A major California pension fund said Monday it voted its shares against the election of four Bank of America directors ahead of Wednesday’s stockholder meeting, the latest fallout from the Charlotte bank’s miscalculation of its capital levels.
The move by the California State Teachers’ Retirement System means at least one major institutional investor is voicing displeasure over a mistake that caused a 6 percent slide in the bank’s stock price when it was announced last week. The error also renewed the discussion about whether big banks were too large to manage.
The North Carolina pension fund is evaluating the issue and has not decided how to vote, said Schorr Johnson, a spokesman for North Carolina state Treasurer Janet Cowell.
The California pension fund voted against four of the five directors who serve on Bank of America’s audit committee: Sharon Allen, Susan Bies, Lionel Nowell III and David Yost. A fifth audit committee member, Pierre J.P. de Weck, joined the board in July.
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CalSTRS also voted its shares against the re-appointment of PricewaterhouseCoopers as the bank’s external auditor.
The pension fund owned 31 million Bank of America shares as of March 12, but that still amounted to just 0.3 percent of total shares. CalSTRS has taken activist stances in the past, such as urging oil companies to assess the impact of climate change.
Prominent proxy advisory firm Glass Lewis & Co. has recommended Bank of America shareholders support all 15 directors and ratify PricewaterhouseCoopers as auditor.
Last week, Bank of America suspended a long-awaited dividend increase after disclosing to the Federal Reserve that it had miscalculated its capital ratios. The bank had planned to raise its quarterly dividend to 5 cents per share in the second quarter, up from the penny per share it had paid since the financial crisis.
Bank of America needs to take steps to make sure the error doesn’t recur, CalSTRS spokesman Ricardo Duran said in a statement. The error stemmed from debt inherited in its 2009 Merrill Lynch acquisition.
“While we appreciate Bank of America promptly disclosing this error to regulators, we have serious concerns with the fact that this crucial financial metric was overstated for six years,” Duran said. “This issue raises new questions about board oversight, risk controls, and the external auditor, specifically given the auditor’s tenure over the entire period.”
Bank of America declined to comment, and a PricewaterhouseCoopers spokesperson could not immediately be reached. Bank of America paid the accounting firm $104.2 million in 2013 for auditing and other fees, according to the bank’s proxy filing.
Bank of America CEO Brian Moynihan is likely to face tough questions from shareholders at Wednesday’s meeting in Charlotte. The capital error comes as the bank faces concerns about the ongoing cost of wrapping up mortgage-related litigation from the financial crisis.
The Fed has required Bank of America to resubmit its capital plan by May 27. The bank said its new proposal will likely return less to shareholders.
The bank’s error has not discouraged at least one big investor: Warren Buffett, who put $5 billion into Bank of America in 2011. He told Berkshire Hathaway shareholders Saturday that he’s not bothered that the bank had to suspend its planned dividend increase and stock buyback.
Bank of America shares closed Monday at $15.08, down 17 cents. The Associated Press contributed.