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JPMorgan's board is unchanged after $6 billion trading loss

January 15, 2013: 3:30 PM ET

Despite criticism, the "London Whale" trading loss has yet to result in a single change to JPMorgan Chase's board of directors.

CEO Jamie Dimon testifying on the

CEO Jamie Dimon testifying on the "Whale" trading loss in a Congressional hearing last year.

FORTUNE --When the board of directors of JPMorgan Chase met on Tuesday, there was no need for introductions. Eight months after the bank disclosed one of the biggest trading losses in Wall Street's history, there's not a single new face on the board of JPMorgan (JPM). No one has left, either.

JPMorgan's board was roundly criticized in the wake of the bank's $6 billion trading loss, which was first disclosed in May. Of the 12-member board, only one, other than CEO Jamie Dimon, had any experience working at a major bank, and that experience included just five years of bond trading more than two decades ago.

There are no former regulators or academics, or anyone who had any working knowledge of the type of financial instruments that had caused the bank to stumble. What's more, when the trade was discovered, JPMorgan's risk management committee, with three members, was the smallest of any its rivals (Goldman Sachs (GS) has eight) and included Ellen Futter, the president of American Museum of National History, and  Honeywell CEO David Cote. Neither has any experience in the financial industry. In the wake of the loss, Timothy Flynn, a former chairman of KPMG and already a member of JPMorgan's board, was added to the firm's risk committee.

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As much as a year before the trading losses, a number of shareholder and proxy advisory firms had criticized JPMorgan's board for its lack of financial acumen. Proxy advisory firm Glass Lewis had recommended shareholders vote against Futter as a director.

Nonetheless, even after the huge losses, which appeared to come as a complete surprise to JPMorgan's board, seemed to validate those concerns, the bank has yet to replace a single member of the board.

"I am absolutely surprised," says Michael Pryce-Jones, a senior policy analyst at Change to Win, a Washington-based shareholder group that had been pushing for changes on JPMorgan's board. "The board needs a wholesale change."

A spokesperson for JPMorgan declined to comment. On Tuesday, the company's board met to review the details of an investigation into the loss, as well as suggestions as to what the board could do to help the firm avoid losses in the future. The board was expected to release the findings of the investigation on Wednesday.

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The bank has made a number of management changes in the wake of the trading loss. JPMorgan has a new chief financial officer and chief risk officer. Ina Drew, who had been in charge of the chief investment office, where the losses occurred, left the firm. And CEO Dimon has handed over the reigns of the investment bank to two new executives. Jes Stanley, a long-time JPMorgan executive who had run the investment bank, recently left the firm to join a hedge fund that reportedly made more than $100 million profit off of JPMorgan's ill-fated trade.

On Monday, the bank agreed to consent orders from the Federal Reserve and the Office of Comptroller of the Currency in relation to the trading losses that called on the bank to beef up its risk controls. The board is also reportedly considering reducing the bonus of CEO Dimon and former CFO Doug Braunstein.

But at a time when the bank seems to be owning up to problems that led to the trading losses, it seems odd that no significant changes are being made to its board. In the past the bank has said that it wasn't the board's job to oversee the trading positions of the bank. But in the settlement with the OCC, regulators seemed to point to the board as one of the problems, and the bank agreed to make changes.

Shareholder activist Pryce-Jones, though, says anything short of new faces on JPMorgan's board won't be enough. "JPMorgan needs a board with strong directors with the knowledge to ask questions and push back," says Pryce-Jones. "That's clearly not the case with this group."

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About This Author
Stephen Gandel
Stephen Gandel

Stephen Gandel has covered Wall Street and investing for over 15 years. He joins Fortune from sister publication TIME, where he was a senior business writer and lead blogger for The Curious Capitalist. He has also held positions at Money and Crain's New York Business. Stephen is a four-time winner of the Henry R. Luce Award. His work has also been recognized by the National Association of Real Estate Editors, the New York State Society of CPA and the Association of Area Business Publications. He is a graduate of Washington University, and lives in Brooklyn with his wife and two children.

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