Bank of America shareholders Wednesday re-elected the bank’s board of directors at its annual meeting despite intense opposition from two shareholder advisory firms. The opposition stemmed from the bank’s decision last fall to also make CEO Brian Moynihan the bank’s chairman. Shareholders also affirmed the board’s decision to give a $13 million compensation package to Moynihan.
Some stockholders told Moynihan they realize he inherited a lot of problems when he took control of the company five years ago. Still, they say not enough progress has been made to justify his compensation package.
Most of that package is in the form of a stock bonus, which is what shareholder Tom Flockhart objects to given that investor payments were only a nickel a share last year.
"The idea of an $11.5 million stock bonus for you is foreign. I don’t understand it. Traditionally a bonus is given on the basis of performance and return to the owners," he said.
Bank of America’s revenue dropped by $1.3 billion in the first quarter of this year but during the annual stockholder’s meeting Moynihan focused on the company’s progress. That list included cutting expenses by $13 billion over the past four years, reducing the number of delinquent loans and selling assets.
"We simplified the company," Moynihan said. "We did it by exiting a lot of businesses, reducing the geographic scope of businesses in the United States and selling or liquidating assets that did not fit the customer-focused strategy."
Moynihan faced a barrage of questions from stockholders dissatisfied with their low investment returns. They questioned whether the bank was too large and unmanageable, pointing to a $4 billion accounting error last year as an example. One shareholder chided bank officials for repeatedly referring to the nearly $17 billion settlement with the federal government that the bank had to pay over mortgage fraud as a litigation expense.
This shareholder, who would not give her name, told Moynihan the mistakes are too costly for investors.
"I don’t know how you say we’re doing good when the stock price is still tanked down in the bottom and it’s cost me $1.5 million," she said. "I think you are part of the problem and it’s time for you to retire."
Moynihan says continued low-interest rates and an economy that's bouncing back slowly are responsible for the bank's less-than-stellar performance. Shareholder Jim Wallace of Oklahoma City has concerns but overall is optimistic about the bank’s future.
"I’m impatient because the downturn was in 2008 and that was seven years ago and the return is still anemic, but I think the problems are monumental and they are on the way to a recovery."
The board and Moynihan were also questioned about the decision last year to give him the titles of CEO and chairman last year without shareholder input or vote. In response, the board will let stockholders vote on the issue sometime before next year’s annual meeting. In the meantime, Moynihan will continue to hold both positions.
