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Power Sheet – April 8, 2016

Many business leaders – especially in industries that stir strong feelings – still believe their best strategy is to keep their heads down. Avoid being noticed if possible. But that’s not leadership, as we’re reminded by JP Morgan Chase CEO Jamie Dimon’s 50-page letter to shareholders, released yesterday. It defies at least three rules of conventional CEO wisdom.

-One of the sturdiest rules for CEOs has long been to stay out of highly charged political issues, especially in election years. A few CEOs have begun to break that rule, though most have not; Apple’s Tim Cook, Salesforce’s Marc Benioff, Walmart’s Doug McMillon, Starbucks’s Howard Schultz, and others have spoken out on same-sex marriage, LGBT rights, and other social issues. Another matter on which you can rile the masses with just a few words is “big banks,” or better yet, “big Wall Street banks.” Bernie Sanders came out strongly for breaking up big banks just a few days before Dimon’s letter – which makes an extended, unapologetic case in favor of big banks. They’re necessary, he says – “Only large banks can bank large institutions” – and more than that, they are good. Big banks are actually stronger and safer than small ones, he argues, and they’re a crucial part of America’s leadership in the world. If you disagree, you’ll have to refute several pages of cogent advocacy.

-Another near-universal rule among CEOs is don’t talk about what could go wrong unless forced to. Yes, you have to list a zillion risk factors in the 10-K, but you certainly don’t have to do it in your letter to the shareholders. Yet Dimon dwells on several possible disasters in detail. One of them made headlines yesterday – “Jamie Dimon Says His Banks Could Lose $4 Billion in China.” He did indeed say Chase could lose that much under the assumptions of “a severe stress test.” His point was that even in such an unlikely scenario, “we could easily handle it.” He also describes at length the Fed’s latest mandatory stress test on Chase and all major banks, noting that the Fed estimates Chase would lose $55 billion pre-tax over nine quarters in those unlikely circumstances – “an amount that we would easily manage because of the strength of our capital base.” He claims the bank has made “extraordinary progress toward reducing and ultimately eliminating the risk of JP Morgan Chase failing.” In case you wondered, bank CEOs generally try to avoid the word “failing.” But Dimon’s head-on confrontation of the topic likely increases confidence among most readers.

-A rule many CEOs feel they’ve learned the hard way is never admit failures or mistakes unless absolutely necessary. Yet Dimon uses the words “mistake” or “mistakes” 17 times in this letter. Sometimes he’s discussing what happens “if and when” the company makes mistakes; sometimes he’s admitting that the company will make more, because they’re inevitable. He says talking about past mistakes is an important part of the bank’s new-leader development program and admits that not having such a program until last year was a mistake. He notes that the company pleaded guilty to an antitrust violation last year in a settlement with the Justice Department, a fact he was certainly not obliged to mention. He even says, “Admitting mistakes is good, fixing them is better, and learning from them is essential.” Warren Buffett likewise confesses sins in his famous annual letter. Again, the effect is to increase confidence, not reduce it.

Dimon is no neutral observer, obviously. He’s selling. His letter also contains its share of platitudes. If you think Wall Street banks are the essence of evil, reading his letter probably won’t change your mind. But you won’t harbor doubts about where he stands or why, even on sensitive issues, and that’s one mark of a good leader.

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What We’re Reading Today

U.S. to appeal MetLife “too big to fail” ruling

Treasury Secretary Jacob Lew said the decision by U.S. District Court Judge Rosemary Collyer invalidating the designation of MetLife as “systemically important” leaves one of the largest U.S. insurers with less oversight than before the financial crisis. Collyer called the government’s designation “arbitrary and capricious.” For Steven Kandarian‘s MetLife, no longer being considered systemically important reduces government oversight and capital requirements.  Fortune

