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BlackRock vote on Dimon’s future highlights ties to JPMorgan

By Christine Harper and Alexis Leondis, Bloomberg

May 9, 2013 • Reprints

Bill Rubin, a senior investment analyst at BlackRock Inc. who picks financial-company stocks, didn’t mince words a year ago when he e-mailed JPMorgan Chase & Co. right after the bank disclosed a trading loss that ultimately cost more than $6.2 billion.

“We are very disappointed by this turn in events, not so much by the size of the loss, but more by the bad stumble in risk management/controls,” Rubin wrote, according to notes relayed to JPMorgan’s management by Sarah Youngwood in the bank’s investor-relations department. “Major reputation and sentiment hit, damaging.”

BlackRock, JPMorgan’s biggest shareholder with a 6.5% stake, will cast a key vote this month on whether Jamie Dimon should be allowed to retain both his roles as chairman and chief executive officer even after last year’s stumble. The vote pits Dimon, who runs the world’s largest trading business, against BlackRock Chairman and CEO Larry Fink, who runs the world’s biggest asset-management company.

The vote could represent “a clash of Too Big to Fails,” said Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, invoking the phrase used to describe companies whose collapse is deemed too damaging to the economy to be allowed. “They’re both strong personalities.”

The two men are at the top of their respective Wall Street domains. Los Angeles native Fink, 60, runs the largest “buy side” business with $3.94 trillion of client assets, while New York City-born Dimon, 57, oversees the biggest “sell side” company, with a $2.39 trillion balance sheet.

Buy Side

“Fink is probably emblematic of the new power that the buy side has because of their sheer size,” said Geisst, who has written about the history of Wall Street. If BlackRock influences Dimon’s role, “people on Wall Street would all genuflect to BlackRock.”

Brian Beades, a BlackRock spokesman in New York, said “no single vote fully captures our philosophy on corporate governance.”

BlackRock is one of JPMorgan’s biggest clients and counterparties as well as a shareholder. JPMorgan’s own asset- management business, meanwhile, competes with BlackRock and owns more than 1 percent of BlackRock stock, data compiled by Bloomberg show. BlackRock has risen 29% in the past five years, outstripping JPMorgan’s 8 percent gain.

“BlackRock is voting shares that could be the swing vote for JPMorgan,” said Erik Gordon, a business and law professor at the University of Michigan in Ann Arbor. “The power has shifted, not just from JPMorgan to BlackRock, but from the sell side to the buy side.”

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Related Terms
US Federal Reserve 8527bank 6455Bloomberg 5254financials 2975stocks 2123equities 1689finance 1292Barack Obama 909New York 841JPMorgan Chase & Co. 818Michigan 789retail 307banks 275JPMorgan 176Jamie Dimon 174BlackRock Inc. 131the University of Michigan 110American International Group Inc. 81New York University 77World Economic Forum 61Bear Stearns Cos. 34BlackRock 32PNC Financial Services Group Inc. 28Stern School of Business 18U.S. Senate Permanent Subcommittee on Investigations 18Dimon 17MarketAxess Holdings Inc. 15Erik Gordon 13Larry Fink 11Institutional Shareholder Services 10Washington Mutual Inc. 8Glass Lewis & Co. 7Brian Beades 3company managements 2Manhattan College 2Charles Geisst 2FactSet Research Systems Inc. 1Fink 1cash-like products 1Bill Rubin 1Sarah Youngwood 1

Free Newsletter Modern Trader Follow

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