Shareholder support for independent chairman proposals has flagged this year despite strong backing from major pension funds.
The May 21 vote on the proposal at J.P. Morgan Chase & Co. received 32.2% of the vote, down from 40% in favor for a similar proposal last year.
Average support this year has been 29%, based on the voting results at 20 companies through May 7, according to data from Institutional Shareholder Services Inc.
That represents a decline from an average 35.6% for proposals that came to a vote at 56 companies all of last year. Four got a majority vote in support last year.
Among other proposals that have lagged in voting support are those concerning majority vote in director elections and classified boards.
Shareholder backing of James “Jamie” Dimon in his position as both chairman and CEO at New York-based J.P. Morgan Chase appears to come down to corporate performance trumping major pension fund corporate governance activism.
The J.P. Morgan Chase proposal gained a high profile because of the company's trading problems last year and continuing concern about corporate and risk oversight.
The proposal was introduced by the $1 billion American Federation of State, County and Municipal Employees Pension Plan, Washington. It was co-sponsored by the five New York City retirement systems, whose assets total $127.5 billion; the $26.3 billion Connecticut Retirement Plans & Trust Funds; and Hermes Fund Managers, owned by the £36 billion ($55 billion) BT Pension Scheme, London.
While the separation proposal won the support of several major public pension plans and proxy advisory firms, the $168.5 billion Florida State Board of Administration, reversed its vote from last year. “We have probably been on the fence on this for a while and last year's performance put us over the top” to support management, said Dennis D. MacKee, communications director of the Tallahassee-based FSBA.
J.P. Morgan Chase shares had a total return of 56.1% from May 18, 2012, through May 20 this year, said Mr. MacKee.
The total return of the S&P 500 was 31.59% and the KBW Bank Index 45.58%, both during the same period, according to Pensions & Investments research.
“What strongly influenced our decision-making this year is that since 2008, they performed very well and they performed extraordinarily well over the last 12 months,” Mr. MacKee said. “They've done a nice job of recovery in terms of market value.”
Mr. MacKee noted the opening sentence of the FSBA's corporate governance principles and proxy-voting guideline states separating CEO and chairman “may improve the decision-making process at firms with records of significant underperformance,” which wasn't an issue at J.P. Morgan Chase.
TIAA-CREF, New York, won't disclose its J.P. Morgan Chase vote until June. But John McCool, director-corporate public relations, cited its vote last year, which opposed an independent chairman, and to TIAA-CREF's policy, which “will generally not support” shareholder proposals seeking such separation. TIAA-CREF, however, might support those where companies don't have a lead director and their corporate governance practices or business performance are significantly deficient, according to the policy. Lee R. Raymond is J.P. Morgan's presiding director.