JP Morgan Chase CEO Jamie Dimon’s apology to shareholders last week managed to fulfill at least three prerequisites for a public mea culpa. It was swift, it was direct, and the CEO took responsibility for the bank’s $3 billion trading loss in a hedge gone wrong.
Dimon used words like “egregious,” “sloppy,” “stupid,” and “self-inflicted.” “The buck stops with me,” was how he answered a reporter’s question after the shareholder meeting. The words were refreshing given the recent events, which have pundits no longer worried about Too Big To Fail. It’s more like Too Complicated To Control. Which is even scarier.
And Dimon appears to have come through the worst of the crisis relatively unscathed. He survived a movement to strip him of power, and the press has treated him fairly well, considering the size of the loss.
Taking responsibility for such a blunder is riskier than it looks, which is one reason why executives so rarely face the music in a public way. It tends to increase legal liability. And in this case, it’s probably already made life easier for shareholder lawyers. They’re certain to sue, and the public apology may add fuel to the fire, raising the odds for a rich settlement.
The bank can easily withstand the trading loss, but that’s just the tip of the reputation iceberg. Not only has Dimon’s personal credibility been tarnished, but his influence on questions around financial reform is pretty well shot. His historical opposition to greater regulation, especially his reference to the bank’s trading risks as a “tempest in a teapot” less than a month before the disastrous trades, will haunt him.
Dimon’s initial response on tougher financial rules was to stay the course (“Just because we’re stupid doesn’t mean everyone else was.”) Then, he seemed to side-pedal when questioned by shareholders, maintaining that the bank supports “an awful lot” of the Volcker rule. Huh?
There’s room for many positions here, but an essential ingredient to an effective apology is a commitment to be part of the solution, if one exists. The fence-sitting comments have reinforced the Too Complicated concerns and launched not only the lawsuits, but a federal investigation. So the public apology is just the first test. The tougher ones are yet to come.