By Laura Marcinek, Donal Griffin and Dawn Kopecki - May 16, 2012 2:42 AM GMT+0700
JPMorgan Chase & Co. (JPM), the biggest U.S. bank, will consider reclaiming incentive pay from employees including former Chief Investment Officer Ina Drew after her unit had a $2 billion trading loss, said two senior executives.
The lender can cancel stock awards or demand they be repaid if an employee “engages in conduct that causes material financial or reputational harm,” JPMorgan said in its annual proxy statement. The company will claw back pay if it’s appropriate, said one of the executives, who asked not to be identified because no decisions have been made.
The JP Morgan Chase & Co headquarters in New York. Photographer: Emmanuel Dunand/AFP/Getty Images
May 15 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner, Sheila Bair, former chairman of the Federal Deposit Insurance Corporation, and Richard Bove, an analyst at Rochdale Securities, offer their views on JPMorgan Chase & Co.'s $2 billion trading loss and Chief Executive Officer Jamie Dimon. This report also contains comments from U.S. Republican Senators Bob Corker of Tennessee and Rob Portman of Ohio; Amar Bhide, a professor at Tufts University; Sarat Sethi, a principal and portfolio manager at Douglas C. Lane & Associates; Paul Miller, an analyst at FBR Capital Markets Corp.; Simon Johnson, a professor at the Massachusetts Institute of Technology, and Lisa Lindsley, director of capital strategies at the American Federation of State, County and Municipal Employees. (Source: Bloomberg)
May 15 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner talks about JPMorgan Chase & Co.'s $2 billion trading loss, financial regulation and fiscal debt. He speaks at the Peter G. Peterson Foundation's 2012 Fiscal Summit in Washington. (Source: Bloomberg)
May 15 (Bloomberg) -- Richard Bove, an analyst at Rochdale Securities, talks about the outlook for JPMorgan Chase & Co. and the firm's $2 billion trading loss. Bove speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
May 14 (Bloomberg) -- Todd Hagerman, an analyst at Sterne Agee & Leach Inc., talks about JPMorgan Chase & Co.'s $2 billion trading loss and the possible impact on the financial industry. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
May 14 (Bloomberg) -- Bloomberg Government economic analysts Nela Richardson and Chris Payne discuss JPMorgan Chase & Co.'s $2 billion trading loss and the regulatory system. (Source: Bloomberg)
May 15 (Bloomberg) -- Bloomberg's Erik Schatzker reports that JPMorgan CEO Jamie Dimon will face shareholders today at the company's annual meeting in Tampa, Florida. JPMorgan Chase & Co. will consider reclaiming incentive pay from employees including former Chief Investment Officer Ina Drew after her unit had a $2 billion trading loss, said two senior executives. He speaks on Bloomberg Television's "Inside Track." (Source: Bloomberg)
May 15 (Bloomberg) -- Sarat Sethi, a principal and portfolio manager at Douglas C. Lane & Associates, talks about JPMorgan Chase & Co.'s $2 billion trading loss and the role of Chief Executive Officer Jamie Dimon. Sethi speaks with Stephanie Ruhle, Scarlet Fu, Sara Eisen and Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
May 15 (Bloomberg) -- Paul Miller, an analyst at FBR Capital Markets, talks about JPMorgan Chase & Co. and the outlook for the bank following its $2 billion trading loss. Miller speaks with Deirdre Bolton on Bloomberg Television's "In the Loop." (Source: Bloomberg)
May 15 (Bloomberg) -- JPMorgan Chase & Co., facing investor ire after posting a $2 billion trading loss, may consider reclaiming incentive pay from employees including former Chief Investment Officer Ina Drew, said two senior executives. (Source: Bloomberg)
May 15 (Bloomberg) -- Brian Foran, an analyst at Nomura Securities International Inc., talks about the outlook for JPMorgan Chase & Co. and the banking industry. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
Ina Drew, former chief investment officer of JPMorgan Chase & Co. Source: JPMorgan Chase & Co. via Bloomberg
The incident, which led to Drew’s retirement yesterday, may test JPMorgan’s clawback policy amid mounting investor criticism over Wall Street pay practices and as regulators investigate the trades. Chief Executive Officer Jamie Dimon said the strategy that led to the loss was “poorly executed and poorly monitored” and that it gave ammunition to proponents of stricter bank regulation.
