We have a fully engaged board, an exceptional management team and a strong corporate culture

We want to be a standard–bearer in the industry when it comes to meeting the heightened standards demanded by our regulators — and not just because it’s required but because we think it’s the right thing to do for our shareholders, clients, employees and communities. And we want to do this across all measures — from our controls to board governance, the cultivating of a strong culture and how we are fighting cyber attacks to how we treat our clients. It starts at the top — with the Board of Directors.

Your Board is fully engaged in all critical matters

The entire Board is fully engaged in the affairs of the company. Board members are fully engaged in the company, from setting the agenda of the Board meetings to reviewing strategy and demanding strong controls to determining CEO compensation and succession planning. Board members also are increasingly engaged in regulatory and shareholder affairs. Several of the Board members meet regularly with our key regulators and major shareholders.

Management succession planning is a priority of the Board. Regarding succession planning, the Board always must be prepared for the “hit–by–the–bus” scenario (which, of course, is not my preference), but ongoing succession planning for the medium and long term is the highest priority of the Board. Importantly, our Board members have complete access to and relationships with the key senior people and continually interact with them, both formally and informally. Both the Board members and I believe that, under all scenarios, this company has several capable potential successors.

The full Board meets without the CEO at every Board meeting. Going way back to Bank One’s Board more than a decade ago and before it was mandated, the Board would meet without the CEO (that’s me) because we all thought it was best for Board members to have an open conversation about the CEO and the company without feeling any pressure. The Board continues that practice today. New rules mandate that directors meet at least once a year without the CEO — yet our Board does so at every Board meeting; i.e., eight times a year. And usually at the end of the session, the Lead Director comes to see me to give feedback and guidance about what the Board is thinking and what it wants.

We have a strong corporate culture — but we must continuously strengthen it

JPMorgan Chase has served its shareholders, customers and communities with distinction for more than 200 years. Since we were founded, our company has been guided by a simple principle that perhaps was best articulated by J.P. Morgan, Jr., in 1933, when he said: “I should state that at all times, the idea of doing only first–class business, and that in a first–class way, has been before our minds.” We continue to strive to meet that principle.

Acknowledging mistakes — and learning from them — is part of the fabric of this company. We also recognize that we have made a number of mistakes — some of them quite painful and costly — over the last several years. One of the things we learned was that we needed to redouble our efforts around culture — not reinvent our culture but recommit to it and ensure that it is an enduring strength of this institution. While we have done an extensive amount of work over the past year and a half to make sure we get this right, we know that it can’t be a one–time effort. It’s like keeping physically fit — you can’t get in shape and expect to stay that way if you stop exercising.

Our efforts around culture and conduct are substantial and include the following:

We will continuously reinforce our business principles. Back in July 2004 at the close of the JPMorgan Chase and Bank One merger, we sent a small blue book to all employees outlining the capabilities of the combined firm, as well as our mission and business principles. While much has changed over the past decade, our commitment to these principles remains the same. In July 2014, we marked the 10–year anniversary of JPMorgan Chase and Bank One coming together to form this exceptional company. It was fitting that on this special occasion, we rededicated ourselves to those same business principles by distributing the rearticulated business principles on How We Do Business to every person in the company. These core principles (which are written in plain English and include lots of specific examples) describe how we want to conduct business, and they will continue to guide us as we move forward. What we are doing differently today is that we are taking substantial actions to continually inculcate our employees and our leadership on these principles:

  • We want to make the How We Do Business principles part of every major conversation at the company — from the hiring, onboarding and training of new recruits to town halls and management meetings.
  • We conduct a substantial amount of ongoing training and certification, from the Code of Conduct for all employees to the Code of Ethics for Finance Professionals that applies to the CEO, Chief Financial Officer, Controller and all professionals of the firm worldwide serving in a finance, accounting, corporate treasury, tax or investor relations role.
  • We have enhanced our leadership training. We have thousands of educational programs, and we have consistently trained the top several hundred people on leadership. But we did not train people when they became first–time managers or, importantly, managers of managers. This will be another opportunity to drive home our How We Do Business principles. The heart of this training provides the chance to teach our leadership how to do the right thing — not the easy thing — and to continually reinforce the principle of treating others in the way you would like to be treated.
  • We also developed a pilot program within our Corporate & Investment Bank in Europe, the Middle East and Africa on How We Do Business, which includes focus groups and other efforts to analyze cultural themes and address any concerns around conduct and behavior. This year, we have taken the learnings from that pilot and will be rolling them out in a global, firmwide Culture and Conduct Program.

