With over $2 trillion in assets, J.P. Morgan Chase & Co. is one of America’s top banks. This article discusses how CEO and chairman Jamie Dimon’s announcement of his throat cancer diagnosis had board members scrambling succession plan for the company, and what this means for the company’s stock value.
James Dimon recently said he plans to remain chairman and chief executive of J.P. Morgan ChaseJPM +0.46% & Co. for an additional five years. But his disclosure Tuesday that he will undergo cancer treatment is raising questions over who is ready to fill in or succeed him and how the largest U.S. bank by assets will handle a sensitive health issue for its most visible employee.
According to Mr. Dimon’s memo to employees, the prognosis for his throat cancer is “excellent” and the illness is “curable.”
Still, the health problem has rekindled interest in the company’s succession plan.
“He’s iconic and it’s going to be delicate,” said bank analyst Nancy Bush of NAB Research LLC. J.P. Morgan will want to make sure people know he “has his pulse on the company [but also] allow him time to heal,” she said.
The biggest question in the short term is the extent to which Mr. Dimon will have to pull back from regular duties while undergoing eight weeks of treatment.
“When you hear the ‘C word,’ everyone freezes,” said Deborah J. Cornwall, managing director at Corlund Group LLC, a leadership and governance consultancy. “The CEO and the board and the corporation are far better served by full disclosure than by playing ostrich and pretending it will go away—because it may or may not.”
So far, she said, J.P. Morgan has handled the situation well. Over the next several weeks the board should be clear whether the treatment will lead to business as usual or a leave of absence resulting in a change in assignment, Ms. Cornwall said.
J.P. Morgan retail head Gordon Smith and asset-management chief Mary Callahan Erdoes are two of the top candidates to take on bigger roles if an immediate change in leadership is necessary, a person familiar with the bank’s plans said.
Asset management and the consumer- and community-banking units in 2013 enjoyed the largest return on equity—both at 23%—of any of the bank’s units, according to Mr. Dimon’s most recent shareholder letter. That compares with 11% at the overall bank, 15% at the corporate and investment bank and 19% at the commercial bank in 2013, according to the letter.
Mr. Smith, 55 years old, joined from American Express Co. in 2007. He made a name for himself by shifting Chase’s card strategy to target more affluent consumers and boosting its rewards program to let customers redeem points for “experiences.”
The unit’s net income was $10.7 billion in 2013, up from $10.6 billion in 2012, and average total deposits are up 10% from a year ago, the company said.
Ms. Erdoes, 46, also is attracting more attention with her success running J.P. Morgan’s asset-management unit, which generated $11.3 billion in revenue and $2 billion in net income in 2013, up 14% and 19%, respectively, from 2012, according to the company.
Ms. Erdoes joined J.P. Morgan in 1996 from Bankers Trust Corp. She has daily 8 a.m. meetings for asset management, people familiar with the meetings said. Everyone in the unit—from interns up—is invited to join the roughly 30-minute discussions, these people said.
Longer-term succession candidates include Chief Operating Officer Matt Zames ; Doug Petno, chief of the commercial bank; Daniel Pinto, chief of the corporate and investment bank; Marianne Lake, chief financial officer; and Ashley Bacon, chief risk officer, a person familiar with the succession plan said.
David Ellison, who manages a portfolio at Hennessy Funds that holds J.P. Morgan shares, said he isn’t concerned about the company’s long-term planning.
“In an organization as large and as complex and as managed as it is, I’m not that worried about succession,” said Mr. Ellison, who is based in Boston. “He’s grooming four or five people, and that will work out just fine.”
J.P. Morgan shares fell 60 cents, or 1%, to $56.97 in 4 p.m. New York Stock Exchange composite trading.
Robert Benmosche, head of American International Group Inc., AIG -0.56% continued to turn around the troubled insurer after he developed cancer in 2010. AIG board members decided Chairman Robert S. “Steve” Miller would take the helm temporarily if Mr. Benmosche couldn’t perform his job. In a February 2011 CNBC interview Mr. Benmosche said the cancer had been eliminated with chemotherapy.
“In these situations, as a CEO, it’s vital to work closely and stay in close contact with the board of directors and shareholders,” Mr. Benmosche said in a statement to The Wall Street Journal on Wednesday.
Mr. Dimon’s disclosure also rekindled a debate over J.P. Morgan’s corporate governance. Mr. Dimon has held the title of chairman and chief executive since 2006. After J.P. Morgan posted a $6 billion trading loss in 2012, some shareholders argued that the roles should be split and proposed a measure to that effect during the 2013 shareholder meeting.
The proposal was soundly defeated, but Mr. Dimon’s current health situation, which likely will force him to reduce his workload this summer, raises the question of whether such a big bank should place so much authority in one person.
“Given the financial crisis and best practices for corporate governance, it’s remarkable that a bank of the size and systemic importance of J.P. Morgan finds itself in a position of having one man as both chairman and CEO,” wrote Janet Tavakoli, president of Tavakoli Structured Finance Inc., in a Wednesday note to clients. “Jamie Dimon’s recent news highlights the risk in that folly.”
On Monday night, Mr. Dimon spoke at a retirement party for a longtime employee and seemed to be in good health and high spirits, people who attended the event said.
Mr. Dimon discovered he had throat cancer within the last few weeks after seeing a doctor because he didn’t feel well, said a person close to the executive.
As he got more reliable medical information over the past week, Mr. Dimon called J.P. Morgan’s lead board director Lee Raymond and a few other directors, people close to Mr. Dimon said. Mr. Raymond, former Exxon Mobil Corp. chairman and CEO, and the other directors then connected with other board members.
Mr. Dimon began J.P. Morgan’s weekly operating committee meeting Monday morning by telling fellow top executives of his diagnosis, stunning his audience, people familiar with the meeting said. Mr. Dimon was stoic, these people said, adding that the bank’s executives are planning to take things step by step.
For over 15 years, Elizabeth Lesar has been nurturing relationships between investment firms and investors to generate optimal revenues via proprietary trading styles focusing on equities, fixed income, and alternative securities. To keep posted on updates about Ms. Lesar and her latest financial endeavors, subscribe to this Facebook page.
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Wow they gotta get this straight. the bank’s in their hands.
With a corporation this big and this organized, I think they’ll be taken care of.
“In these situations, as a CEO, it’s vital to work closely and stay in close contact with the board of directors and shareholders,” – I agree!
With the board member they have and how organized they were, I think they’re in good hands.
Hope so. I’m a big Dimon fan.