Will BofA's Lewis survive shareholder backlash?
Florida's state pension fund is joining the ranks of Bank of America investors eager to take a whack at BofA Chairman and CEO Ken Lewis, the human punching bag, and the entire board of directors at BofA.
The Florida State Board of Administrationplans to oppose the re-election of Lewis as BofA chairman and support a proposal that would split the chairman and CEO roles. The Florida pension fund thus joins the State Teachers Retirement System of Ohio, teachers' pension fund TIAA-CREF and public funds in New Jersey, Connecticut and Illinois in advocating for a boardroom makeover at the nation's largest bank by assets, says the Wall Street Journal, and a dominating bank in the Florida market. (Lewis photo: St. Petersburg Times files.)
The critical vote takes place Wednesday when the banking company holds its annual shareholder meeting. Much of the controversy stems from last week’s release of testimony from Lewis toNew York Attorney General Andrew Cuomo in which Lewis says he was strong-armed by former Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke to seal the deal to buy Merrill Lynch without telling his shareholders about the brokerage’s mounting fourth-quarter losses, which came to $15.4 billion.
So much for transparency by the government, or for CEOs who say they always keep their investors' interests in mind but prefer to keep their cushy jobs. This government-big bank melange is one big conflict of interest, to say the least.
Is Lewis in danger of losing his job? He's still three years away from the traditional retirement age of 65. And he has not identified a possible successor, a source of criticism from corporate governance watchdogs. Should Lewis lose his job in the short-term, reports BofA's hometown newspaper, the Charlotte Observer, the top internal candidates include Brian Moynihan, who runs global banking and wealth management; Barbara Desoer, who heads mortgage and insurance; and chief financial officer Joe Price. Outside candidates who may be in the mix include two former Bank of America chief financial officers: Jim Hance and Al de Molina.
(DeSoer, by the way, was busy this weekend overseeing the start of the removal of the Countrywide Bank signsnationwide. BofA bought the big mortgage lender, whose name is considered tainted and no longer worth using.)
So, again, is Lewis' job really up for grabs? Three major proxy advisory firms – Glass Lewis & Co., RiskMetrics Group and Egan-Jones Proxy Services – have told shareholders to vote against re-electing Lewis. Reports the Observer:
"Political and labor groups, who say their position as taxpayers gives them a say in the bank's operations, plan to protest at bank branches Tuesday (Venture blog is interrupting here to note that Florida shows little if any participation in these protests) and are collecting petitions for the Treasury that say, 'Replace the leadership at the bailed-out banks, starting with Bank of America CEO Ken Lewis.'
"But Bank of America is mounting its own campaign. This year, it has hired two proxy solicitors to help with the vote. Georgeson Inc. and Laurel Hill Advisory Group help companies reach out to institutional shareholders and activist groups, provide advice on strategy, and canvass investors to try to persuade them to vote with the bank's recommendations."
So, a final time: Is Lewis' job in peril at the shareholder meeting? When was the last time you saw the CEO of a giant corporation taken down by a shareholder vote? It's rare. Lewis, in my opinion, will survive Wednesday's votes. But his clout, already diminished in this Merrill Lynch merger mess, will never be the same.
-- Robert Trigaux, Times Business Columnist