Bank of America Corp. shareholders should oust four board members for overruling a shareholder referendum by combining the roles of chairman and chief executive officer, Institutional Shareholder Services said.
The bank named CEO Brian T. Moynihan as chairman in October, amending the firm’s bylaws following a 2009 shareholder-backed measure to require an independent chairman, ISS said in a report obtained Thursday by Bloomberg.
Moynihan’s predecessor, ex-CEO Kenneth Lewis, was stripped of his chairman title during the firm’s 2009 annual meeting by shareholders incensed over Lewis’s handling of the Merrill Lynch & Co. takeover. The resolution to split the jobs of CEO and chairman won by a vote of just over 50 percent, and Lewis resigned later that year, paving the way for Moynihan’s promotion.
“Shareholders now face several questions, but whether or not the chairman should be independent is not one of them,” ISS, which advises investors on how to vote, said in the report. “That question was answered by shareholders in 2009 and nullified by the board last October. If there is a lesson for BAC shareholders, it is that binding shareholder votes are meaningless in the face of a board that chooses not to abide by them.”
The four members of the board’s corporate governance committee are Sharon Allen, Frank P. Bramble, Lionel L. Nowell and Thomas J. May, according to the firm’s proxy. Larry DiRita, a bank spokesman, declined to comment on the ISS report.
In granting Moynihan the chairman title, the board credited him for overhauling the bank’s strategy after the financial crisis. It named Jack Bovender lead independent director with duties that include helping Moynihan set board meeting agendas, advising him on what information directors need, and calling gatherings of independent board members.
Bovender has a “strong independent voice,” the board said in the proxy. The company has “evolved significantly” since the 2009 vote, including the addition of eight independent directors in the past three years, it said.
Still, Bank of America failed to engage shareholders on the topic of combining the roles out of a desire to avoid media attention, ISS said. The firm’s recommendation to vote against the four directors isn’t a comment on Moynihan’s suitability as chairman, but the process in which he gained the role, ISS said.
“Although the board had ample opportunity to vet its plan with shareholders and/or allow them to ratify the decision afterward, it instead annulled a shareholder vote and acted to deny shareholders input,” ISS said.
The second-biggest U.S. lender by assets holds its annual meeting May 6 in Charlotte, North Carolina, where the company is based, according to the proxy statement last month.
Glass, Lewis & Co., another proxy advisory firm, recommended in an April 19 report that shareholders vote against May, because he’s chairman of the corporate governance committee. The report backed the election of every other director.