May 20, 2009 > Gov't pressuring Bank of America board change
Gov't pressuring Bank of America board change
By Ieva M. Augstums, AP Business Writer
CHARLOTTE, N.C. (AP), May 15 _ A report Friday said federal officials are pressuring Bank of America Corp. to revamp its board and bring in directors with more banking experience.
The story in The Wall Street Journal called the regulators' move ``unusual'' as the government does not own a stake in the company, and most of the bank's problems are the result of its purchase of Merrill Lynch & Co., which was advised by regulators.
Bank of America said last week it was looking for new directors, but gave little detail. The announcement came as the government, after completing its stress test of the bank and 18 other financial companies, said Bank of America needed to raise nearly $34 billion. The bank has received $45 billion in government funds as part of the Treasury Department's $700 billion financial rescue package.
The Journal said regulators including the Federal Reserve and the Office of the Comptroller of the Currency had previously signaled to the bank's leadership that changes in the board would be well received by the federal government, the Journal report said.
Bank of America spokesman Scott Silvestri declined to comment on the report, but said every bank that participated in the recent U.S. stress tests was advised to review its board and management.
News that BofA would revamp its board came just a little over a week after a shareholder revolt stripped Chief Executive Ken Lewis of his chairman title. To help with the director search process, the bank said last week it had established a committee, led by its new chairman Walter Massey. Massey, president emeritus of Morehouse College in Atlanta, was elected by Bank of America's board to replace Lewis as chairman.
The Journal, which reported that the government was in favor of the committee's creation, also said officials suggested that independent directors lead the search. It also suggested that the board needed more directors with banking experience, the Journal said.
Charlotte, N.C.-based Bank of America lists 18 directors on its board. It remains unclear how many directors could be affected or who might step down.
Any board changes could affect how long Lewis remains in his job.
Lewis has said he plans to remain as CEO to help the bank navigate raising the required cash to meet the government's stress-test results _ an additional $33.9 billion in capital _ and repay $45 billion in federal funds it has received since October. He has said he is likely to step down as CEO by the time he turns 65 in three years _ the traditional retirement age for executives at the bank.
On Monday, Lewis said the decision on how long he stays wasn't his.
``I would like to see us at least start to be able to pay back the government money, if not do it all,'' Lewis said during a call with analysts. He added he would then ``regroup and then decide how much energy I have left and how well prepared are we to make the transition.''
According to the Journal report, members of the new committee include BofA directors: former MBNA Corp. executive vice chairman Frank Bramble; NSTAR CEO Thomas May; former Internal Revenue Service Commissioner Charles Rossotti; and former FleetBoston Financial Group CEO Charles Gifford, who served as chairman for several months in 2004 following Bank of America's acquisition of FleetBoston.
The committee is expected to examine the strength of the board and the issue of CEO succession, the Journal said, citing a person familiar with the situation.
Executives at the company, Brian Moynihan, Barbara Desoer and Joe Price have all been cited internally as candidates, according to the Journal.
Investors have been upset in recent months over a tremendous drop in the company's stock price, continuing losses and ongoing government investigations surrounding Bank of America's acquisition of Merrill Lynch.
After the deal was sealed Jan. 1, Merrill Lynch reported $15 billion in fourth-quarter losses and it was learned that Bank of America had approved the early payout of billions of dollars in bonuses to Merrill Lynch employees.
Shares of Bank of America fell 47 cents, or 4.2 percent, to $10.84 in afternoon trading.