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Chairman/CEO Debate

Sigma Investment Counselors

May 20, 2013

At JP Morgan Chase’s annual meeting tomorrow, shareholders will be given the opportunity to vote on whether the roles of Chairman of the Board and Chief Executive Officer should be held by the same individual.

Quoting from an article published by American Banker on May 15, 2013, William Isaac states the following:

“…much of the debate about the chairman/CEO issue is misdirected, trivialized and too emotional. Unfortunately, any discussion or consideration of the issue is too often taken as a personal affront to the CEO involved.”

“…I have seen both models used successfully and unsuccessfully.”

“The heart of the issue is not who holds what titles, but whether a company’s governance processes are functioning as they should. Is the board of directors, including its committees, properly overseeing management and company’s operations, strategic direction and risks?”

Sigma’s current policy when voting proxies on behalf of our clients is “we vote on a case-by-case basis on shareholder proposals that would require the positions of chairman and CEO to be held by different persons”. In our decision making process, Sigma has an overall policy that states that, “the best interest of the shareholder is the key tenet underlying the committee’s (IC) decisions and judgments”. In practice, Sigma proxies have generally been voted in favor of separating the two roles.

It will be interesting to watch the vote tomorrow. First, it will be interesting to see how shareholders cast their lots. Second, as the vote is non-binding, the board may or may not split the dual roles even if a majority of shareholders vote to separate the two positions.

Thoughts and questions are welcome.

Christopher J. Kress, CFA

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