These initiatives will make us a better company. We hope they will reduce any bad behavior. No human endeavor can ever be perfect, but we are hopeful that as incidences of bad behavior decline and as management’s responses to bad behavior are vigorous, governments and regulators will appreciate the intensity of our efforts.

Compensation has been consistent and fair and is awarded with proper pay–for–performance

Our long–term success depends on the talents of our employees. And our firm’s compensation system plays a significant role in our ability to attract, retain and motivate the highest quality workforce. We design our compensation program to encompass best practices, support our business objectives and enhance shareholder value. For example:

  • We do not have change–of–control agreements, special executive retirement plans, golden parachutes or things like special severance packages for senior executives.
  • We do not pay bonuses for completing a merger, which we regard as part of the job. (When a merger has proved successful, compensation might go up.)
  • We virtually have no private “deals” or multi–year contracts for senior management.
  • We always have looked at financial performance as a critical factor, but not the only factor, in pay–for–performance. We have formulas (which always have been properly charged for capital usage) for how we accrue compensation, but we do not pay it out in a formulaic way to anyone. Financial performance alone is not a comprehensive picture of performance. Broader contributions are important, like qualitative skills such as leadership attributes, character and integrity, and management ability. This also includes recruiting, coaching and training, building better systems and fostering innovation, just to name a few.
  • We also have invoked comprehensive clawbacks of previously granted awards and/or repayment of previously vested awards when we thought it was appropriate. In 2014 alone, more than 200 employees had compensation reduced for risk–and control–related events. Importantly, many more than that were terminated for poor performance or ethical lapses during the course of the year.

Compensation alone is not enough, and one should not confuse good compensation with good morale. Getting compensation right is critical — everyone wants to feel they are being paid fairly, and most people have other alternatives. But proper compensation alone is not enough. I have seen many companies try to make up for politics, bureaucracy and low morale with high compensation — it does not work. When a company has been doing poorly, or treats its customers badly, the company should expect low morale. What employees want to see is that the company faces its issues, reduces politics and bureaucracy, and improves customer service and satisfaction. Maintaining a corporate culture where the right people are promoted and everyone is treated with respect is as important as compensation. Then morale will improve, and employees will be proud of where they work every day.

We need to operate like a partnership. If, for example, a company’s largest, and perhaps most important, business unit is under enormous stress and strain, unlikely to earn money regardless of who is in charge, a manager might ask his or her best leader to take on the job of running that business. This may be the toughest job in the company, one that will take years to work through before the ship has been righted. When the manager asks a leader to take on the responsibility, she quite appropriately will want to know whether she will be supported in the toughest of times: “Will you make sure the organization doesn’t desert me?” “Will you stop the politics of people using my unit’s poor performance against me?” “Will you compensate me fairly?” My answer to these questions would be yes. And as long as I thought she was doing the job well, I would want to pay her like our best leaders, profits aside. Conversely, we all know that a rising tide lifts all boats. When that’s the case, paying that leader too much possibly is the worst thing one can do — because it teaches people the wrong lesson.

We still believe deeply in share ownership. We would like all our senior managers to have a large portion of their net worth in the company. We believe this fosters partnership. While some make the argument that it causes excessive risk taking — we disagree. The first people to lose all of their money if a company fails are the shareholders and the management team. We want your management team to be good stewards of your capital and to treat it as they would their own. It is formulaic compensation plans, where people are paid solely on financial performance, that can cause undue risky and bad behavior.

