Good Brand, Bad Brand

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Originally published in Applied Arts Magazine, 2016

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Publicly traded companies fail to understand the value of their brand

In the minds of strategists everywhere, the ideal brand is laser-focused, highly differentiated and consistent in its messaging and actions. It says what it does and does what it says. It prioritizes employees and customers, and is rewarded with their loyalty and repeat business as a result. And all that is meant to deliver growth and returns to shareholders.

Would that the ideal were more real. Alas, what is said often differs with what is done. In publicly traded companies, employees and customers matter far less than shareholders. The stock price is the first priority, which means that executives are motivated to deliver good quarterly results at any cost. And often, that cost takes the form of job cuts, stagnating wages and share buybacks, all designed to keep Wall Street analysts and shareholders happy. Make no mistake, they come first, no matter what the company says in its commercials or PR releases.

Earlier this month we saw a glaring example of how not to be a good brand when Jamie Dimon, CEO and chairman of JPMorganChase, made the magnanimous announcement that he was giving his employees a raise. Why? Wage stagnation, income inequality and lack of quality education. In a Linkedin Pulse post on July 12, Dimon writes, “Issues like these have led approximately two-thirds of Americans to believe that the next generation will be worse off than the last. We must find ways to help them move up the economic ladder, and everyone — business, government and nonprofits — needs to play a role.”

While it’s comforting to hear a Wall Street CEO acknowledge that business needs to step up to this challenge, let’s put things in perspective. Take income inequality. Dimon announced that pay for 18,000 of his employees would rise from the current $10.15/hr to between $12 and $16.50/hr over the next three years. That means the current yearly wage of a JPMorganChase employee will go from $20,300 to $33,000. That’s almost a 50 per cent increase over three years.

Looks good on paper, right? But compared to what Dimon makes, it’s a joke. On average, CEO compensation in America today is 300 times that of the lowest-paid employee. In the 1970s, that ratio was only 30 to 1. It has increased a whopping 1000 per cent since then. In Dimon’s case, it’s more like 800 per cent. His compensation in 2015 was $27 million.

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Add to that the fact that JPMorganChase is one of the “too big to fail” banks whose dubious derivatives, asset-backed commercial paper and subprime loans triggered the Great Recession, and you have to wonder what kind of a foundation this “brand” is built on.

Part of the problem is that JPMorganChase, like the other too-big-to-fails, is bipolar—the “JPMorgan” side of the business serves Wall Street while the “Chase” part of the business serves Main Street. In many countries, these banking functions are kept separate by law (Canada is a leading example). The reason for separating them is so that a bank is not tempted to make bets on the stock market by investing the deposits of its retail customers. This was one of the things that triggered the 1929 market collapse, leading to a 10-year depression. It inspired the passing of the Glass-Steagall Act of 1932, which prohibited investment banks form doing business as consumer banks, and vice versa. But that law was overturned by the Clinton administration in the late 1990s, opening the door to exactly the kinds of shenanigans that led to its creation.

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This means that there is nothing preventing Jamie Dimon from making the same kinds of moves that lead to the last eight years of economic stagnation, further enriching himself and his Wall St. peers while impoverishing his Main St. customers. And given that his compensation is mostly in stock, he is highly motivated to do so.

Another problem is that companies like JPMorganChase are the end result of hundreds of previous mergers and acquisitions. Something like 1,200 companies have over the years been merged, bought and sold by both JP Morgan and the Chase Manhattan Bank before these two giants merged. You can bet that those transactions were not guided by any interest in creating the ideal brand. wn