JPMorgan Chase & Co's (JPM) shareholders backed their embattled Chief Executive Jamie Dimon at the bank's annual shareholders meeting on Tuesday, voting against a proposal to split the CEO and chairman roles just days after the company revealed a massive trading loss.
While shareholders at the meeting, in Tampa, Florida, gave Dimon a pass for the most part on the loss, pressure mounted on the bank to reclaim some of the millions of dollars it paid to the executives who oversaw the wrong-way trades.
Dimon, speaking so fast he swallowed some of his words, opened the meeting with another statement that the trading losses -- $2 billion and perhaps greater -- were "self-inflicted."
"There are many lessons here and many changes in policies and procedures that are being implemented here," said Dimon, addressing a few hundred people in a converted cafeteria at one of the company's back-office operations.
But as a shareholder question-and-answer session opened, hardly any of the queries or comments made reference to the losses. Instead, most people seemed more concerned with the bank's mortgage servicing practices and with the proposal to split the roles of chairman and CEO.
That nonbinding proposal received 40.1 percent of the votes cast in favor. By way of comparison, 44 percent of AT&T Inc shareholders and 46 percent of Honeywell International Inc shareholders voted to separate the roles at their companies in meetings held last month.
After two trading days of heavy losses, JPMorgan shares rose 1.9 percent to $36.48 in morning trade. Even so, the stock is down more than 10 percent since the trading losses were disclosed, wiping out $16.2 billion of market capitalization.
"It affects my opinion of the entire financial industry," said Dennis Hong, principal with Altimeter Capital, a hedge fund that manages about $250 million.
"It's really shocking because JPMorgan has been known as the most conservative in terms of managing their business risk. They may be losing their way," Hong said at an event in Boston.
AFFIRMS 'CASE FOR ... REFORM'
In Washington, U.S. Treasury Secretary Timothy Geithner said JPMorgan's losses strengthened the case for reform.
"I think this failure of risk management is just a very powerful case for ... financial reform," Geithner told an event sponsored by the Peterson Foundation.
"The test of reform is not whether you can prevent banks from making mistakes ... the test of reform should be: 'Do those mistakes put at risk the broader economy, the financial system or the taxpayer?'"
Protests outside the annual meeting were relatively limited. Half a dozen Occupy Tampa protesters did media interviews and occasionally chanted, "hey hey ho ho, big banks have got to go."
Nonetheless, retail shareholders expressed incredulity at the size of the losses.
"I am amazed that they think $2 billion is a bump in the road," said A. Reihl, an 85-year-old shareholder who said she has owned the stock for more than a decade. "This is not the time to be taking risk."
New York City Comptroller John Liu, who oversees the city's $400 million stake in JPMorgan, on Tuesday joined those calling for a "clawback" of compensation from executives responsible for the trading losses, including Ina Drew, chief of the hedging unit that racked up the losses. She announced her retirement on Monday.
Reuters was unable to reach Drew at her New Jersey home on Monday evening.
In its 2011 annual report, JPMorgan said its stock-based compensation awards were subject to clawback provisions. It said in its proxy filing that it could conduct a clawback review "as a result of a material restatement of earnings or by acts or omissions of employees."
JPMorgan can cancel unvested awards or require that the value of distributed shares be repaid when "the employee engages in conduct that causes material financial or reputational harm to the firm or its business activities," according to the proxy.
"We don't know the facts and culpability, but it appears she (Drew) did have a responsibility here along with a number of others," Sheila Bair, former chairman of the Federal Deposit Insurance Corp, said in an interview with Reuters Insider. "Clearly, the whole purpose of clawbacks is if you make a bad bet that results in losses, compensation should be clawed back."