Katz: This Dimon Is Forever

Editor's Note: This article was originally published on Real Money at 11:32 a.m. EDT on May 13. To see latest Real Money commentary as it's published, sign up for a free trial of Real Money.

NEW YORK ( Real Money) -- A company's annual proxy vote is the one time each year that its shareholders can effectively participate in the composition of the board of directors and setting executive compensation. Recently, the threat (or reality) of shareholder activism has focused the directors' discussions, and, for the most part, has served to improve board behavior. Occidental Petroleum ( OXY) is a case in point, where a widespread uprising of shareholders (in which we participated) successfully reversed a wrong-headed initiative to force out a highly effective CEO.

Now a highly visible issue has emerged regarding JPMorgan Chase's ( JPM) continued employment of Jamie Dimon as both its chairman and CEO. As a general policy, having a separate chairman and CEO is a better practice. We strongly endorse this structure for companies that have already made the distinction, and for those where a CEO transition is under way.

But in companies with unified chairman and CEO roles, the issue often requires more thought. For JPMorgan, the issue is ultimately one of textbook policy vs. pragmatic reality. Contrary to some commentary, the role of the chairman is not to "supervise" the CEO. If this were true, a single person occupying both positions would face an obvious conflict of interest. Actually, the responsibility for executive succession and assessment is a primary responsibility of the entire board.

The role of the chairman is to direct the board's discussion setting the company's long-term strategic evolution (director: direct). The CEO should be part of that discussion as a board member. The role of the CEO is to execute (executive: execute) that plan by leading the team through day-to-day operations. For a company like JPM, which has one highly capable individual currently filling both roles in Dimon, shareholders must determine pragmatically whether separation helps or hurts the company.

We've been owners and buyers of JPM since well before the global financial crisis of 2008, in part because we believe that the company has superior management, as exemplified by its performance both during and since the crisis.

Dimon has proven himself to be one of the very top-tier managers in the extremely complex financial sector. Judging by his public appearances at conferences, hearings and on earnings calls, it's clear that he understands all the issues throughout the company's many businesses, and has a thoughtful and analytical viewpoint on each. He's hands-on, action-oriented, and holds people accountable for their commitments and performance.

When we look back over the crisis period, chairmen and CEOs of many industry players didn't fully understand their businesses and their inherent risks; as a result, they often drove their companies over the cliff. Dimon and his team consistently touted the benefits of a "fortress balance sheet," appropriately assessed risk and led JPM through the crisis, coming out of it as the pre-eminent financial institution in the world.

Certainly, the substantial "London Whale" losses and Dimon's initial reaction to it was a major embarrassment, but the subsequent response was strong and appropriate. His bonus was docked, responsible parties were held accountable, and meaningful changes in oversight and risk-assessment were put in place. Most important, the $6 billion in losses were manageable and the rest of the company didn't miss a beat. In a business full of egos, Dimon's admissions, apologies and actions stand out, as his own ego hasn't gotten in the way of resolving problems at JPM.

Dimon is both the most able CEO and chairman in the banking business, and we believe that it is in JPM shareholders' interest to support him and retain him in both positions, notwithstanding the conventional wisdom of having a separation of responsibilities.

At the time of publication, Katz had a position in JPM.