JPMorgan Chase & Co. and Morgan Stanley's executive compensation packages received endorsements from ISS Proxy Services USA, the firm whose negative recommendation helped sink a similar plan at Citigroup Inc.
JPMorgan and Morgan Stanley displayed “reasonable alignment” between shareholder returns and pay for Jamie Dimon and James Gorman, the firms' respective chief executive officers, ISS analysts wrote in separate reports dated April 27. Glass Lewis & Co., another shareholder advisory firm, also endorsed the pay plans for the New York-based banks, which will hold their meetings on May 15.
Citigroup Inc. shareholders rejected an executive pay plan earlier this month, a first among the six largest U.S. banks, amid criticism it lets CEO Vikram Pandit collect millions of dollars in rewards too easily from the No. 3-ranked U.S. lender. ISS had urged investors to reject Citigroup's plan.
ISS said that while JPMorgan “continues to resist adopting incentive plans with pre-established goals and long-term objectives,” it added a feature “that provides both an incentive for sustained performance and some mitigation against excessive risk-taking.”
Glass Lewis and ISS also endorsed a shareholder proposal to require an independent board chairman, which the bank opposes. Dimon holds the titles of chairman and CEO.
'Inability' to Monitor
Dimon, 56, was awarded $23 million in salary and bonuses for his 2011 performance, the same as he received for 2010, JPMorgan said in a regulatory filing this month. Gorman, 53, had his package cut 25 percent to $10.5 million, Morgan Stanley said in a filing.
Mark Lake, a Morgan Stanley spokesman, declined to comment, as did JPMorgan's Joe Evangelisti.
Glass Lewis told shareholders to vote against the election of director Ellen Futter to JPMorgan's board. Futter, president of the Museum of Natural History, previously served on the board of American International Group Inc., the insurer rescued by the U.S. government in a bailout that swelled to $182.3 billion.
Futter, who has served on JPMorgan's board since 1997, showed an “inability to effectively monitor credit risk during her tenure at AIG,” and JPMorgan's “investment activities do not appear to be any less complex than those of AIG,” Glass-Lewis said in its report. JPMorgan has donated an undisclosed sum to the New York museum Futter runs, the proxy firm said. ISS recommended shareholders elect Futter.
Futter didn't immediately respond to e-mails sent through the museum seeking comment on Glass Lewis's recommendation.
Easing Concerns
JPMorgan's stock dropped 22 percent last year and Morgan Stanley fell 44 percent, compared with 18 percent for the Standard & Poor's 500 Financials Index.
While Morgan Stanley investors “remain concerned about the company's continued lagging returns, concerns may be mitigated by the fact that 2012 incentive awards for the CEO, based on 2011 performance, decreased by 45 percent due to the absence of a cash bonus payment and stock options,” ISS wrote.
ISS opposed Morgan Stanley's proposal to set aside 50 million shares to cover future equity-compensation awards. ISS said the shares would bring the total available, along with outstanding options and unvested previous awards, above the proxy firm's allowable cap. Glass Lewis recommended shareholders vote for the proposal.
Morgan Stanley responded to ISS's opposition in a regulatory filing today, saying the proxy adviser compared the firm with a broader range of companies than its direct competitors. It said a rejection of the proposal would hinder the bank's ability to both align shareholder and employee interests and to comply with guidance from regulators on pay.
Glass Lewis recommend shareholders vote against Laura D. Tyson, a professor at University of California, Berkeley's Haas School of Business, who has been an adviser to the Obama administration and has served on Morgan Stanley's board since 1997. Tyson, as head of the bank's governance committee, should be held responsible for its “poor disclosure” regarding transactions with entities affiliated with directors, the proxy firm said. ISS didn't oppose any directors.
Morgan Stanley doesn't have any shareholder proposals up for vote.
Bloomberg News
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