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2. Dell special committee seeks more information

JPMorgan Chase (NYSE: JPM) directors have come out swinging, offering an apparently unified front and showing a willingness to go toe-to-toe with critics. In a letter to shareholders, they note that all directors except Jamie Dimon, the controversial CEO and Chairman, are outsiders, if not independent, and that they have performed well over the long term, the recent issues notwithstanding.

DealBook offers an excerpt, which notes that "All of our directors have deep experience in public company governance and with JPMorgan Chase in particular. They are essentially the same directors who helped the Company navigate through the financial crisis, as well as our acquisitions and integrations of Bear Stearns and the assets and certain liabilities of Washington Mutual. That our Board's membership has been relatively stable when compared to the wholesale changes made by companies that suffered near catastrophic losses and severe capital and liquidity events during the financial crisis is a testament to the work of an engaged, proactive JPMorgan Chase Board, in close collaboration with the Company's management."

I can only hope that the board is taking a conciliatory approach behind the scenes. I've suggested that the directors need to turn this into less of a test of wills and more of a negotiation. Surely there are steps the board could make that would enhance their ability to monitor executives and add firepower to key committees. Making this an all-or-nothing game doesn't seem like the best strategy.

If they lose on the Chairman/CEO split, for example, or if the various directors fail to win an impressively high percentage of the vote, they have put themselves in a tough position. The votes will be hard to ignore.

There is still time to come to an agreement on hot-button issues. For example, they could agree to change the composition of the risk policy committee, perhaps by adding new expertise, or somehow enhancing the role of the lead outside director.

For more:
- here's an article

Read more about: Shareholder Vote, JPMorgan Chase
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By Jim Kim

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3. Bloomberg aims to reassure on executive terminal monitoring

We could be settling in for a protracted tactical war when it comes to the Dell leveraged buyout saga. The latest development is that the special committee of the Dell board has asked for more specific information from Carl Icahn and Southeastern Asset Management. The committee apparently wants to determine if the proposal is a formal proposal or merely an alternative to be considered if the current deal isn't approved.

In a letter to the investors, the committee asked for a definitive agreement and queried the investors about financing, working capital plans, strategy, executive structure and so on. As of now, a shareholder vote on the current deal proposal from Silver Lake and founder Michael Dell has not been scheduled. It will not likely be held until July at the earliest. As of now, the board doesn't seem inclined to hold the deal vote at the same time as the annual meeting, which means that an alternative slate of candidate, should Icahn and Southeastern go that route, will be voted on after the deal vote.

The battle seems to be taking an increasingly personal tone, as Icahn has made clear that Michael Dell would be forced to relinquish command of the company if the alternative proposal comes to fruition.

For the next few months, there will be lots of skirmishing, but the battle at this point will play out slowly. At some point, Michael Dell and Silver Lake may be forced to sweeten their bid. But that's not going to happen anytime soon. One milestone will likely be next computer industry report on quarterly shipments. If the market's downturn continues, it could shake up the deal debate all over again.

For more:
- here's a Reuters article

Read more about: Carl Icahn
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By Jim Kim

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4. JPMorgan board member a polarizing figure

Bloomberg's top editorial executive has apologized for the shocking revelation that its reporters were able to use the company's terminal to snoop on executives. He also added some details meant to reassure users that any monitoring was limited in scope and certainly not "spying" in the traditional sense.

Matthew Winkler said the controversial techniques have been used since the 1990s and are "almost as old as Bloomberg News." Back then, the tool made sense, he indicated, because reporters often queried executives about what stories they wanted to see covered. The implication is that it helped to know a bit about the executives' use of the terminals. Reporters could see a user's login history, help desk queries, and how many times different computer programs were accessed, according to media reports.

That practice, the executive admits, no longer makes sense, calling access to such data "inexcusable." He also emphasized in a letter to users that certain information has always been off limits.

"At no time did reporters have access to trading, portfolio, monitor, blotter or other related systems," the executive wrote. "Nor did they have access to clients' messages to one another. They couldn't see the stories that clients were reading or the securities clients might be looking at."

This will likely blow over once everything's said and done. But it's a reminder of just how powerful Bloomberg has become.

For more:
- here's a CNNMoney article

Read more about: Monitoring, Bloomberg Terminals
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By Jim Kim

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5. JPMorgan stock will fall if Dimon leaves

Lee Raymond--the lead director on the JPMorgan Chase board, which comprises all independents except for chairman and CEO Jamie Dimon--has emerged as the main supporter of the status quo.

He and the board oppose the resolution that would split the Chairman and CEO positions and the effort that would essentially fire three-fourths of the risk policy committee and various directors on the audit committee, which oversees the risk committee.

DealBook offers an article exploring whether "the 74-year-old Mr. Raymond is seen as strong enough to stand up to Mr. Dimon."

As CEO of ExxonMobile, Raymond "was well known for his ferocity as chief of Exxon Mobil, unafraid to cut off gadflies in midsentence during investor meetings."

The article also notes that, "He has his defenders, who say he is a strong leader and a driving force behind decisions to claw back millions of dollars in compensation from executives at the center of the botched trades."

There's no doubt that Raymond has the requisite "toughness" as an executive, and he deserves credit for essentially halving the pay of Dimon for the bank's woeful performance on key issues in 2012, though any strong board would have done the same. However, one could argue that the issue now is less about whether he has the intestinal fortitude to go "toe-to-toe" with Dimon and more about simple board effectiveness. A strong counterweight to the CEO would be great, but that doesn't equate necessarily to strong board performance.

In other words, you can have a strong lead directors and an underperforming board. Similarly, while the risk policy might well include some very qualified people, you have to look at its recent performance when weighing whether they should be replaced.

In the end, there may be a way to keep the risk policy basically intact and also improve its quality. The board needs to be exploring this with shareholders, who might be amenable to a compromise that would add relevant expertise. At a minimum, the board needs to acknowledge that it could use some additional directors to help repair this key committee.

For more:
- here's the article

Read more about: corporate governance
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By Jim Kim

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