JPMorgan Sees Sweeping Changes In Top Management

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A string of changes have been announced at JPMorgan Chase’s (NYSE:JPM) upper echelons as the diversified financial institution continues to work its way towards building investor confidence. JPMorgan’s reputation of being one of the best-run big banks in the world took a significant hit early this May when it announced a multi-billion trading loss linked to a hedging strategy gone wrong. And the upheaval in the top ranks clearly seeks to address the questions investors and regulators raised about the inability of the bank’s management team to effectively oversee its gargantuan business.

Most notably, the bank embraced a system of co-chiefs, with two people sharing responsibilities for roles which are inherently the most demanding. This includes two co-chief operating officers and two co-chiefs of commercial & investment banking.

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Changes Began Immediately After the Debacle Was Announced

Quite a few heads rolled in JPMorgan’s London based investment office within days of the trading loss announcement which cost the bank $5.8 billion in Q2 2012. The most prominent one was Ina Drew who was then the bank’s chief investment officer (CIO). She was directly responsible for the London investment office, and was promptly replaced by Matthew “Matt” Zames as the CIO. [1] Mike Cavanagh, the head of JPMorgan’s Treasury & Security Services business was entrusted with the additional responsibility of identifying the reasons for the trading loss and ensuring that such an issue does not arise in the future. [2]

The Final Set Of Changes Came Last Week

The new shakeup saw Matt Zames get another promotion with him being named co-COO along with Frank Bisignano. The bank also assigned Mike Cavanagh and Daniel Pinto roles of co-CEOs for its Corporate & Investment Bank business, while Todd Maclin and Gordon Smith were named co-CEOs of the Consumer & Community Banking. [3]

So What Does It Mean For Investors?

As is evident from the list of management changes, JPMorgan attempts to address the biggest question posed to it – of the bank’s management team simply being unable to keep up with the size of its vast operations. Having two people sharing top jobs should ensure better management of JPMorgan’s business.

What remains to be seen is how effective the changes actually are in reaching their intended goal.

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Notes:
  1. JPMorgan Names C.I.O. to Succeed Ina Drew, NYTimes DealBook, May 14 2012 []
  2. CIO Disclosure FAQs, JPMorgan Website []
  3. Executive Committee, JPMorgan Website []