Obviously Jamie Dimon won this head-to-head
PR battle, as he’s still standing and still has a job. But let's review what
happened.
In May, JPMorgan was reeling when it wound
up with a colossal trading loss, not the tempest in a teapot that its CEO Jamie
Dimon originally described. It turned out to be a hurricane, and we’re still
not sure of its size. The loss could be anywhere from $3 billion to $9 billion.
Perhaps, larger. No one knows for sure, as it depends on the exit and the day
you ask. Nonetheless, Dimon stepped up and admitted mistakes. Heads rolled.
Dimon's head bowed.
Recently, Barclay's acknowledged that
its traders manipulated Libor in order to benefit the firm. Its CEO Bob Diamond's stance was to say
that the firms’ traders involved were wrong and that he wasn't going to leave
the Barclays. The next day, he left the firm saying, "The focus of intensity was my leadership. It was better
for me to step down." Note,
he did not say that he took any responsibility for the actions of those under
his watch.
Dimon owned up to the mistakes of
individuals and his team, as well as his own shortcomings. While Diamond
deflected, saying that it was the traders’ fault. You know what? CEOs are
responsible for what happens under their leadership. Not dissimilar to a middle
manager being responsible for their individual team members. The standard is higher for the CEO
because the pay is a bit more and the responsibility much greater, thus there
is more accountability. You can't
take all of the credit and none of the blame, especially in such a public
display.
Here’s what Dimon said in front of
the US Senate: “We made a mistake. I am absolutely responsible. The
buck stops with me.” Simple, clean and honest. People liked and respected him
for it.
In contrast, Diamond pointed fingers at everyone
else while answering to the British Parliament. He shifted some blame onto the
Bank of England’s Paul Tucker. He denied having knowledge of the traders’
actions. He pointed to the faults of Libor itself. He also voiced his frustration
that other banks were not suffering from the same negative spotlight. Not a single one of his many fingers was
pointed at himself. The reviews of this performance were not positive.
The difference here is in understanding
the gravity of a situation and anticipating stakeholder reaction to both the
issue and the response. JPM expected their story to have legs and consistently appeared
to be well prepared. In contrast, Diamond added fuel to his own firing (I mean,
resignation) by being cocky and assuming that the story would just go away. According to a WSJ story last week, he
believed this story would last one news cycle.
Having read a newspaper or two, I have never seen a $400
million+ settlement just vanish after one news cycle. I have often been criticized for being too cynical. However,
being a cynic opens the mind to potential risks of a bad story, expectations of
the worst possible scenario, followed by the preparation for said scenario. It
certainly is not a pretty or easy road to travel, but in the long run, it is
the safest route.
