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.
“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.”