Bank of America's Lewis loses chairman's role
Bank of America held it's highly-anticipated annual meeting today and has just released the results of its shareholder vote. CEO Ken Lewis and all of the board's directors have been re-elected. However, shareholders narrowly voted to split the roles of CEO and Chairman of the board. WFAE's Julie Rose was at the meeting and joins us to explain.
Mark Rumsey: Hello Julie. So how close was the vote, and what does this mean?
Julie: Well, the margin was 50.34 percent to 49.66. Very close. Until now BofA CEO Ken Lewis has also been the chairman of the board. That's a common set-up at public companies. But shareholders have grown increasingly worried that having the CEO lead the company and basically answering to himself as chairman of the board didn't provide enough oversight. In fact, many believe it helped lead to the bank's troubles.
The bank and its board have said that's not the case because the board also has an independent lead director who provides some counterbalance to Lewis. But today BofA shareholders split the positions. Now Ken Lewis will still keep his job as CEO of the bank. The Board will just get a new chairman.
But Lewis isn't out of the woods yet, because when shareholders did the same thing at Washington Mutual and Wachovia last year, it wasn't long before CEOs of both banks lost their jobs.
Mark: Clearly this is only the beginning of new drama for the bank. Today's meeting was expected to be pretty contentious. Did it live up to the hype?
Julie: Well, it lasted nearly four hours and half of that was spent with Ken Lewis standing on stage- at times a bit uncomfortably- while shareholders had their say. A lot of them are very angry that their stock has lost 77 percent of its value in the last 12 months.
Now typically it's critics who dominate the open mic time. But interestingly, today's comments were fairly evenly split. For example, we even saw the CEO of the Charlotte Chamber and the national heads of the United Way and Habitat for Humanity stand up to praise Ken Lewis and the bank. I heard some skeptics after the meeting wondering if those supporters were planted in the audience by Bank of America.
Mark: What about the bank's acquisition of Merrill Lynch? That's has caused the bank's stock to stuffer. And in the last week we've heard a lot about how Ken Lewis was pressured by federal regulators to stick with the deal. Did that come up at the meeting?
Julie: Several times it did. But Lewis essentially said he couldn't divulge anything more about the deal because of ongoing lawsuits. At one point a shareholder really challenged him:
Shareholder: "You knew what was going on at Merrill Lynch. You kept it from us. You're still keeping it from us. I find it incredible that you didn't have the guts to stand up to the U.S. government."
She went on for quite awhile before giving Lewis a chance to respond.
Lewis: We have um, it's been made public that um, we in fact made our decision independent of the threat of the government. That was not the deciding factor.
Mark: That sounds like a pretty touchy exchange. Was the entire meeting like that?
Julie: No. In fact, the audience seemed pretty strongly supportive of Lewis and the bank management, just judging from the level of applause. The people who spoke were a small fraction of the thousands in the audience. And many that I met were actually first timers like Peb Hendricks from Florida:
Hendricks: "There's a group of us that came up. We're all personally shareholders. And pretty interesting year and we figured this would be pretty interesting meeting to attend."
Julie: And? What's your thought?
Hendricks: "I think it went great. Ken Lewis is the man with the plan, so to speak."
That's exactly the message Ken Lewis hoped to get across. After the question and answer period, he gave a 20-minute speech and kept referring to how well the bank would be performing right now if this were a "more normal economy." He used that phrase several times. And even said during normal times, the Bank would likely have a net profit of $30 billion. He also said very strongly that he does not regret acquiring Merrill Lynch or countrywide. In fact, he says they two companies will be critical to the bank's future success.
Mark: And of course, moving forward, he'll no longer be chairman of the board.
Julie: That's right.
Mark. Okay Julie, thanks.