Clawback controversy at JPMorgan
The question on most people's mind about JPMorgan Chase is how much did the bank lose on the disastrous hedges-turned-prop-bets announced in May.
But a bigger question is whether the board will execute any clawbacks from executives implicated in the mess. Attention has focused largely on Ina Drew, the CIO who oversaw the trading that allowed the positions to build. She had long been a favorite of CEO Jamie Dimon, and that status may have been reflected in his decision to let her resign rather than terminating her for cause. The decision, according to Bloomberg, allowed her to retain $17.1 million in unvested restricted shares and about $4.4 million in options that she otherwise would have been required to forfeit.
To be sure, the bank can claw some of that back in various ways, it can defer vesting or reduce future restricted grants. But it's going to be a tough decision for Dimon and the board. Drew was an exemplary employee and executive over her long career. Toward the end, she battled Lyme Disease, which caused her to be absent for long stretches. During that period, there was a lot of politicking that took place, as contenders sought power.
"Meetings during Drew's absence often devolved into shouting matches over the trades. In the end, there was no one to push back against the huge trades of Macris unit. After Drew returned, she seemed to have less of an appetite for managing such deep internal divisions. In the end, Macris won the internal war, and the results are history," I noted.
So the board has to balance her long-term performance and personal challenges against one big mistake that took place on her watch. My guess is that Dimon will allow clawbacks, including some for his own compensation, but spare Drew as much as he can.
- here's the article