The Pope urges understanding of “irregular” situations 

In a document titled “On Love in the Family,” Pope Francis urged priests to show more understanding of homosexuals and those who have been divorced. He did not challenge church doctrine, leaving it to bishops to decide how best to implement his views. BBC

GM settles ignition-switch lawsuit 

GM and a plaintiff settled in a case involving the death of a Saturn Ion driver in 2013. GM has won two previous cases that went to trial. Mary Barra‘s company faces three more important cases that will influence settlements of future cases. The company has already paid $2 billion in fines and disbursements to victims’ families over its failure to recall faulty ignition switches for over a decade. WSJ

Redstone competency case settles

The two sides have agreed to a settlement that would allow Sumner Redstone to make his own health care decisions. If the former Viacom and CBS chairman is unable, then daughter Shari Redstone and a mutual friend would decide for him. The case holds major implications for Viacom and CBS because Redstone still controls the companies through his ownership of National Amusements. His former companion, who brought the case, will receive a multi-million-dollar payout. Hollywood Reporter

Building a Better Leader

Innovative companies fired redundant workers…

…during the recession but also hired those with skills they needed, according to a new study. Strategy+Business

Take a page from 7-Eleven’s former CEO if you’re forced out

Toshifumi Suzuki stepped down in the midst of a board fight, blaming his “lack of virtue.” Fortune

CEO compensation falls 3.8%

Average pay for the leaders of the top 300 companies fell from $11.2 million in 2014 to $10.8 million last year. It’s the steepest drop for top CEOs since 2008. WSJ

Worth Considering

Pfizer CEO keeps support despite losing Allergan

The $160-billion inversion play to merge with Allergan was the second large deal that Pfizer CEO Ian Read has failed to complete. In 2014 he tried an inversion by buying AstraZeneca for $118 billion, but British officials intervened. Investors say Read has bought goodwill by reinvigorating Pfizer’s R&D, and many blame the Allergan deal’s failure on the Obama administration, which imposed new rules clearly intended to block the merger. Reuters

Theranos adds star-studded medical board… 

…but what it will do for the organization is unclear. Elizabeth Holmes‘s company announced it’s adding six members to its medical board, five of whom have served as president or board members of the American Association for Clinical Chemistry. While Holmes defends the company’s blood test accuracy, the board will be advising the company on incorporating the tests into clinical practice and helping with scientific journals. Fortune

VA Hospital heads faked patient wait times

Veteran Hospital facilities in at least seven states rigged wait times; hospital heads asked employees to falsify information. In 40 facilities, employees “zeroed out” wait times over 1o years. The VA’s Undersecretary for Health, David Shulkin, says he will today announce goals to reach by year-end in an effort to fix the problems. USA Today

Up or Out

GM’s design chief Ed Welburn will retire in July. Michael Simcoe will succeed Welburn. Detroit Free Press

Fortune Reads and Videos

Hotel magnate Robert Bigelow plans his next expansion…

…into space. The Bigelow Expandable Activity Module will head to space for a two-year test to see if it can add 500 cubic feet of living area for astronauts at the International Space Station. Fortune

Sanders campaign clarifies GE statements

Campaign chair Warren Gunnels says GE is destroying America because while CEO Jeff Immelt takes home a large pay package, his company is helping to fund a lobbying group that advocates cutting Social Security, Medicare, and Medicaid. Fortune

San Francisco finds that over 25% of short-term home listings…

…are rented out more than 90 nights a year, which is illegal. These homes were rented out 200 times a year, on average. Fortune

Facebook asks community to help with stopping gun sales  

Facebook doesn’t allow the sale of guns on its platform, but it needs users to flag the shops. Fortune

Happy Birthday

Robert Johnson, co-founder of BET, turns 70 today.  Biography

Hugh Hefner turns 90 tomorrow.  Biography

Marc Jacobs, fashion designer who created the company bearing his name, turns 53 tomorrow.  Biography

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Produced by Ryan Derousseau
@ryanderous
powersheet@newsletters.fortune.com