Dear Fellow CII Members,

We are writing to urge you to vote AGAINST JPMorgan Chase & Company (JPM) Director and Audit Committee Chairman Timothy P. Flynn (Item 1g) at the company’s annual meeting on May 16. Director Flynn bears primary responsibility for the Audit Committee’s failure to identify a glaring potential conflict of interest in the hiring of PricewaterhouseCoopers (PWC) to perform JPM’s racial equity audit in 2022.  The racial equity audit stemmed from our shareholder proposal which received 40.5% support in 2021. PWC has been JPM’s independent financial auditor for 58 years and earned more than $1 billion in fees from JPM over the past decade.  Director Flynn failed to properly apply JPM’s policies by classifying the racial equity audit as an “audit related expense” and then appears to have abdicated oversight of this audit to the Public Responsibility Committee. A vote AGAINST is warranted for the following reasons.

• The Audit Committee, chaired by Director Flynn, had the responsibility of reviewing and pre-approving all services conducted by PWC, including the company’s racial equity audit.  This selection created a serious potential conflict of interest. Worse, PWC lacked core competency in the skills required to perform a racial equity audit.  JPM’s racial equity audit has failed to live up to the expectations of a strongly supported shareholder proposal, as noted in our critique.
• The Audit Committee improperly categorized the racial equity audit as an “ESG audit-related service.” Meanwhile, PWC did not attest to using any ESG-related reporting standards in its racial equity audit report. Instead, PWC conducted the racial equity audit under the standards set forth by the American Institute of Certified Public Accountants and stated that its opinion does not “cover or provide assurance on whether or not JPMorgan Chase is achieving its commitment to advance economic growth and opportunity for Black, Hispanic, and Latino communities.” 
• Director Flynn’s oversight failure is demonstrated by the Audit Committee not overseeing the racial equity audit that they classified as being related to the company’s financial audit.  Instead that duty was discharged to the Public Responsibility Committee.

For further reference, please see our shareholder letter, available here.  Agenda also recently published an article regarding our concerns, which is available here.  If you have any questions or would like to discuss, please let us know. 

Sincerely,

Cynthia Simon

ESG Analyst & Engagement Specialist | SOC Investment Group

Mobile: +1 (917) 254-1776

socinvestmentgroup.com | @socinvgrp