Bloomberg News

JPMorgan Loses Potential Successor to Dimon as Cavanagh Quits

March 25, 2014

Michael Cavanagh

Michael Cavanagh, co-chief executive officer of corporate and investment bank with JPMorgan Chase & Co., during a Senate Permanent Subcommittee on Investigations hearing in Washington, D.C. on March 15, 2013. Photographer: Andrew Harrer/Bloomberg

JPMorgan Chase & Co. (JPM:US)’s Mike Cavanagh, who served as a close deputy to Chief Executive Officer Jamie Dimon for more than two decades, will leave to become co-chief operating officer of Carlyle Group LP.

Cavanagh, 48, was seen internally as a potential successor to Dimon, 58, who has told people he wants to remain CEO for another five years, a person with direct knowledge of the matter said, asking not to be identified discussing personnel.

Top bankers and traders have left the biggest Wall Street firms for more lucrative jobs in private equity and at hedge funds, as regulation of lenders has intensified following the financial crisis and lower returns have pushed banks to cut the amount of revenue they set aside for compensation.

“The regulatory landscape definitely makes it less enticing for some of these great managers to stay at the big banks, and the talent drain will continue,” said Glenn Schorr, an analyst at New York-based International Strategy & Investment Group LLC. “It’s a significant loss for JPMorgan and a huge win for Carlyle, no two ways about it.”

Uncertainty about when the CEO job would become available also may have contributed to Cavanagh’s decision, Matt Burnell, a Wells Fargo & Co. analyst, wrote in a note to investors.

Cavanagh held roles including chief financial officer before being named co-head of JPMorgan’s corporate and investment bank with Daniel Pinto, 51, who becomes sole CEO of the unit effective immediately, the New York-based firm said today in a statement. Cavanagh was tapped by Dimon in 2012 to lead an internal review into the so-called London Whale trading loss in the chief investment office.

‘Regrettable Loss’

“This is a regrettable loss for our company as Mike has been a part of the fabric of our organization for the last 14 years,” Dimon said in a memo to employees. “I have personally worked with Mike since 1993, and he has been an exceptional partner with great instincts, integrity and strategic thinking.”

Cavanagh told Dimon about his decision over the telephone on Sunday, according to two people with direct knowledge of the conversation. Pinto is one of the remaining candidates to succeed Dimon, as are Matt Zames, 43, head of mortgage banking; Mary Erdoes, 46, CEO for asset management; Gordon Smith, 55, who runs the consumer bank; Doug Petno, CEO of the commercial bank; and CFO Marianne Lake, the person said.

Pinto will remain in London, the people said.

Carlyle Founders

Glenn A. Youngkin, 47, will be co-COO with Cavanagh at Carlyle, the Washington-based buyout firm said in a separate statement. Carlyle’s founders reaped $92.9 million each last year in pay and cash dividends, an increase of 61 percent from 2012, as the firm took advantage of rising equity markets to sell shares in companies.

Cavanagh received stock valued at $9.75 million for his work last year at JPMorgan, according to a January regulatory filing. Pinto received the same total pay as Cavanagh, a person briefed on the awards said at the time. Total compensation figures for top executives, including salary and cash bonuses, will be disclosed in coming weeks in an annual proxy filing.

“I have worked at JPMorgan Chase for almost my entire professional life, and it was not without a lot of soul searching that I decided it was time for me to take my career in a different direction,” Cavanagh said in the statement. “I wouldn’t have left for any company other than the Carlyle Group.”

In a memo he wrote to JPMorgan employees, Cavanagh said there “really isn’t anything more behind it.”

Top Lieutenants

A 2008 Fortune magazine story about JPMorgan’s leadership included photographs of Dimon’s 14 top lieutenants. Today, just three of them remain.

Zames, who wasn’t among those in the photos, climbed JPMorgan’s ranks as other long-time executives left. Frank Bisignano, who had been co-COO with Zames, departed in April 2013 to become CEO of First Data Corp. James E. Staley, 57, who also had been seen as a successor to Dimon, quit in January of last year to join BlueMountain Capital Management LLC, the hedge-fund firm that profited from the London Whale loss.

Dimon ousted Bill Winters, 52, and pushed Steven Black, 61, into a lesser role to install Staley atop the investment-banking unit in 2009.

Chief Investment Officer Ina Drew, 57, left in May 2012, within a week of the initial disclosure of the trading loss. Doug Braunstein, 53, was replaced as CFO by Lake that November, around the same time that Charlie Scharf, 48, the former head of retail banking, left to become CEO of Visa Inc. Heidi Miller, 60, the former head of JPMorgan’s international operations, announced her retirement in 2011.

The London Whale task force led by Cavanagh produced a 129-page report that cited poor risk controls and Dimon’s failure to question information he received from deputies as contributing to the more than $6.2 billion loss.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Steve Dickson, Steven Crabill


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