Dimon Shareholder Letter: JP Morgan Chase

From the JP Morgan Chase shareholder letter [emphasis added]:

We have consistently described to you, our shareholders, the basic principles and strategies we use to build this company — from maintaining a fortress balance sheet, constantly investing, nurturing talent, fully satisfying regulators, and continually improving risk, governance and controls to serving customers and clients while lifting up communities worldwide. 

Adhering to these principles allows us to drive good organic growth and properly manage our capital (including dividends and stock buybacks), which we have consistently demonstrated over the past decades. All of this is shown in the charts in this introduction. In addition, we urge you to read the CEO letters in this Annual Report, which will give you a lot more specific detail about our businesses and what our plans are for the future. 

If you look deeper, you will find that our success and accomplishments are founded on our commitment to our shareholders. Shareholder value can be built only if you maintain a healthy and vibrant company, which means doing a good job taking care of your customers, employees and communities. Conversely, how can you have a healthy company if you neglect any of these stakeholders? As we have learned in 2020, there are myriad ways an institution can demonstrate its compassion for its employees and its communities while still upholding shareholder value.

Ultimately, the basis of our success is our people. They are the ones who serve our customers and communities, build the technology, make the strategic decisions, manage the risks, determine our investments and drive innovation. Whatever your view is of the world’s complexity and the risks and opportunities ahead, having a great team of people — with guts and brains and enormous capabilities who can navigate personally challenging circumstances while dedicating themselves to professional excellence — is what ensures our prosperity, now and in the future.

To be healthy and vibrant – and to create long-term shareholder value – a company must be financially successful over the long run.

The problem with the American public’s impression of “shareholder value” is that too many people interpret it to mean short-term, rapacious profit taking – which, ironically, is the last thing that leads to building real, long-term shareholder value. And when they hear the word “fiduciary,” they think we are standing behind our lawyers. 

Obviously, companies have fiduciary responsibilities. However, legal and fiduciary language does not represent how most CEOs and boards actually run their companies. We should not be buttonholed by the debate about whether there are “fiduciary” reasons to think of “shareholder value” narrowly and to the exclusion of those who work at the company, our clients and communities. When most CEOs and board members wake up each morning, they worry about all of the things that they need to do right to build a successful company. A company is like a team. We must do many things well to succeed, and, ultimately, that leads to creating shareholder value.

To a good company, its reputation is everything. That reputation is earned day in and day out with every interaction with customers and communities. This is not to say that companies (and people) do not make mistakes – of course they do. Often a reputation is earned by how you deal with those mistakes. 

While all businesses are different, there are some fundamentals: good products, fair and transparent pricing, thoughtful and responsive service, and continuous innovation. Great companies constantly set high standards, acknowledge their mistakes and properly discipline or dismiss bad actors. 

Great companies are strict about having fair dealings with their customers. I have always loved that Home Depot’s company policy is not to raise lumber prices in the immediate aftermath of a hurricane, regardless of whether it can. (I want to remind readers that banks essentially did not raise the price of credit when they renewed loans during the financial crisis.) Pricing to customers should be what’s fair – not what a company can get away with. 

Banks, in particular, have to be rigorous about standards. Unlike many companies that will simply sell you a product if you can pay for it, banks must necessarily turn customers down or enforce rules that a customer may not like (for example, covenants). This makes open and transparent dealings even more important. When I hear examples of people doing something that is wrong because they could be paid more, it makes my blood boil – and I don’t want them working here. And I can’t believe it when I hear about a company, or a hedge fund, causing loans and a company to default so they can trigger credit default swap hedges – it’s completely unethical.

We must always strive, particularly in tough times, to earn the trust of our customers and communities.

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