Despite Protests from Angry Shareholders, Lewis Remains CEO but Loses Chairman Title
Ken Lewis was taken down a peg by shareholders today angry at his stewardship of Bank America and the bank's acquisition of Merrill Lynch, voting to strip him of his title as chairman despite his re-election as the company's chief executive officer.
Following a heated debate at today's annual shareholder's meeting in Charlotte, N.C., and a protracted counting of ballots, the bank announced that shareholders had passed a proposal to split the CEO and chairman roles, and named former Morehouse College president Dr. Walter E. Massey to the position of chairman.
The bank said Lewis, in his role as CEO, and the 18 members of the board were elected by "comfortable margins."
Lewis's leadership was put to a vote following a shareholder proposal to strip him of his chairmanship. The CEO had become a flashpoint of shareholder scorn since the bank acquired faltering Merrill Lynch late last year, helping to drive its stock price down 42 percent since the beginning of the year.
"I question whether the board has effectively represented the stock holders who elected them," said shareholder Fred J. Martin Jr., who said he was from San Francisco and owned 25,000 shares.
"Whether you go or stay depends on whether you can turn around this large aircraft carrier and get it out of the puddle of systemic loss," he said.
Many of those angered shareholders were pleased to learn of Lewis losing his title as chairman. One called it a "rebuke" and said the move would rein in the "excessive risk taking" that led to the Merrill Lynch deal.
Lewis has led the company during a year in which Bank of America's shares have plunged nearly 80 percent, wiping out tens of billions of dollars in market value.
Despite calls from some shareholders for Lewis to leave, the CEO was greeted by applause when he took the stage this morning. Lewis defended the company's acquisition of Merrill Lynch and another troubled company, mortgage lender Countrywide Inc.
Lewis was met with a diverse crowd of shareholders who held diverse opinions of his leadership. He was slammed by pensioners who hogged the microphone and accused him of malfeasance, and praised by the directors of charities who said his stewardship of the bank allowed them to help people.
Lewis' acqusitions of Merrill Lynch and Countrywide were compared by one angry shareholder to the "blitzing of Baghdad." Many accused him of fiduciary neglect.
The CEO, however, said the acquisitions are providing "the positive counterbalance to our traditional banking businesses, which at this point of the business cycle are under much more stress from rising credit losses."
"Countrywide and Merrill Lynch are two of the most important reasons Bank of America is the most profitable financial services company in the United States so far this year," Lewis said. "Today, I can state without reservation that these acquisitions are not mistakes to be regretted. Both are looking more and more like successes to be celebrated."
Lewis raised the ire of investors when it was revealed last week that when subpoenaed by the New York attorney general he testified that Bush administration officials had forced him to keep shareholders in the dark about the dangers of purchasing a hemorrhaging Merrill Lynch.
"There is absolutely no question [Lewis] had an obligation to be honest to the shareholders," said Richard W. Clayton, spokesman for the Change to Win Investment Group, which holds 33 million Bank of America shares, or about one half of one percent of the bank's stock, for the Teamsters, the Service Employees International Union and other trade groups.
"Bank of America needs a CEO and board of directors that will put the interests of shareholders ahead of their own interest in self-preservation," CTW said in a written statement. "Voting against Chairman and CEO Ken Lewis, Lead Director O. Temple Sloan and Governance Committee chair Thomas Ryan at the bank's April 29 annual meeting is the necessary first step in this process."
On Tuesday, the California Public Employees' Retirement System also called for shareholders to vote against re-electing Lewis and the other members of the bank's board. The California system is the largest pension fund in the U.S. and holds about one-third of one percent of the bank's shares.
Bank of America has received $45 billion in government aid as part of the Troubled Asset Relief Program, and additional guarantees backing hundreds of billions more in risky investments after it took over Merrill Lynch in January. Just yesterday, an analyst wrote that the bank may need another $70 billion from the government to maintain adequate capital.
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