J.P. Morgan’s profit jumps 47%, and here’s why

Any corporation has four discrete parties of interest.

First, the customers. These are the folks who consume the products or services that the company offers. They should therefore be considered important. In order to keep them happy, and to keep them as customers, they have to feel (and this feeling should be true) that they are getting good value for their money.

Next, the employees. The employees, mostly behind the scenes, make it all possible. Whatever “it” is. They’re the ones doing it and managing it, and getting paid to do so. Their motivator is respect for a job well done, and payment in wages and salary that feels equal to the task.

After these, the shareholders. In order to pay for the infrastructure and the development of the services and products before the money rolls in from the customers, there needs to be a supply of money. This is provided by the shareholders. Some are small, some are large. Each has an opinion, and a vote, concerning how the money they’ve invested is to be spent. Those with the most shares get to call the shots.

Finally, the board of directors. While the board is generally a subset of investors/shareholders, they must nevertheless monitor the overall performance of the corporation. They need to ensure that the above three groups are happy, which sometimes is a remarkable balancing act.

In today’s economy, many boards have been asleep at the wheel. They have had an unrealistic and myopic view regarding the health of their organizations, and have skewed this toward the shareholders. As if these corporations were all giant Ponzi schemes, dependent on new investment to keep the wheels turning, rather than on real, bona-fide customers consuming their product, they have bent over backwards to satisfy the eternal thirst for profits exhibited by the shareholders. Without showing significant gains on value of investments, and rewarding dividends, the investors will pull their money and invest elsewhere. Keeping them happy has become paramount.

Where does this leave the customer? Screwed. Take J.P. Morgan, for example. Through my own consulting business and various volunteer activities, I represent a number of accounts at J.P. Morgan and Chase. Some are profit-based businesses, some are personal, some are non-profit. In my personal experience over several years of monitoring it, a small account that might bear a small amount of interest can generate enormous bank fees, relatively speaking. In the current month, one of my accounts, for a not-for-profit organization, has an average balance of say $20,000. The interest paid on December 31? $0.18. That’s 18 cents. The service charges applied on January 5? $72.07.

Now, what’s going to happen? I’m going to get on the phone tomorrow, find out what’s going on, and try to get something to happen here, some sort of correction. This organization keeps multiple accounts at the bank, and some have considerable balances. These fees should not be happening. If they continue, we will take our business elsewhere.

But J.P. Morgan’s profits jumped 47%, so the investors are happy. But it’s at my expense. I don’t like it, and I am not happy. I will not tolerate it, and if J.P. Morgan doesn’t make good, I will leave their bank. But that’s not part of the board’s formula, because that’s so nebulous and iffy and down the road – plus I don’t have direct access to or contact with them, as some of the major investors do – so my needs as a customer are not being met.

The system is broken. It’s got one leg shorter than the others. The short one is the one that supports the customers. We’re all getting screwed in the current corporate equation, and at some point, maybe not now, but not far from now, we’ll let our feelings be known. And the investors and the board will have to pay.


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