Your company sets aside $23 billion to pay government fines and legal fees.
Media from every platform worth skin in the game demand the CEO’s firing.
Objective observers say the company’s “compliance failures are egregious and systemic.”
But if you are Jamie Dimon, CEO of JP Morgan Chase, your defenders prevail.
We discussed Dimon several months ago when those compliance failures hit the street. We noted that he delivered all the bad news, took responsibility and apologized. But no one survives a $23 billion hit to the bottom line, right?
As Andrew Ross Sorkin wrote in the Times’ Dealbook today, Dimon’s not likely to have to look up at his golden parachute, at least not right away.
“Are you crazy?” Marvin C. Schwartz, a managing director at Neuberger Berman and a longtime investor in JPMorgan, asked me when I mentioned the possibility of ousting Mr. Dimon. “Jamie Dimon is one of the best C.E.O.’s of any company in the world,” he said. “It doesn’t mean you can’t have an accident. It’s totally unfair to say he inflicted this upon himself.”
Daniel Loeb, the activist investor who has made a career out of targeting troubled companies and ousting their chief executives, also sided with Mr. Dimon. “In my experience, they are meticulously ethical, and nobody has a more rigorous compliance effort.” He added, “It’s a very large and complex company, and things will happen.” But he said that Mr. Dimon was now “being used as a scapegoat and piñata to satisfy some kind of bloodlust.”
Nice to have friends in high places, but a prominent CEO is expected to, right? Well, sure, but there is something greater at work here.
Morgan Chase, the nation’s largest bank by assets, faces a series of serious legal problems, federal government fines and hits to its reputation. These include a “multibillion-dollar trading loss from what’s become known as the London Whale, the sale of flawed mortgage-backed securities without fully warning investors of the risks, accusations it manipulated energy markets in California and Michigan and a continuing inquiry into the bank’s hiring of the sons and daughters of political leaders in China,” Sorkin noted.
And at least some Morgan board members Sorkin spoke to see a clear need for repairs and reforms. They just don’t see a bulls-eye on Dimon’s back.
Why? Because of the facts relayed above. The company’s reputation was stellar.
There is immense value in a clear slate of performances when it comes time to deal with mud splashed onto that reputational record. While it’s often true that one bad deed can undermine and even destroy a lifetime of good [Honey, it was just drinks and a kiss good night!] sometimes it doesn’t.
Establishing, solidifying, buffing an excellent reputation is worth, literally, billions.
There seem to be two possibilities and schools of thought. Dimon brilliantly considered all these scenarios when the government foisted Bear Stearns and Washington Mutual on Morgan in 2008 at the start of the Great Recession and he’s cynically doling out the chits and chips he acquired for his good deeds.
Or, JPMorgan Chase is, under Dimon, an excellent bank.
One inescapable conclusion is that the value of an extraordinarily good reputation, especially in an industry filled with thieves and scoundrels, can now be valued at $23 billion plus one.
The content of this blog is about crisis management and mismanagement in a digital age. It originates with Steve Bell, who spent 30 years as a journalist for the Associated Press and in four top editor positions at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower + Associates, one of the nation’s largest independent advertising, integrated marketing and public relations agencies, with seven offices in the Northeast and Southeast. Learn more about EMA at http://www.mower.com. Steve’s blog is based on his own opinions and does not represent the views or positions of Eric Mower + Associates.