Can JP Morgan Transparently Police Itself?

The Harvard Law School Forum on Corporate Governance and Financial Regulation 2012-05-31

Summary:

Editor’s Note: Ben W. Heineman, Jr. is a former GE senior vice president for law and public affairs and a senior fellow at Harvard University’s schools of law and government. This post is based on an article that appeared in the Harvard Business Review online.

In the wake of its significant trading losses (now reportedly rising from $2 to $3 billion or more), JP Morgan can win back some of its lost reputation by transparently holding those responsible to account.

These individuals could include (but not be limited to) the London trader, Bruno Iksil ("The London Whale"); his London boss, Achilles Macris; their U.S. boss, Ina Drew, the former head of their unit in of the bank's, the Chief Investment Office (CIO); and CEO Jamie Dimon, to whom the CIO reported who oversaw the CIO. Drew quickly retired after the losses, and Iksil and Macris are, according to news reports, leaving the bank.

Although the media has spoken loosely about a company "clawing back" pay, there are, in fact, different ways to hold responsible individuals to financial account. A "claw-back" seeks cash or equity already transferred to an individual. A "hold-back" cancels financial benefits which have been awarded but have not yet vested. A future compensation action would reduce 2012 variable benefits (bonus or equity awards) in absolute terms (or through a much slower rate of increase). Claw-backs or hold-backs of past awards could be appropriate for the departed employees. They could be appropriate for Dimon, but so could a compensation action about future variable comp.

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Link:

http://blogs.law.harvard.edu/corpgov/2012/05/31/can-jp-morgan-transparently-police-itself/

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Tags:

transparency risk management accounting & disclosure banking & financial institutions banks executive compensation risk op-eds & opinions ben heineman accountability jpmorgan clawbacks

Authors:

Benjamin W. Heineman, Jr., Harvard Law School Program on Corporate Governance and Harvard Kennedy School of Government,

Date tagged:

05/31/2012, 15:00

Date published:

05/31/2012, 12:45