April 29 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis and the company’s directors repelled an effort to unseat them from the board by shareholders who had criticized the takeover of Merrill Lynch & Co.

All 18 directors were re-elected by a “comfortable margin,” spokesman James Mahoney said today after the annual shareholders meeting in Charlotte, North Carolina, where Bank of America is based. Another vote on splitting the chairman and CEO jobs at the bank -- the largest in the U.S. by assets -- was still being counted as the meeting ended.

Lewis has fended off calls to quit from firms such as Egan- Jones Proxy Services amid speculation that U.S. stress tests will show the bank needs more capital. He’s drawn fire from investors including the California Public Employees Retirement System for agreeing to buy Merrill Lynch last year and failing to tell shareholders before they approved the deal in December that the brokerage’s losses were soaring.

Shareholders weren’t informed because aborting the takeover might have destabilized the financial system and damaged Bank of America, a scenario the board “took very seriously,” Lewis said in a speech at the meeting. The decision to remain silent was “not about selfish desire” to keep management and the board in place, he said. Disclosing talks with the government on how to resolve the matter might have created the “very crisis” they wanted to prevent, he said.

Remaining Silent

Lewis, 62, has been CEO since 2001. Dissidents also targeted 70-year-old lead director Temple Sloan Jr.

New York Attorney General Andrew Cuomo revealed this month that Lewis had testified then-Treasury Secretary Henry Paulson may have threatened to remove the bank’s management and directors in December if the lender tried to back out of buying Merrill.

Lewis balked at completing the deal as the quarterly loss soared toward $15.8 billion, only to have U.S. officials tell him to proceed, according to testimony released by Cuomo. Regulators also instructed Lewis not to disclose Merrill’s losses, his desire to back out of the takeover or the intervention of regulators, according to Cuomo.

Lewis has also been criticized for allowing bonus payments to Merrill Lynch employees before the takeover was completed Jan. 1. He said today there was “no perfect solution” on bonus payments to Merrill employees, citing the threat that talent might be lost to competitors. “Every major bank” is under pressure, Lewis said in his speech.

Stock Reaction

Lewis has presided over a 79 percent drop in Bank of America shares during the 12 months ended yesterday amid a worldwide credit crisis and recession. He’s said the acquisitions of Merrill Lynch and mortgage lender Countrywide Financial Corp. will be among the bank’s best long-term purchases.

The stock rose 53 cents, or 6.5 percent, to $8.68 as of 4:15 p.m. today in New York Stock Exchange composite trading.

The stock’s decline this year hasn’t been caused just by the Merrill deal and first-quarter earnings might not have been as strong without it, Lewis said today.

The acquisition of Merrill Lynch is “beginning to pay off,” and the takeover of the brokerage and Countrywide, the biggest U.S. home lender, were not “mistakes to be regretted,” Lewis said.

Morgan Stanley, Wells Fargo

Like most corporate resolutions, the vote on splitting the job of chairman and CEO is advisory and not binding on the board. While Lewis and the directors opposed the resolution, Mahoney said the bank would abide by results of the balloting.

Dividing the roles typically is favored by advocates of better corporate governance. Such splits were a precursor to the complete ouster of Wachovia Corp.’s Kennedy Thompson and Washington Mutual Inc.’s Kerry Killinger last year. Both lenders were overwhelmed by loan losses tied to the mortgage and credit- market routs.

Shareholders of Morgan Stanley rejected a similar resolution today that would have required the chairman of the board to be an independent director, and Wells Fargo & Co. voted against such a split yesterday.

“In times like these with the bigger banks, it certainly helps to have two experienced leaders at the helm,” said David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, in an interview on Bloomberg Radio.

Filling the Hall

Investors almost filled the 2,100-seat Belk Theater of the North Carolina Blumenthal Performing Arts Center, next to Bank of America’s 60-story headquarters in downtown Charlotte. Lewis received an ovation as he opened the meeting, and speakers who supported him and the board received repeated rounds of applause from the audience, which included numerous employees of the bank wearing name tags.

The session attracted a mix of activists such as Evelyn Y. Davis from previous annual meetings, as well as organizations such as Habitat for Humanity, United Way and the Charlotte Chamber of Commerce that offered praise for Lewis.

Some attendees questioned the bank’s management and the Merrill takeover. One attempt to criticize Lewis’s compensation as “horrific” was cut off by a burst of applause when Lewis responded, “Because of my pledges, I did give away more than I made.”

Individual investors included Fred Martin Jr. of San Francisco, a holder of 25,000 shares who said he made the trip to urge Lewis to focus on basic banking and reduce risk. Deborah Snyder of Stafford, Virginia -- who drew laughter when she told Lewis his facial expressions reminded her of her husband -- said the decline in dividends on her 2,300 shares hurt her ability to care for her ailing mother.

Outside, people were protesting the bank’s lending to coal companies and its opposition to relaxing rules on union organizing.

To contact the reporters on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net; Linda Shen in New York at lshen21@bloomberg.net

Last Updated: April 29, 2009 17:39 EDT