J.P. Morgan: It’s time for some real change

March 15, 2013, 6:31 PM UTC

FORTUNE — It’s always the coverup that will get you. And that’s what J.P. Morgan CEO Jamie Dimon and his former CFO have to worry about now.

The Senate Permanent Subcommittee on Investigations issued a scathing bipartisan report last night.  Fifty of the 300 pages of the report were devoted to a section entitled “misinforming investors, regulators and the public” in which Dimon was front and center.

Lucky for Dimon, the Senate did not call him to testify today. J.P. Morgan (JPM) sent an email statement to me that said, “While we have repeatedly acknowledged mistakes, our senior management acted in good faith and never had any intent to mislead anyone.”

But the report, citing Rules 10b-5 and Section 17(a) of the Securities Act of 1933, made it clear: Dimon did not appropriately disclose what he knew when he knew it.

It’s not just Dimon’s fault, though. The board at J.P. Morgan has failed. Last year, the bank’s directors needed to act. And yet they stalled instead.

The board has not taken a firm oversight role at the bank. Even this year, the board allowed the company to issue a Whale report without all the facts in full view.

But J.P. Morgan’s board has not just failed on the Whale matter. Lee Raymond, presiding director, and the rest of the board have sat back, as boards too often do, throughout Dimon’s missteps and run-ins with legal authorities. They have allowed him to hold the reins of both the company and the board, as both CEO and chair. They have rewarded him for the Whale disaster with $11 million in compensation last year — and much more in years prior.

Will they claw back his bonuses now? The board’s weakness suggests they have no ready successor — although calls for Dimon’s removal came last summer. They need to get moving fast.

This is a sad chapter for the storied firm. And the episode taints not only Dimon but former Exxon Mobil (XOM) CEO Raymond’s legacy, along with the other board members as well.

The SEC also shares the blame. Why did the regulator not step up quickly to address the clear disclosure issues? The misleading Whale information arose last April — when J.P. Morgan hid the Whale losses from view. It’s 11 months later now — and it took an act of Congress to lay the facts bare.

Will the board and the SEC step up now? While they consider their options, I think they should consider this. If they think this is a singular instance and just related to the Whale mess, they are wrong.

This is a cultural issue at J.P. Morgan that must be fixed at the top, and shareholders need to send a clear message. J.P. Morgan will likely issue its proxy next month. Shareholders need to vote to split the roles of CEO and chair and to remove Dimon from the board. Congress and the regulators also need to address what is broken — in the law and its enforcement.

Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (
), a board advisory firm.