In yesterday’s media coverage about two proxy advisory services recommending that Bank of America shareholders vote against some of the lender’s directors, another recommendation didn’t get as much attention.
Institutional Shareholder Services and Glass Lewis made headlines yesterday for advising stockholders to vote against some directors in response to the board’s decision last fall to re-combine the CEO and chairman roles. But the two influential proxy advisers are also recommending that stockholders vote against a shareholder proposal that calls on the bank to devise a plan for breaking itself up.
It’s a setback for the shareholder, Bartlett Naylor, who won Securities and Exchange Commission support earlier this year for his proposal to be included on the bank’s proxy.
Naylor “appears to provide no evidence of lapses in oversight or failings” at Bank of America that would lead to suspicions that the lender doesn’t already consider any opportunities to sell its assets, Glass Lewis wrote in its report. Naylor’s proposal, which calls for a committee of independent Bank of America directors to create a plan for divesting all non-core banking segments, “would be overreaching and ... not in the company or its shareholders’ best interests.”
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In its report, ISS points out that Bank of America has had problems with its federal “stress tests,” which “may be a reminder that the company’s size and complexity do present challenges.” But the report says it is unclear that there is immediate need for the bank to consider selling assets.
(I could not immediately reached Naylor for comment, but he later responded to this blog post. “I should have thought record, multi-billion dollar criminal fines would qualify as a 'lapse' of oversight,” he wrote in an email.)
In his nonbinding proposal, Naylor says new regulations formed in the wake of the financial crisis “may not do enough” to avert another crisis. His proposal says splitting Bank of America into one company that performs basic lending and separate companies focused on activities like investment banking would reduce the risk of another financial meltdown.
In its proxy statement, Bank of America has advised shareholders to vote against Naylor’s proposal, which the lender says would not enhance stockholder value. The bank argues, among other things, that it has already eliminated dozens of non-core businesses since 2010.