JP Morgan Asset Management (JPMAM), the $1.7trn fund manager, has been following proxy advisor guidance to reject excessive executive pay packages this year, contrasting embarrassingly with a recent outburst by Jamie Dimon, Chairman and CEO of JP Morgan Chase, its banking parent, who slammed investors who use such advice as “lazy”, “irresponsible” and “probably” poor investors.
Dimon caused a storm last month when he tore into shareholders who rely on proxy firms such as Institutional Shareholder Services (ISS) and Glass Lewis.
“If you do that, you are just irresponsible, I’m sorry,” he told a New York conference, adding: “And you probably aren’t a good investor either.”
But Responsible Investor can reveal that the bank’s asset management subsidiary – which takes ‘base case’ advice from ISS – itself voted against pay at five global companies during the first quarter of this year. The voting decisions were all in line with ISS recommendations, although the fund manager does not automatically follow ISS advice.
One pay vote was at Georg Fischer, the Swiss piping and automotive products company, which held its AGM on March 18. According to voting records seen by RI, JP Morgan voted against the remuneration report because long-term share awards are subject to continued employment only and do not have any additional financial performance conditions.
ISS advised voting against the pay report, having advised for the recommendation over the prior three years. This year, Georg Fisher’s pay report was opposed by 40% of the company’s shareholders, including the Florida State Board of Administration and Christian Brothers Investment Services, though leading responsible investors such as Norges Bank Investment Management voted for.
In all, JPMAM – a signatory to the UK’s Stewardship Code and the Principles for Responsible Investment (PRI) – voted against five pay-related resolutions in the first quarter.
At Arrowhead Research Corporation, the Nasdaq-listed pharma firm, it voted against the remuneration report “because of the quantum of CEO pay” – joining institutions such as CalSTRS. ISS’s advice was to vote against because the size of the CEO’s equity “raises serious concern”.
JPMAM also vetoed the pay report at South Korea’s Lotte Chemical because it was “excessive” compared to peers, a view shared by shareholders includingPGGM, the giant Dutch pension fund, whose voting disclosure system is hosted by ISS, and Canada’s CPP Investment Board (CPPIB) (which uses ISS).
At French caravan maker Trigano SA, JPMorgan voted against directors’ remuneration due to “discrepancies” between the amounts paid and approved by shareholders. With a 4.98% stake, JP Morgan is Trigano’s second largest shareholder after chairman/CEO Francois Feuillet.
And at Xinyi Glass Holdings, JPMAM voted against the adoption of a share option scheme, as did the likes of CPPIB.
Historically, JPMAM has been a fervent supporter of proxy voting agencies: “It is clear that the major proxy voting agencies have an important role in modern cross-border voting activity,” the firm said in a response to a consultation on proxy voting companies run by the European Securities Market Association (ESMA) back in 2012, adding: “It is easy to forget the enormous improvements that proxy voting agencies have brought to the industry over the past decade.” The same letter noted that in calendar year 2011 JPMAM overrode the ISS voting recommendation just 4.3% of the time on shareholder resolutions.
According to JP Morgan’s Corporate Governance and Proxy Voting Guidelines, released on April 1 this year, the fund manager monitors the corporate actions of the stocks held in its clients’ portfolios. “To assist JPMAM investment professionals with public companies’ proxy voting proposals, a JPMAM Entity may, but shall not be obligated to, retain the services of an independent proxy voting service [ISS].”
The fund manager says ISS provides it with a “comprehensive analysis of each proxy proposal” and recommendations on how to vote each proxy proposal based on those guidelines. Market observers told RI that it appears that JP Morgan’s default position is to vote with their provider’s recommendation unless they choose to override it.
The firm’s Stewardship Code Statement says: “JPMAM retains the services of the ISS voting agency, although its analyses form only the ‘base case’ voting recommendation and we will frequently take a differing view, based on the results of our engagement activity or our own insights”.
Robert Hardy, London-based Head of Corporate Governance at the firm, told RI that his team of three votes on around 5,000 AGMs a year and uses ISS to help “triage” its voting. He added the firm’s own voting guidelines look a lot like ISS’s because they are based around the same international principles: “There’s a lot of commonality,” he said.
Link to RI Comment: It’s Jamie Dimon who is being irresponsible with his comments on proxy advisors