By Christina Rexrode
Bank of America Corp. on Monday said it would give shareholders
the chance to vote on the board's decision to give the chairmanship
to CEO Brian Moynihan, bowing to shareholder pressure over the
controversial move.
The bank's announcement comes two days before the bank's annual
meeting and after some shareholders expressed unhappiness about the
way the board had given the job to Mr. Moynihan last fall. To do
so, board members overrode a 2009 shareholder-passed rule requiring
that the two jobs be held by separate people, and also changed the
bank's bylaws.
In a Monday letter to shareholders, signed by Mr. Moynihan and
the board's lead independent director, Jack Bovender, the bank said
"a number of stockholders" had told the bank that they "should have
been given the opportunity to vote to ratify the board's bylaw
change."
"We appreciate the candor with which stockholders have shared
their insights, both in support of the decision and in expressing
reservations about the process," Mr. Bovender and Mr. Moynihan
wrote.
Bank of America shares gained about 1% in early afternoon
trading.
The bank will hold its annual meeting Wednesday in its
headquarters city of Charlotte, N.C., but the vote won't be on the
ballot. The bank said it will hold the vote before next year's
annual meeting. The board already changed the bylaw, so the vote
will allow shareholders to either confirm or reject the board's
decision.
Fredric Russell, founder and CEO of a Tulsa, Okla., money
management firm that bears his name, thinks Mr. Moynihan has done
"a fine job" but thought the board overreached in giving him the
chairman job without consulting shareholders first.
"Bank of America went too far," said Mr. Russell, whose firm
owns 93,500 shares, adding he thought the firm "became
arrogant."
Mr. Russell said he plans to vote against the board's move.
"It's not an overwhelmingly decisive victory, but it is a victory"
for shareholders, Mr. Russell said. "This is a warning to (the
bank's officers) to not exceed their grasp."
The bank has previously described Mr. Moynihan's elevation to
chairman as a "return to normal," noting that the CEOs of most of
the other biggest U.S. banks hold the chairman jobs. The bank has
also noted that the 2009 shareholder rule was passed in a different
era, under a different CEO and when the bank was in the depths of
the financial crisis.
Of the nation's 100 biggest banks, 44 have a separate chairman
and CEO, according to CLSA bank analyst Mike Mayo. About 53% of
S&P 500 companies combine the roles, according to ISS
QuickScore.
Many shareholders who expressed displeasure to the bank were
concerned largely about the process that the board went about
making the change, and not about Mr. Moynihan's leadership,
according to people familiar with the matter. The board made the
change without consulting shareholders ahead of time.
Two proxy advisers, Institutional Shareholder Services and Glass
Lewis, recently recommended that shareholders vote against
re-electing Thomas May, who runs the board's corporate governance
committee, as a way to send a message about the board's process.
ISS also recommended voting against the three other board members
on the corporate governance committee, which was influential in
giving the chairman job to Mr. Moynihan. Mr. May is a long-time
board member. Like Mr. Moynihan, he came to the bank when it bought
FleetBoston Financial Corp. in 2004.
"If there is a lesson for BAC shareholders, it is that binding
shareholder votes are meaningless in the face of a board that
chooses not to abide by them," ISS wrote in a report late last
month. The firm also made clear that its move was "not a
referendum" on Mr. Moynihan as chairman.
Mr. Moynihan became CEO more than five years ago and has spent
the bulk of his tenure working through a mountain of litigation and
bad loans that he inherited.
But investors have more recently started to raise questions
about the bank's long-term strategy, beyond cost cutting and
waiting for interest rates to rise. The bank's first-quarter
earnings were far improved from the year before, thanks to a huge
drop in legal fees, but missed analysts' expectations. The bank's
shares have dropped 9% so far this year, a performance that trails
the other biggest U.S. banks.
Some pension-fund investors had pushed last fall for the bank to
put such a proposal on the ballot at this year's annual meeting,
but without success.
The board stepped up its outreach to shareholders after ISS and
Glass Lewis issued their recommendations in late April. The board
last week sent around information on Mr. Bovender and the four
corporate-governance committee members, as well as reiterating
information on recent victories, such as last year's
shareholder-dividend increase.
After hearing from shareholders as the annual meeting drew near,
Mr. Moynihan decided it was easier to put the matter to a vote,
according to a person familiar with the situation.
Write to Christina Rexrode at christina.rexrode@wsj.com
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