Nov. 11 (Bloomberg) -- Bank of America Corp. should pick an internal candidate to succeed Chief Executive Officer Kenneth D. Lewis rather than an outsider with limited understanding of the biggest U.S. bank, former lead director Temple Sloan said.

Sloan favors Brian Moynihan, the bank’s consumer banking head, or Barbara Desoer, head of home loans and insurance, because they excelled at the Charlotte, North Carolina-based company, he said in a telephone interview yesterday. Moynihan joined Bank of America through its 2004 purchase of FleetBoston Financial Corp., while Desoer worked for BankAmerica Corp. when it was bought by NationsBank Corp. in 1998.

“I get tired of hearing we didn’t have a succession plan,” said Sloan, chairman of Raleigh, North Carolina-based General Parts Co., owner of the Carquest auto parts brand. “I had the list and we discussed it every month. There has always been a succession plan. You can’t run a company the size of Bank of America without a plan.”

Sloan, 70, was among 10 Bank of America directors who left the board this year amid criticism over the $29 billion acquisition of Merrill Lynch & Co. Federal officials pressed the bank for an overhaul following investor criticism of Lewis’s decision to delay disclosing Merrill’s mounting fourth-quarter losses and bonus payments until after the transaction was approved by shareholders.

A six-member search committee led by chairman Walter Massey is considering candidates, with the board possibly making a decision by Nov. 26, spokesman Scott Silvestri said.

Northern Exposure

The search includes candidates who want to live in New York, acknowledging the bank’s biggest units are no longer based in Charlotte, people familiar with the matter said. The leading internal CEO candidates are Chief Risk Officer Gregory Curl, 61, who lives in Charlotte, and Moynihan, 50, according to a person familiar with the matter. Lewis in September named six inside candidates, including Desoer, 57, who has led the mortgage unit since the July 2008 purchase of Countrywide Financial Corp.

The Merrill Lynch acquisition is already paying off, though its success remains overshadowed by criticism of Lewis and the board, Sloan said. The acquisition has prompted investigations by Congress, the Securities and Exchange Commission and attorneys general in New York, Illinois and North Carolina.

“Everyone got crucified over a company that made a billion dollars last quarter,” he said, referring to Merrill’s contribution in the period.

Bailout Funds

The U.S. injected $45 billion into Bank of America through the purchase of preferred shares, including $20 billion approved in January after the Merrill Lynch takeover. Lewis announced on Sept. 30 his plan to retire at the end of the year.

“I don’t think they anticipated Ken Lewis leaving as soon as he left, so I’m not sure Brian Moynihan was fully groomed as his successor,” said Jonathan Finger, a Houston investor whose family controls more than 1 million shares of the bank. Earlier this year, Finger organized a campaign seeking Lewis’s ouster as board chairman, and he advocated for an outside successor.

Candidates contacted by the bank include Robert Kelly, CEO of Bank of York Mellon Corp., and Charles Scharf, retail banking head at New York-based JPMorgan Chase & Co., according to people familiar with the matter. Kelly is not interested, spokesman Kevin Heine said last week. A spokesman for Scharf declined to comment.

Sloan said he doesn’t know whom the board will select and he hasn’t talked with new board members. “I didn’t think it was appropriate,” he said.

The Laborers International Union of North America filed a shareholders’ proposal in 2008 asking and Bank of America to provide more information about CEO succession. It was never put to a vote, according to the union.

Who’s Next?

If the company had a succession plan, “it was never disclosed to any degree,” said Richard Metcalf, director of the Laborers International Union of North America, which owns bank shares through its pension funds. “The attitude from talking to the board was that we should ‘leave the running of the company to us, and you will be happy when you see the results later on.’ That pervaded the culture.”

The board’s hesitation about promoting an insider reflects poorly on the bank’s succession planning, said Paul Lapides, director of Kennesaw State University’s Corporate Governance Center in Kennesaw, Georgia.

“When you think of how many people are earning millions of dollars working at Bank of America, it seems incredible that they wouldn’t have someone in place ready to take over,” Lapides said.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: November 11, 2009 09:32 EST