- Resolution wins about 63%, according to preliminary tally
- CEO survives campaign by pension funds to split his roles
Bank of America Corp. Chief Executive Officer Brian Moynihan survived a battle to remove him as chairman, fending off critics including the biggest U.S. pension funds.
A resolution allowing Moynihan to remain chairman and CEO passed with about 63 percent of the votes, the Charlotte, North Carolina-based company said Tuesday during a special meeting, citing a preliminary tally.
Pension funds and proxy advisers had argued that more independent oversight was needed for Moynihan, who’s nearing his sixth year leading Bank of America, as the stock lags behind peers. The bank said Moynihan, 55, deserved the dual roles after overhauling its balance sheet and resolving legal cases.
“With all of the controversy, for them to be able to get 63 percent indicates that they’re working hard and they have people who believe in them,” said Greg Donaldson, chairman of Evansville, Indiana-based Donaldson Capital Management LLC, which oversees more than $1 billion in assets. “I still believe in them, I just can’t imagine why they wanted to pick this fight.”
The vote ratifies the board’s decision last year to rewrite governance rules that shareholders initiated in 2009. The October 2014 move by Bank of America galvanized critics who said the underperformance of the firm’s shares and the company’s struggles with annual industry stress tests were proof that more supervision was needed. Pension funds including the California Public Employees’ Retirement System and the California State Teachers’ Retirement System said they would vote against management.
“Anything less than a 70 percent support level is really going to demand questions of this board,” Michael Pryce-Jones, corporate-governance director at CtW Investment Group, said in a Bloomberg TV interview before the meeting. Possible improvements could include bringing in new directors, he said. CtW, which advocates for union-affiliated pension funds, had said Moynihan should give up the chairman title.
In a meeting with reporters after the vote, Moynihan called the bank’s board “strong” and indicated that sweeping changes to its composition shouldn’t be expected. When asked if Charles Gifford or Thomas May, long-serving directors, might step down before the next shareholder meeting, Moynihan said the bank had asked Gifford to serve on the board another year. Gifford has reached the firm’s suggested board retirement age of 72.
"We’re going to engage with large institutional shareholders in a more proactive way than in the past," Jack Bovender, the bank’s lead independent director, told reporters. The board didn’t anticipate the furor that came after making the governance change in late 2014, he said.
At the time, the board considered making Moynihan temporary chairman when Chad Holliday stepped down from that role, but opted not to because that could make it seem as if they lacked full confidence in their CEO, Bovender said.
Shares of the company fell 1.1 percent to $15.53 at 12:18 p.m. in New York, compared with a 1.5 percent drop in the Standard & Poor’s 500 Financials Index.
Voices in support of Moynihan included billionaire Warren Buffett, who said the CEO had done a “first-class job” turning around the lender. Moynihan, who has run the bank since 2010, has cut costs, raised capital levels and resolved more than $70 billion in legal issues, mostly stemming from his predecessor’s acquisition of subprime lender Countrywide Financial Corp.
Bank of America has said that Bovender helped ensure its board was an effective check on management. Bovender assists in setting meeting agendas, advises Moynihan on what information directors need and calls gatherings of independent board members.
It’s rare for proposals to split CEO-chairman roles to succeed. Only 3.2 percent of 62 such votes passed this year, according to a Simpson Thacher & Bartlett LLP analysis of companies in the Russell 3000 Index. Plans to separate the jobs usually get about a third of votes, according to the law firm.
At JPMorgan Chase & Co., the biggest U.S. lender by assets, proposals to strip CEO Jamie Dimon of his chairman title failed twice, getting 32 percent of the vote in 2013 and 40 percent in 2012. Citigroup Inc. is the only U.S. lender among the biggest 10 with an independent chairman.
Former CEO Kenneth D. Lewis lost his chairman title during the firm’s 2009 annual meeting when investors were incensed over his handling of the Merrill Lynch & Co. takeover. The binding 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.
The bank is resubmitting its capital plan to the Federal Reserve at the end of this month after the regulator said in March that internal controls needed improvement. If the bank fails, the Fed could restrict dividends or share buybacks for the third time during Moynihan’s tenure as CEO.
Moynihan expressed relief that the vote was behind him.
“It’s one more piece in a path to this company getting normal,” he said.