When CEO Is Superhero, Chairman Is Sidekick

NEW YORK ( TheStreet) -- Shareholder activists calling for an independent chairman at JPMorgan Chase ( JPM) may be guided by principles of sound corporate governance, but they fail to see the biggest weakness in their case.

So long as Jamie Dimon stays CEO, he will be the boss.

JPMorgan's annual meeting is on Tuesday. Among the various proxy items subject to a shareholder vote is a proposal to split Dimon's dual roles as CEO and chairman of the board of directors.

Press reports suggest Dimon might quit if the vote goes against him. But if he does decide to stay and gives up his chairman title, it will probably make zero difference to how things are run at JPMorgan.

If history is any guide, when you have a strong CEO with a forceful personality, the chairman is often the one toeing the CEO's line and not the other way around.

Strong CEOs often have an overpowering influence on their boards, whether they are chairmen or not.

Steve Jobs was never chairman of Apple ( AAPL) except for a brief period during his illness. But it was always clear that Jobs called the shots at Apple.

The late Apple co-founder famously hand-picked his board. The company was often criticized by corporate governance experts for having a board that was too cozy with the co-founder and CEO.

But who would have been strong enough to stand up to Jobs' fiery personality and win an argument with him?

And can anyone really argue that that model did not work for Apple? Was anyone successfully able to argue that Jobs be fired because he had too much power? Surely, not the second time.

"There's no 'we' in 'CEO,'" American International Group ( AIG) CEO Bob Benmosche, told Bloomberg News in a recent interview.

The famously "in-your-face CEO" has a good relationship with AIG current chairman Steve Miller. But he constantly locked horns with former Chairman Harvey Golub, another strong personality, to the point of calling his relationship with Golub "ineffective and unsustainable."

In the end, it was Golub who turned in his resignation, not Benmosche. Golub said in a letter to the board that he was stepping down because "it was easier to replace a chairman than a CEO."

So much for having a chairman in place to fire a CEO.

"You can't have this divisive attitude where the chairman is trying to run some things, and the CEO is trying to run things. It became dysfunctional," Benmosche told Bloomberg.

Dimon is not a bully, but he has grown accustomed to calling the shots. And even if he decides to cave in and give up his chairman title, he is going to want to operate with considerable autonomy or he will head for the exit.

So the board will make sure that the chairman they appoint will work well with Dimon. And since practically everyone on Wall Street in the last few weeks has hailed King Jamie, finding someone who will allow the CEO to continue to operate the way he always has should not be a problem.

All this vote will really end up achieving then, at best, is the appearance of good corporate governance. At worst, it could backfire and prompt Dimon's exit, which given his track record, will likely hurt the stock.

Shares of JPMorgan Chase are up 56% in the one year since it disclosed its biggest trading loss in history, outperforming the S&P 500 and the KBW Bank Index.

There is no doubt that Dimon is a highly influential CEO. His track record in successfully steering JPMorgan Chase through the financial crisis and the fact that the bank has posted record profits three years in a row -- the "London Whale" trading losses notwithstanding -- has earned him a vote on every important matter that affects the financial industry and the economy.

That track record allows Dimon to voice his opinions more freely than his peers in the industry would. And because he is known for speaking candidly, his words carry even more weight.

The board continues to back Dimon as Chairman and CEO because they do not question his authority when it comes to running JPMorgan.

JPMorgan and Dimon's reputation have both been tarnished by the London Whale incident and the continuing political and regulatory scrutiny do not help. The bank continues to be the target of federal investigations on a range of regulatory violations from its handling of foreclosures, to its alleged violation of anti-money laundering rules to its bidding practices in the organized energy markets.

Shareholders are understandably justified in worrying about what looks like frequent lapses in controls. This should be of concern to the board as well. Blind faith in Dimon's abilities is a feeling that should be checked. In some ways, the constant scrutiny helps, since it ensures there are more checks and balances at the bank than there ever has been.

But it is also important to remember that these issues cut across all large banks, not just JPMorgan.

Perhaps JPMorgan Chase and the other big banks really are "too big to manage." But that is a different and more complicated debate, one that deserves a less superficial solution.

-- Written by Shanthi Bharatwaj in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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