The entire Operating Committee gets involved in compensation — it is not done in a back room. One way we make sure we are fair and just with compensation is that the entire Operating Committee spends a substantial amount of time reviewing the compensation of our top 500 people — this way, we have internal justice, we can review someone’s total performance across all measures, and we can understand how a manager manages up, down and across the organization — not just up.

We want to have the best people, and competitive compensation is critical. We must continue to pay our people properly, competitively and well for doing a good job. It is imperative at JPMorgan Chase that we continue to attract and retain the best.

We treat all of our people fairly. While we generally talk about compensation for the most senior managers, the compensation levels of our entire employee population are fairly similar to that of the U.S. population’s household income distribution. We invest a significant amount of time and money to ensure that all of our employees are properly compensated. We still have a defined benefit pension plan for most of our employees that provides a fixed income upon retirement to supplement Social Security and any other savings they have. We also provide a 401(k) plan with matching dollars. In addition, we have excellent healthcare plans that incentivize people to take care of themselves. For example, premiums are lower if an employee gets an annual physical examination or stops smoking. We also subsidize these healthcare plans more for lower paid employees (at 90%) versus our higher paid employees (who are at 50%). And each year, we are recognized as a great place to work by various groups, including Working Mother 100 Best Companies, Top 100 Military Friendly Employers by G.I. Jobs magazine and Best Employers for Healthy Lifestyles by the National Business Group on Health, among many others.

As we centralize all risk functions, we also must be certain that line of business CEOs remain empowered to manage their business end to end

We always have tried to be very thoughtful about which functions are centralized or decentralized at the company. We always have centralized functions that can create huge economies of scale like data centers or utilities that are used by the entire company (like general ledgers and payroll) or critical control functions (like Corporate Legal, firmwide accounting policies, etc.). We try to decentralize where we can and when it makes sense to do so. For example, while a lot of finance functions reside at Corporate (like accounting policy), some finance people are devoted to only one line of business, so we keep them within that line of business. We do this to provide direct accountability, speed up decision making and minimize bureaucracy.

In the new world, in order to improve the consistency of controls, regulators have demanded that most risk and control functions be centralized, including Risk, Compliance, Finance, Oversight & Control, Audit and Legal. In doing this, we have given huge amounts of additional authority to functions at our corporate headquarters. Corporate headquarters can sometimes forget that it exists only because there is a banker in front of a client somewhere. The Home Depot, one of America’s great companies, does not call its corporate headquarters the corporate headquarters — it’s called Store Support Center to remind employees every day why they are there: to support the stores and the clients. This still remains true at JPMorgan Chase — we at Corporate would not be here if we didn’t have our bankers in front of clients.

We need to work hard to get the best of both centralization and decentralization. And we need to manage Corporate so the line of business CEOs and management teams are fully responsible and empowered to manage their businesses. Centralization should not mean demoralizing bureaucracy or slowing down services as multiple committees and layers sign off on every decision and stifle innovation. We have been managing through this process with our eyes wide open. The Operating Committee members of the company spend a considerable amount of time to make sure we get this right.

We need to develop the right culture and avoid creating a culture of finger–pointing. We need to analyze our mistakes because that is the only way we can fix them and consistently improve. But we cannot allow this to devolve into crippling bureaucratic activity or create a culture of backstabbing and blame. We need to develop a safe environment where people can raise issues and admit and analyze mistakes without fear of retribution. We must treat people properly and respectfully — even if we have to make tough decisions.

I believe this company currently has the best management team with whom I have ever been associated — and I mean their character, culture and capabilities. I now ask questions that I did not ask when I was a younger manager: “Would I want to work for these managers?” “Would I want my children to work for these managers?” My answer would not always have been yes, but now it is. These leaders have navigated the last several years with fortitude and a smile, driving results, making tough decisions and treating each other as complete partners. They are the reason why both performance and morale remain strong in this environment.


I feel enormously fortunate to be part of the remarkable 200–year journey of this exceptional company. I wish you all could see our employees and your management team at work, particularly in these challenging times. If you did, I know that you, like me, would be bursting with appreciation and pride and have great comfort in knowing that our wonderful legacy will continue.

Jamie Dimon
Chairman and Chief Executive Officer
April 8, 2015