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JPMorgan Chase

At JPMorgan Chase, constructive dialogue at the top management level helped protect the company from taking major losses in the financial crisis. The 15- member operating committee is a diverse group "of longtime loyalists, J.P. Morgan veterans, and outside hires." They meet monthly for intense debate about developments in the company and in the markets it serves.

The group is generally loud and unsubtle..., the atmosphere is variously described by the participants as "Italian family dinners" or "the Roman forum – all that's missing is the togas." Dimon will throw out a comment like "Who had that dumb idea?" and be greeted with a chorus of "That was your dumb idea, Jamie!" "At my first meeting, I was shocked," says Bill Daley, 60, the head of corporate responsibility and a former Secretary of Commerce. "People were challenging Jamie, debating him, telling him he was wrong. It was like nothing I'd seen in a Bill Clinton cabinet meeting, or anything I'd ever seen in business."[1]

A similar atmosphere prevailed at monthly meetings of top management of each of JPMorgan Chase's major operating units:

To make it on Dimon's team you must be able to withstand the boss's withering interrogations and defend your positions just as vigorously. And you have to live with a free-form management style in which Dimon often ignores the formal chain of command and calls managers up and down the line to gather information.[2]

As one participant told Fortune in 2008, Dimon was tough but open to feedback. "He understands the details completely, he loves to debate and disagree, yet he'll let you do it ... [a]s long as you know what's in Appendix 3 of your report as well as he does."

In October 2006 at one of the monthly reviews, the part of JPMorgan Chase's retail operations that serviced mortgages reported a significant increase in delinquencies by subprime mortgage borrowers. Data confirmed that the trend was widespread in the subprime market and that competitors' subprime holdings were performing even worse. Other parts of the company also reported indicators that mortgage securities were increasingly troubled. Putting all of this together, Dimon issued an order to all parts of the company to shed its exposure to subprime mortgages. JPMorgan Chase took losses that were modest compared to its major competitors.

As Northwestern University Professor Russell Walker concludes:

In the case of JPMorgan, it was the retail banking division that shared data with the investment bank on the escalations in mortgage delinquencies. This sharing of data across business lines allowed Mr. Dimon and his corporate team to change strategy on the investment side. For many organizations, sharing information that challenges accepted norms or questions conventional wisdom is not welcomed. Other banks could have done the same as JPMorgan, but the practice of communicating risks and data across business lines was absent. The lesson, of course, is that an enterprise must be willing to communicate about risk, especially when things are going well and the risk has yet to be realized.[3]

  • [1] Tully, "Jamie Dimon's Swat Team."
  • [2] Ibid.
  • [3] Russell Walker, "Fortune Favours the Well-Prepared," Financial Times, January 29, 2009.
 
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