and Dan Loeb do it all the time. Sure, JPMorgan performs better than many of its rivals, delivering an 11 percent return on equity last year despite a whopping $6.2 billion trading loss. Even so, the bank’s shares still trade just below book value, a figure that essentially represents what the disparate parts should fetch if sold off.

Yet both Goldman and JPMorgan are claiming the ballot initiatives are, among other things, too “vague.” That can happen with flighty individual investors, but isn’t typically the case from established investors like union adviser CtW and the AFL-CIO, which put forward the two questions this year.

What’s odd is that both banks have made their cases before. JPMorgan boss Jamie Dimon regularly addresses why he thinks carving up big institutions isn’t the answer, including in his annual missives to shareholders. Goldman, like others, reviews its leadership structure each year.

If the crisis made anything clear, it’s that banks should be forced to defend their business models and corporate governance - regularly. Fighting to suppress such questions only makes it sound like these supposedly master sellers are afraid they can’t close. 

Read more at Reuters Breakingviews.

Antony Currie has more than a decade of experience as a financial journalist, having worked with Euromoney since 1996, most recently as a US editor. He has worked on assignments in the major financial centres of Europe and the US and written stories on capital markets, global economies and the investment banking industry.

TODAY IN SLATE

Culturebox

The End of Pregnancy

And the inevitable rise of the artificial womb.

Doctor Tests Positive for Ebola in New York City

How a Company You’ve Never Heard of Took Control of the Entire Porn Industry

The Hot New Strategy for Desperate Democrats

Blame China for everything.

The Questions That Michael Brown’s Autopsies Can’t Answer

Foreigners

Kiev Used to Be an Easygoing Place

Now it’s descending into madness.

Technology

Don’t Just Sit There

How to be more productive during your commute.

There Has Never Been a Comic Book Character Like John Constantine

Which Came First, the Word Chicken or the Word Egg?

  News & Politics
The Slate Quiz
Oct. 24 2014 12:10 AM Play the Slate News Quiz With Jeopardy! superchampion Ken Jennings.
  Business
Moneybox
Oct. 23 2014 5:53 PM Amazon Investors Suddenly Bearish on Losing Money
  Life
Outward
Oct. 23 2014 5:08 PM Why Is an Obscure 1968 Documentary in the Opening Credits of Transparent?
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Working
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
  Arts
Brow Beat
Oct. 23 2014 6:55 PM A Goodfellas Actor Sued The Simpsons for Stealing His Likeness. Does He Have a Case?
  Technology
Technology
Oct. 23 2014 11:47 PM Don’t Just Sit There How to be more productive during your commute.
  Health & Science
Science
Oct. 23 2014 5:42 PM Seriously, Evolution: WTF? Why I love the most awkward, absurd, hacked-together species.
  Sports
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.