LEX There is a popular cry for Ken Lewis to do a far, far better thing than he has ever done. But why should the boss of Bank of America’s head roll? There are two thrusts to the argument. The first is retrospective: Mr Lewis should be punished for inadequate due diligence before buying Merrill Lynch, which lost $15.3bn last quarter and sent BofA’s shares tumbling. The second argument looks ahead: Mr Lewis has so inflamed employee passions at both BofA and Merrill that he can no longer lead the combined bank.
Both views are flawed. BofA’s purchase of Merrill must be seen in context. Last autumn, the entire US banking deck of cards was thrown in the air. How they landed would shape the financial landscape for decades – and sharp bank bosses knew it. Barclays grabbed Lehman, Citigroup rushed for Wachovia but lost to Wells Fargo. JPMorgan had already stolen Bear Stearns. Sure, BofA overpaid in retrospect. But had markets surged in the fourth quarter, Mr Lewis would have been a hero. He made a terrible error but with the flawed information he had, it was a punt worth taking. A better question is why more chief executives are not guillotined for top of the market, value-destroying deals.
Should Mr Lewis lead from here? The argument that employees are upset should be met with “who cares?”. The days when Merrill could moan about a poor cultural fit, or BofA staff about receiving $50,000 bonuses spread over three years, are over. And many, frankly, are lucky to have a job at all. Besides, when markets are in upheaval, change at the top is no palliative. Removing Chuck Prince at Citi, Stan O’Neal at Merrill, Peter Wuffli at UBS, Ken Thompson at Wachovia and Kerry Killinger at Washington Mutual did nothing to improve the fortunes of those banks. Let Mr Lewis get on with it.
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