By Christina Rexrode
Two influential proxy advisers are telling Bank of America Corp.
shareholders to vote against some of the bank's board members,
citing how the board last year combined the chairman and CEO
roles.
Institutional Shareholder Services told shareholders in a report
earlier this week to vote against the members of the bank's
corporate governance board committee: Sharon Allen, Frank Bramble,
Thomas May and Lionel Nowell.
Glass Lewis also told shareholders to vote against Mr. May, who
chairs the corporate governance committee.
The two proxy advisers, which make recommendations to
institutional shareholders, both cited the board's process and
decision in October to recombine the chairman and CEO jobs, which
put Brian Moynihan in both roles. The bank made the move despite a
2009 shareholder-passed rule saying the two jobs must be held by
separate people.
The recommendations against the board members could become a
point of contention when the Charlotte, N.C., bank holds its annual
shareholder meeting May 6. The bank previously has described Mr.
Moynihan's elevation to chairman as a "return to normal," and said
the 2009 shareholder referendum was for a different time, when the
company was in crisis mode and a different CEO, Kenneth Lewis, was
in charge.
But ISS and Glass Lewis argued that the board didn't engage with
shareholders before making the change. Bank officials told ISS that
it wanted to avoid media attention, according to ISS's report.
"Shareholders must now consider whether directors who nullify
shareholder votes and avoid shareholder input can represent
shareholder interests in the boardroom and warrant their support
going forward," the ISS advisers wrote.
The last time the company had the role of chairman and CEO
combined, the company was struggling through the depths of the
financial crisis, said Robert McCormick, chief policy officer at
Glass Lewis.
"When they were separated," said Mr. McCormick, "that's when the
company started to get out from under its troubles."
A spokesman for the bank, the second largest U.S. lender by
assets, declined to comment.
ISS said that its recommendation wasn't a referendum on Mr.
Moynihan, and both proxy advisers recommend voting for Mr. Moynihan
as a board member.
Still, the recommendations of the two advisers can be a powerful
influence. Two of J.P. Morgan Chase & Co.'s board members
stepped down in 2013 shortly after they both drew less than 60%
support at the annual meeting. ISS and Glass Lewis had recommended
voting against both of them.
Charles Elson, head of the Weinberg Center for Corporate
Governance at the University of Delaware, said Bank of America
should be concerned about the recommendation, "because it doesn't
cast the bank or its directors in a particularly favorable
light."
The bank under Mr. Moynihan has cleaned up much of its
crisis-era litigation, which had dragged down the bank's earnings
for years. But now some shareholders and analysts are starting to
ask for more information about the bank's plans to move forward,
beyond cutting costs and waiting for interest rates to improve.
In a recent setback, the Federal Reserve last month told the
bank to resubmit its stress-test plan, citing weaknesses in some of
the bank's processes, though it did give the bank permission to buy
back shares and pay dividends before then.
The bank previously has said that the board, led by the
corporate governance committee, made the decision to override the
shareholder decision after "months of thorough deliberation." It
also at the time nominated board member Jack Bovender as lead
independent chairman, and has said he has shown "a readiness to
challenge management." Many other big U.S. banks combine the two
jobs under a single leader.
Mr. May is chairman and CEO of Eversource Energy, formerly known
as Northeast Utilities. He joined the board when Bank of America in
2004 bought FleetBoston Financial Corp., where Mr. May was a board
member. Mr. Bramble, a former vice chairman of credit-card company
MBNA Corp., joined the board when Bank of America bought MBNA in
2006.
Ms. Allen, former chairwoman of Deloitte, and Mr. Nowell, the
former treasurer of PepsiCo Inc., have joined the board since
2012.
A shareholder group called the Interfaith Center on Corporate
Responsibility had filed a proposal asking for a vote on whether
the chairman and CEO roles should be separated but withdrew the
proposal after the bank agreed to issue a report on its business
principles. Rev. Seamus Finn, chairman of the board at the
Interfaith Center, said Thursday that the group was pleased with
the bank's progress on the report and would support all the board
members.
Other shareholders, including the Office of New York City
Comptroller Scott Stringer, which advises the city's pension funds,
had asked the bank to let shareholders vote on the topic but didn't
file a shareholder proposal. Last month, the bank agreed to a
"proxy access" proposal that had been pushed by Mr. Stringer's
office, which will allow certain large shareholders to nominate
members of the bank's board. A spokesman for Mr. Stringer said
Thursday that the New York City pension funds would vote in favor
of Bank of America's board members.
Write to Christina Rexrode at christina.rexrode@wsj.com
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