“The political environment is very sensitive right now and this couldn’t have come at a worse time,” said David Knutson, a credit analyst in Chicago with Legal & General Investment Management, which owns JPMorgan debt. “I can see how pressure from regulators could result in JPMorgan attempting to exercise a clawback.”
‘Every Single Dollar’
New York City Comptroller John Liu said that JPMorgan should tell shareholders it will “aggressively claw back every single dollar possible from the executives responsible for the $2 billion loss,” according to a statement today.
“Doing so will send a clear message to senior management that anyone who recklessly gambles with shareholder money is jeopardizing long-term value and will be held accountable,” Liu said in the statement.
JPMorgan’s executive-compensation plan won the approval of 91.5 percent of shareholders today in a non-binding advisory vote at the company’s annual meeting in Tampa, Florida.
Drew, 55, received $14 million in compensation for 2011, including $7.1 million in restricted stock, a $4.7 million cash bonus and $750,000 salary, according to the proxy. Her pay over the past two years averaged $1.2 million a month. After three decades at the company, she was replaced yesterday by Matt Zames, co-head of global fixed income at the investment bank.
‘Gross Negligence’
Stock awards can be canceled or repaid if a member of the operating committee, which included Drew, “improperly or with gross negligence” fails to identify risk, JPMorgan said in the proxy. Committee members also can have 2012 stock awards canceled if Dimon deems their performance was “unsatisfactory for a sustained period of time,” according to the proxy.
Drew didn’t respond to phone and e-mail messages seeking comment. Jennifer Zuccarelli, a bank spokeswoman, declined to comment.
JPMorgan’s stock declined 9.3 percent the day after Dimon disclosed the loss on May 10, the biggest drop since August. The shares slid 3.2 percent yesterday to $35.79 in New York.
The trading loss has hurt JPMorgan’s reputation, Dimon said in a conference call last week. It “puts egg on our face and we deserve any criticism we get,” he said.
More shareholders are voting to reject compensation packages for senior executives as Europe’s sovereign-debt crisis and stagnating economic growth squeeze bank profits. Citigroup Inc. shareholders last month rejected compensation for executives including CEO Vikram Pandit in a non-binding vote after the New York-based firm’s shares plunged 44 percent last year.
Morgan Stanley
Morgan Stanley (MS), owner of the world’s biggest brokerage, instituted clawbacks in 2009 that allow the New York-based bank to take back compensation if an employee’s conduct hurts the firm in the years after it was paid. UBS AG (UBSN) said in 2010 that its net loss a year earlier would trigger a bonus clawback for the first time, depriving bankers of 300 million Swiss francs ($321 million) of deferred pay they were due to receive.
JPMorgan will have to weigh the trading loss against Drew’s tenure at the firm and any profit her unit generated before this year, said Paul Sorbera, president of executive search firm Alliance Consulting in New York.
The bank’s corporate division, under which she reported, earned a peak of $3.7 billion in 2009. The bank doesn’t break out results for the chief investment office. Dimon, upon announcing Drew’s retirement, called her a “great partner” who has made “vast contributions” to the firm, according to a statement yesterday.
“There are so many things she’s entitled to in the organization -- as a long-term employee, as a managing director, as woman in the organization -- they want to take care of her, they want to do the right thing by her,” Sorbera said. “The bank will be in a position where they probably could go one way or the other.”
To contact the reporters on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net; Donal Griffin in New York at dgriffin10@bloomberg.net; Dawn Kopecki in New York at dkopecki@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
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