NEW YORK (TheStreet) -- New York City has won the support of two advisory firms in its push to have JPMorgan Chase (JPM) tell investors when executives are forced to return bonus pay because they broke the law.
Both Institutional Shareholder Service and Glass Lewis say investors should vote in favor of the New York City Pension Funds' proposal for the company to disclose its use of so-called clawback provisions at least once a year. Investors should also support splitting the roles of chairman and CEO while voting against the $20 million pay package for CEO Jamie Dimon, the advisory firms said.
Glass Lewis and ISS did not complain about the bank's 2014 performance but said investors should urge JPMorgan to provide greater clarity about executive pay during its May 19 annual meeting in Detroit.
"Without transparency, it is impossible to know if a clawback policy is being used or if it is being used effectively," New York City Comptroller Scott M. Stringer said on Friday.
While JPMorgan has "established clawback policies that go well beyond what which is required by law," the policies are only effective when used, Glass Lewis said in its report. "Given the number and size of settlements the company has entered into, we believe that increased disclosure of how the company is enforcing its recoupment policies would benefit shareholders."
For example, JPMorgan paid about $1 billion in November in a settlement with three U.S. and British regulators over claims it conspired to rig foreign exchange benchmarks, Glass Lewis said. In February 2014, JPMorgan paid $614 million in a U.S. Justice Department settlement of allegations that it had submitted false claims on federally guaranteed mortgage loans, the firm said.
The bank argued in its proxy filing that, while it has reported previous clawbacks, the proposed requirement could confuse shareholders. If the bank had to make a report even in years when no incentive pay had been forfeited, shareholders might conclude that the bank didn't do anything at all to address misconduct in that period.
In addition to clawbacks, there are a number of measures JPMorgan can take to correct misconduct, including retraining, suspension and termination, the bank noted.
While Glass Lewis praised the bank's clawback policy on pay for senior executives, along with its balance between short- and long-term incentive pay, its report said pay and performance aren't sufficiently linked and variable pay is largely discretionary.