Lewis loses role as BofA chairman

Bank of America chief executive Ken Lewis was stripped of his role as chairman on Wednesday after a rebellion among shareholders forced BofA’s normally quiescent board to replace him with long-time director Walter Massey.

Mr Lewis will remain as BofA’s chief executive but the passage of a shareholder proposal to separate the dual roles he has held since taking the helm eight years ago is a blow to his standing and will loosen his grip on the company.

The result of the ballot, which was delayed for hours while BofA scrambled to count the votes after heavy turnout, is a high water mark for the corporate governance movement in the US. It is extremely rare for investors to win votes on proposals that are opposed by management, because institutional investors and mutual funds are reluctant to go against companies’ recommendations.

Mr Lewis survived a separate no-confidence vote that called for him and the board to step down.

That proposal was supported by unions, pension funds, proxy firms and dissident shareholders, which made their feelings towards BofA’s directors known during a raucous investor meeting in the bank’s hometown of Charlotte, North Carolina.

BofA said Mr Lewis, which has been under fire for the slump in the company’s share price and his handling of the acquisition of Merrill Lynch, had the unanimous backing of the board to continue in his role as chief executive.

But the loss of the chairman title does not bode well for Mr Lewis. Last year, two former high-flying banking executives – Kennedy Thompson of Wachovia and Kerry Killinger of Washington Mutual – were stripped of their chairman titles and, shortly after, removed as chief executives as their institutions sagged under the weight of bad real estate loans.

In the past year, BofA’s stock has slumped from $40 to a low of $3, following the acquisition of Countrywide Financial and Merrill, and the revelation that Mr Lewis needed an infusion of $20bn in government funds to complete the Merrill deal.

The disclosure last week of documents suggesting that Mr Lewis closed the Merrill deal only after his job was threatened by federal regulators fuelled criticism of his leadership.

The proposal urging the board to strip Mr Lewis of the chairman title passed with just over 50 per cent of the vote, up from 40 per cent a year ago.

“The shareholders spoke loud and clear,” said Dennak Murphy, who represents corporate stewardship for the Service Employees International Union. Mr Murphy said the votes against Mr Lewis and BofA’s board did not just come from individual shareholders who lost money on the stock. “These are huge institutional shareholders,” he said.

Wednesday’s events throw a spotlight on Mr Massey, a 70-year old former science researcher who has been on the BofA board for a decade. Mr Massey, who is also a director of McDonald’s, will have to allay investor fears over BofA’s corporate governance and strategic direction as well as providing a counterfoil to the forceful Mr Lewis.

Separately, BofA sold an asset management unit with $12.8bn in assets to Evercore Partners, the boutique investment bank headed by Roger Altman, former deputy US Treasury secretary.

Additional reporting by Saskia Scholtes in New York