FOCUS-JP Morgan's board rejects switch to stakeholder-focused entity - Yahoo Finance

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By Ross Kerber

BOSTON, Feb 9 (Reuters) - JPMorgan Chase & Co CEOJamie Dimon has led calls for companies to consider the needs ofworkers, communities and customers as well as those ofshareholders.

But now it is clear: investors come first.

That is how activist investor John Harrington interprets arecent decision by JPMorgan's board - chaired by Dimon - not toconvert itself to a "public benefit corporation," a Delawarelegal structure gaining attention among would-be financialreformers.

JPMorgan's board cited a legal review it commissionedstating, among other things, that when the interests ofstockholders and other constituencies conflict at a corporationlike JPMorgan, "the board's fiduciary duties require it to actin a manner that furthers the interests of the stockholders."

That would not be the case for a public benefit corporation,however. Directors at such companies must balance stockholderinterests with the interests of other constituencies, accordingto the review sent to shareholder Harrington, who had requestedit.

Harrington said the document's details and the board'sdecision show the limits of the sentiments espoused by Dimon andother top CEOs when they issued their "Statement on the Purposeof a Corporation" in 2019 calling on companies to look out forall stakeholders.

"What they said was meaningless," Harrington said in atelephone interview.

A JPMorgan spokesman declined to comment.

A representative for the law firm that wrote the report,Richards, Layton & Finger of Wilmington, Delaware, also declinedto comment.

DO THE RIGHT THING

Harrington's effort is one of several campaigns aiming tomove corporate practices into line with some CEOs' increasinglyliberal rhetoric on hot-button issues like climate change andincome inequality. A Reuters analysis foundshareholders have often kept their leverage.

Other reformers have urged corporate boards to give theirown statements of purpose. A rare example came when tobaccocompany Philip Morris International Inc in its proxy lastyear gave its commitment to "delivering a smoke-free future"with products scientifically shown to be less harmful thantraditional cigarettes. The statement reiterated what thecompany had called its "strategic priority" in 2017.

Separately, some activists have urged companies to addworkers to their boards of directors. But of ten shareholderresolutions filed in 2020 on the topic, none won more than 8%support of votes cast, according to a review by Proxy Insight.

One company that has converted to a public benefitcorporation, software maker Veeva Systems Inc, wonbacking for the change from 99% of votes cast lastmonth.

Veeva's certificate of incorporation, sent by a spokesman,now states that the company will be managed to balancestockholder interests with those of its customers, employees andothers. "We believe this corporate structure reflects ourguiding principle, 'do the right thing,'" the document states.

Harrington, the investor, has filed other shareholderresolutions for this spring calling on additional banks toconvert themselves to public benefit corporations.

One recipient, Bank of America Corp, told Harringtonin a Feb. 5 letter that it plans to hold a vote on his proposalat its annual meeting.

But it also stated its board will recommend investors voteagainst the idea for reasons including that it already operatesin a way that balances shareholder and stakeholder interests,and because "The public benefit corporation model is new,largely untested, and is therefore inappropriate for a companyof our size and complexity."

A Bank of America spokesman declined to comment further.

A spokeswoman for another recipient, Wells Fargo & Co, noted it previously studied and rejected the idea.

In January 2020, Wells Fargo's board said it could alreadyconsider stakeholder interests "without the significantuncertainties, costs, and distractions" that conversion wouldrequire.

(Reporting by Ross Kerber in BostonEditing by Matthew Lewis)

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