05/13/2013 05:47 pm ET Updated May 15, 2013

JPMorgan Activist Shareholders May Regret Push To Split CEO And Chairman Roles, Professor Says

Activists shareholders pushing JPMorgan Chase & Co. to strip Chairman and CEO Jamie Dimon of one of his job titles scored a major victory earlier this month, when two well-regarded independent advisory firms supported their proposal. Shareholders saw another sign their activism has gained momentum last Friday, when the bank's board felt compelled to issue a seven-page letter defending its current management structure.

Now, an academic writing in the Harvard Business Review has a message for those shareholders: Be careful what you wish for.

In a post on the management journal's website Monday, University of Minnesota Professor Aiyesha Dey pointed to a 2011 study she conducted that found firms tended to perform relatively poorly after being forced by shareholders to divide the role of chairman and CEO.

“Splitting the roles of the CEO and chairman often works well in small firms, where communication between the chief executive and chair is relatively uncomplicated and the amount of information the chairman has to absorb is modest,” Dey wrote. “But for large, complex companies, separating the roles can create real challenges.”

She further argued that the activist shareholders' reasons for separating the chairman and CEO roles at JPMorgan were weak, as they “don't always understand board-CEO dynamics or the firm-specific costs and benefits of splitting the CEO-chairman roles.”

“Stripping JPMorgan Chase's CEO of the chairmanship may be counterproductive over the long term,” Dey wrote, adding that shareholders “shouldn't compromise the bank's future performance just because they want to take Jamie Dimon down a peg.”

At least some of Dey’s arguments echo those put forward in the letter JPMorgan’s board sent shareholders on Friday, which noted the company’s current governance structure was "working effectively and has served the Company exceptionally well."

“Our current structure provides the balance good corporate governance seeks to achieve and it would be a mistake to change it now,” directors Lee R. Raymond and William C. Weldon wrote in the letter.

Lisa Lindsley, director of capital strategies at AFSCME, represents one of the main shareholders behind the proposal to split the role of chairman and CEO at JPMorgan. Lindsley said she feels Dey’s writings mischaracterize the shareholders' motivations.

“This is not a referendum on Jamie Dimon,” Lindsley said. “This is not an attempt to take him down a peg.”

Lindsley noted a different academic study, by the international policy organization commonly referred to as the Group of 30, which argued that “the pressures and breadth of responsibility borne by the CEO have grown almost beyond the capacity of a single person” and having someone also take on the role of chair “seems unreasonable.”

“Being a chairman is a full-time job in itself,” Lindsley said.



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