Catholic priests and nuns take on Bank of America
Bank of America will hold its annual meeting in Charlotte on April 28, and it's not likely to be a friendly gathering. Last year, shareholders booed loudly and forced CEO Ken Lewis from the chairmanship of the bank's board of directors. This year shareholders are pushing several proposals to limit executive pay and require the bank to be more forthcoming in its use of a now-infamous product called "derivatives." That proposal comes from a somewhat surprising source: a coalition of priests and nuns. All those years Sister Barbara Aires spent teaching in a Catholic high school probably prepared her well for her latest work: chastising corporate executives. "I just got up at a shareholder meeting and said you're not running this meeting properly," says Sister Aires, recalling an annual meeting of Freeport-McMoran Copper and Gold in the 90s. She was the face of a campaign against the company's mining activities in Indonesia. The most memorable part of the meeting for her happened the day after, when the company's chairman phoned her. "He said, 'Who the 'ell did I think I was?' And he went on and on and on," says Aires. "Finally I said, 'Now why did you call me?' And he said, 'Because I was furious with you.' And I said 'Did you want any help or do you want to just tell me to go to hell?'" It turned out to be a little of both, says Aires with a chuckle. And it wasn't the first or last time this straight-talking Catholic nun would tangle with a corporate big wig over social justice issues. Sister Aires attends half a dozen annual meetings a year representing the retirement and missionary investment funds of her convent, Sisters of Charity of St. Elizabeth in New Jersey. Sometimes she speaks on environmental issues or worker's rights. Lately she's been after the big banks to clear up their use of derivatives: These are the sliced and repackaged mortgages that banks traded back and forth so quickly and in such huge numbers, none of them knew what they were holding or what they were worth when the housing market crashed. Today a lot of them are known as "toxic assets." "Now (the banks) all claim they've sorted these things out and everything is registered, etc. and they know who's who and who's who," says Aires. "But the question is 'What are the clear policies and risks? And what is the tolerance that the board will allow?'" Sister Aires would like to see the big banks publish a report about their derivatives trading and risk policies in the kind of clear English she required of her high school history students. Her convent joined with seven other Catholic convents and monasteries to get that proposal on the agenda for Bank of America's upcoming annual meeting. They're all members of a nonprofit called the Interfaith Center on Corporate Responsibility. Some 300 faith-based groups belong to the center and together hold billions of dollars worth of corporate stock. Father Seamus Finn represents one of the larger Bank of America stock holders behind the derivatives proposal. Missionary Oblates of Mary Immaculate has about 30,000 that today are worth half what they were before the financial crisis. "Much of our work is in the developing world where we see millions and millions of very poor people impacted by what happens in the stock market in New York or London," says Finn. "We're trying to say 'These actions have consequences.'" Bank of America says it already reports on to financial regulators about its derivatives and that adding more detail about its trading policies would be too complicated for everyday shareholders to understand. In a statement, the bank says "management is in the best position to make informed judgments" about derivatives. Duke Law Professor James Cox says the bank needn't worry, since the derivatives resolution is not likely to pass. "These proposals tend to crash and burn in the way of votes," says Cox, who specializes in corporate securities law. "That said, it does open up a mechanism for enhancing the dialogue between owners and the corporation to adopt some aspects of the proposal." Recently Father Finn says a group from the Interfaith Center has met with top bank executives about the derivatives concern. And he acknowledges many of the banks have created new policies in the wake of the financial crisis. Does that mean they'll be more receptive when Father Finn or Sister Aires steps to the microphone at the annual meeting? Duke Law's James Cox says, perhaps. "Frequently the demeanor of the person running the shareholders meaning is one of barely-masked contempt for those in the audience raising questions about the company," says Cox. "I would speculate that when it's a person who stands up wearing a collar or a habit, they will get a deferential reaction." That reaction may be out of reverence. Or it maybe that CEO went to Catholic school and knows how to behave when a nun speaks.