JPMorgan Chase on transparency: Defining the way forward
In a no-holds-barred move, Mark Tercek, CEO of the Nature Conservancy, began his interview with JPMorgan Chase CEO Jamie Dimon with a direct shot: “In the wake of the financial crisis, your industry continues to face high scrutiny and low trust. How is society better off because of what JPMorgan Chase does?”
Dimon, featured prominently at the beginning of the financial behemoth's latest corporate responsibility report, didn’t dodge the question. While the interview was meant to address the heightened focus on transparency improvements in risk management and operational sustainability, the key idea was to highlight one main issue: trust.
In fact, Tercek's first question is telling of the intent and content of the interview that follows. Searching deeper to learn more about JPMorgan Chase's sustainability activities in 2012 as well as how the institution prioritizes intangibles like customer trust, ethics and responsible leadership into its business strategy and operations, I turn to Peter Scher, EVP and global head of corporate responsibility.
At the height of the financial crisis in the U.S. three years ago when lending was lean, JPMorgan Chase announced increased lending to small businesses to boost the economy. It made good on that commitment, and today is one of the largest lenders to small businesses in the country. "We also hired 1,000 small business bankers to help us find small businesses to invest in. This commitment has increased every year since then -- from $7 billion in 2009 to $11 billion in 2010 and $17 billion in 2012," explained Scher.
Despite the increased lending and a resolute desire to beat a deepening crisis by focusing on core competencies and a community-based approach, 2012 was a tough year for the financial leader.
"We had significant trading losses which cost us money and embarrassment -- more the latter since we made record profits in 2012. It also showed that we weren’t immune to making the mistakes other companies made. What we were proud of was that we didn’t try to hide any of it or explain it away," he said.
For example, the bank – after Dimon's public apology -- made its control agenda a top priority leading to a re-prioritization of its major projects and initiatives, deploying massive new resources and dedicating critical managerial time and focus to the effort. Specifically, the bank:
- Established a new firm-wide oversight and control group separately staffed and reporting directly to the Chief Operating Officer with the authority to make decisions top down, in command and control fashion.
- Appointed a business control officer in every line of business to report jointly to the line of business CEO and the firm-wide oversight and control group.
- Staffed every major enterprise-wide control initiative with program managers and oversight group managers, including COOs.
- Made it mandatory for the operating committee to meet regularly with regulators to share information and hear any criticisms.
"I have worked in a lot of different public and private institutions during the course of my career and have not found one that doesn’t make mistakes,” Scher added. “The real test is how we address them. And at JPMorgan Chase, starting with the senior leadership, there was never any effort to hide or explain away our mistakes. In fact, there was a commitment that we were going to use them as an opportunity to become a stronger company.”
So what is JPMorgan Chase doing to shift the modus operandi of its industry?
"The most important thing we want to convey through the report is that we're using more than just our money and resources to make a positive impact. [Our] scale and global reach puts us in a unique position to not just spend money, but use the core expertise of our company and employees to make a difference for our clients and communities," he said. "We want to focus on using all of our resources to support our communities."
In 2012, JPMorgan Chase raised and provided $2 trillion in capital and credit for its clients worldwide. It also donated more than $190 million to nonprofits in 37 countries while its employees volunteered 468,000 hours in local communities.
Furthermore, it’s trying to help address some of the world’s most pressing challenges.
For example, urbanization. "Half the world's population already lives in or around cities. That's going to increase to 70 percent in the next few years. That translates into a lot of challenges for what our infrastructure can support: energy, healthcare, water, job creation, etc. And for us as one of the largest lenders for these projects, that has significant ramifications," Scher said.
"So we're trying to use our resources and expertise to help address these challenges. We're working on understanding how policymakers are dealing with these across the world and trying to bring in some creative thinking to help them shift as the economies transform. We're also thinking of how we can finance energy exploration and development in a more sustainable way.
"In the U.S., for example, a lot of these investments have focused on natural gas. We're identifying best practices and creating a risk assessment framework to help us influence our clients' policies and procedures and help them conduct their energy operations in a sustainable manner."
And how is the bank's Social Finance arm faring? It launched in 2007 to serve the new and growing market for impact investments -- new business models that deliver market-based solutions for social impact.
JPMorgan grew its Social Finance principal investments to nearly $50 million in commitments for funds focused on helping improve the livelihoods and quality of life of people living in poverty around the world, with a particular focus in emerging markets. "In addition to making principal investments, we’re also working to help shape and grow the field of impact investing, by providing client advisory services and data-driven thought leadership," Scher stated.
With a report that runs into 90 pages replete with data, interviews and the makings of a comprehensive CR strategy, JPMorgan Chase seems to be pulling all the strings it has available to make a positive impact on its constituents -- with some appreciable humility thrown in for good measure.
Image of bank vault by Sashkin via Shutterstock