April 2007

J P M O R G A N   C H A S E

2007

Proxy

Statement

–

Compensation-related Shareholder Proposal Discussion

Exhibit 99.1

2

Compensation-related Shareholder Proposal Overview

Proxy statement includes two important compensation-related shareholder proposals.  The Board has

recommended a vote against each of these proposals. 

Proposal #4: performance-based restricted stock

Proposal #5: executive compensation approval

Board of Directors and Management view corporate governance as an important priority.  The Board and

Management

have

listened

to

and

understand

shareholder

interest

in

corporate

governance.

Below

are

actions taken by the Board since the 2006 annual shareholder meeting:

By-laws amended to provide for majority voting for election of directors (director tenders

resignation for Board consideration; replaced previous policy)

Established an independent presiding director position, which will rotate every six months between

the chairs of the Compensation and the Corporate Governance Committees

By-laws

amended

to

allow

special

shareholder

meetings

to

be

called

by shareholders with at least

one-third of shares outstanding

Adopted a policy on political contributions and legislative lobbying.  Posted a report on the Firm’s

website regarding political contributions made by the Firm’s PACs

Formalized

a

policy

on

bonus

recoupment

if

financial

results

are

restated

Management has engaged key shareholders in dialogue to better understand positions and action

steps desired regarding compensation practices and policies

3

Shareholder Proposal #4

Proposal

#4

specifies

that

a

significant

portion

of

restricted

stock

awards

to

senior

executives

requires

achievement of performance goals as a prerequisite to vesting

Board believes that current compensation policies and practices align Management and shareholder

interests and performance-based compensation is already in place

Management performance is measured on both quantitative and qualitative criteria, which may

include:

Multiple layers of rigor around setting compensation:

Performance of the Firm, relevant LOB and individual employee

Performance versus peers

Relative versus absolute performance: recognize that market conditions need to be

differentiated versus underlying business growth

Return on capital

Contribution across business lines

Improving operational efficiency

Expense management

Executing other major projects

Revenue growth

Improving client satisfaction

Credit and risk management

Investing for growth –

business expansion

and technology

Operating earnings

Quantitative criteria

Supporting and strengthening the

communities we serve worldwide

Supporting the Firm’s values

Executing acquisition integration tasks

Protecting the integrity and reputation

of the Firm

Attracting, developing and retaining

highly effective and diverse leaders

Maintaining compliance and controls

Achieving and maintaining market

leadership positions in key businesses

Thinking beyond your own business

Establishing, refining and executing

long-term strategic plans

Building an inclusive culture

Quality of earnings

Qualitative criteria

4

Shareholder Proposal #4 (cont.)

Incentive compensation is variable (as it should be) from year-to-year; for Operating Committee as

a group, 2006 incentive compensation averaged 95% of total annual compensation

Portion of incentive compensation must be equity-based¹: 35% for highly-compensated individuals

and 50% for Operating Committee

Equity awards (restricted stock units) typically vest over a three year timeframe (0% in year 1; 50%

in years 2 and 3)

Periodic equity awards in form of stock appreciation rights (commonly referred to as options) have

been awarded to a limited population of senior officers to further align them with long-term

shareholder

interests;

vest

over

a

five

year

period

(0%

in

years

1

and 2; one-third in years 3-5)

Operating Committee and Executive Committee must retain 75% of all net shares received from

equity-based awards

Board and Management believe that a high bar has been set for determining incentive compensation

and that by delivering compensation with a portion as equity-based which vests over time there is

an at-risk component

Because equity awards are based on prior achieved performance, it is not market practice within

the financial services industry to impose further performance conditions

Risk of competitive disadvantage or alternatively higher compensation expense

¹Restricted stock units as a percentage of annual incentive compensation began at 10% for incentive awards of $20,000

and increased on a graduated scale

5

Shareholder Proposal #4 (cont.)

The Board and Management believe we already have in place appropriate quantitative and

qualitative

performance

thresholds.

Additional

thresholds

could

lead to reliance on a simplistic

formulaic approach to compensation.  Potential unintended consequences:

Reduce needed investments (expense) to meet short-term financial targets

Lever the balance sheet to attain revenue and earnings targets

Focus less on relationship management and business building and more on immediate

gain/growth

Could

drive

individuals

to

take

less

risk

rather

than

build

or

repair

businesses

Corporate governance practices will continue to evolve, the Board and Management are committed

to the continuing review of peer company practices and dialogue with key shareholders to insure

that the Firm’s compensation policies and practices evolve appropriately over time

6

Shareholder Proposal #5

Proposal #5 requires a shareholder advisory vote to ratify the compensation of named executive officers

The Board and Management believe that the compensation policies and practices currently in place

provide a thoughtful, disciplined and transparent approach to setting executive compensation

Appropriate checks and balances already in place: Compensation Committee reviews and approves the

goals and objectives relevant to compensation for the CEO, all compensation for Operating Committee

members and aggregate incentive awards and equity grants under the LTIP

CD&A

disclosure

provides

improved

transparency

into

compensation

practices and actions

Could impact ability to attract and retain talent

Need to allow Board to fulfill its role on behalf of shareholders

Shareholders

have

multiple

other

mechanisms

for

effective

input,

such as votes on equity plans, election

of directors, and communication with the Board and Management around the compensation process

Board and Management are open to shareholder discussion on compensation and welcome shareholder

input

Existing

lines

of

communication

are

better

than

an

advisory

vote

which will be hard to interpret

May lead to formulaic approach to compensation review