What were they thinking? Edition No. 982
Less than a year after the infamous JPMorgan Chase & Co.’s “London Whale” trading scandal that led to a $6.2 billion loss, IR Magazine gave an award to Jamie Dimon, the company’s chief executive officer, for having the best investor relations by a CEO or chairman in the large market capitalization category.
Though perhaps IR Magazine is giving Dimon the award for the way he handled investor relations following the scandal, in April 2012 Dimon described the would-be sweeping trading scandal as a small event that had been exaggerated out of proportion on JPMorgan’s first-quarter earnings conference call.
In response to a question regarding London Whale Bruno Iksil’s large position in credit-default swaps in corporate bonds, Dimon said on the call:
“It’s a complete tempest in a teapot. Every bank has a major portfolio. In those portfolios you make investments that you that you think are wise, the offset your exposures. Obviously it’s a big portfolio, we’re a large company, and we try to run it – it’s sophisticated, obviously complex things, but at the end of the day, that’s our job is to invest that portfolio wisely and intelligently over a long period of time to earn income and to offset other exposures we have.”
This misleading statement along with the lack of transparency provided to investors about trading practices raises eyebrows about IR Magazine’s decision to award Dimon the honor of having the best investor relations as a CEO.
IR Magazine’s Methodology
On its website, IR Magazine says that it conducts in-depth research to identify the best corporate investor relations teams. The magazine canvassed opinions through electronic surveys and telephone interviews of more than 800 sell-side analysts, buy-side analysts and portfolio managers across the U.S. to determine the winners.
Other nominees in Dimon’s category “Best IR by a CEO or chairman” included Covidien’s José Almeida, Danaher’s Lawrence Culp and Coca-Cola Co.’s Muhtar Kent.
“But fundamentally good IR is still a matter of building trust with the investment community – which is what all our award winners and nominees – as well as the IR Magazine US Top 100 – have achieved,” said IR Magazine’s CEO and founding editor Janet Dignan on its website.
Lack of Transparency
In a New York Times Dealbook article last week about the hearing by the Senate’s Permanent Subcommittee on Investigations that summoned Dimon and other current and former JPMorgan officials as it continues to formulate reports, John C. Liu, the New York City comptroller, raised concern on the way Dimon misinformed investors.
“It’s clear from the Senate report and Friday’s hearing that senior executives not only misinformed investors and regulators about the excessive risks the bank was taking, but also withheld this information from their own board. Mr. Dimon’s failure on this score come from the hubris of having too much power placed in his hands.”
Liu has invested in $500 million worth of JPMorgan shares on behalf of public pension funds. Liu is hoping to bolster support for a shareholder proposal that would split JPMorgan’s CEO and chairman roles, The New York Times reported.
Yet on the other side, Joe Evangelisti, a bank spokesman, said:
“Our management always said what they believed to be true at the time. In hindsight, we discovered some of the information they had was wrong…Jamie apologized and took responsibility on live television, multiple analyst calls, and in testimony before Congress and the Senate.”
Additionally, JPMorgan’s board have remained largely in support of its CEO and the bank has had its most profitable year ever and its stock rose more than 20 percent in the last four months.
“And above all the din and arguments concerning risky banking practices is the voice of money — if you’re making it, then you’re fine with how it’s being made,” wrote the International Business Times on Monday.
Yet some in the business media have been critical of Dimon and JPMorgan’s actions. Bloomberg News’ Jonathan Weil wrote an article in January about the omissions in JPMorgan’s report about the London Whale trading losses.
“The report also included this bizarre disclaimer: “This report sets out the facts that the task force believes are most relevant to understanding the causes of the losses. It reflects the task force’s view of the facts. Others (including regulators conducting their own investigations) may have a different view of the facts, or may focus on facts not described in this report, and may also draw different conclusions regarding the facts and issues.” In other words, we haven’t been told the whole story.”
What do you think? Did Dimon deserve to receive IR Magazine’s award as “Best IR by a CEO or chairman” for the way he handled investor relations during and after the London Whale crisis, or does this seem like a suspicious action of the business media cozying up to the CEO of the most powerful banks in the world?