Bank of America said Friday that it will allow certain shareholders to nominate members for the Charlotte bank’s board, granting a change some large investors had pushed the second-biggest U.S. bank to make.
The California Public Employees’ Retirement System, the California Teachers’ Retirement System and the investment adviser to New York City’s pension funds were among investors seeking the change, which resulted in the bank amending its bylaws this week.
The decision comes at a time when public companies are feeling pressure from investors to give shareholders a say in the nomination of board members. Bank of America’s move follows similar action this year by other companies, such as Citigroup and General Electric Co.
“Bank of America joins the growing list of companies that have embraced this fundamental right, which will help protect and create long-term value for share owners,” New York City Comptroller Scott Stringer said in a statement. Stringer also took to Twitter to laud the bank’s decision.
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Under the change Bank of America made, both single shareholders, as well as a group of up to 20 shareholders, will be able to make nominations to the bank’s board if the shareholders meet certain criteria. For example, those shareholders must have owned a total of at least 3 percent of the bank’s shares continuously for at least three years.
At many U.S. public companies, typically the board nominates candidates for shareholders to vote on. Charles Elson, finance professor at the University of Delaware, said the idea of allowing shareholders to nominate board members has become popular among institutional investors looking for more board accountability.
“If someone isn’t acting appropriately, you want the ability to replace them with someone that will,” he said.
Bank of America spokesman Lawrence Grayson told the Observer the bank had “numerous discussions with a range of shareholders on the issue.”
The announcement comes as Bank of America prepares for its annual shareholders meeting this spring.
The bank’s shareholders learned this week that the lender will allow shareholders to vote at the meeting on a nonbinding shareholder proposal asking the bank to examine ways to break itself up. The proposal says the bank may be “too big to manage” and seeks to have it split into separate companies, one for traditional banking and the others for investment banking activities. Bank of America had tried to block the proposal but was told by the Securities and Exchange Commission that it couldn’t.
Bank of America shareholders will not be able to take advantage of the nomination change for this year’s shareholders meeting but will be able to for next year’s meeting.
No vote on chairman issue
In an unrelated issue, Stringer and some pension funds, such as the California State Teachers’ Retirement System, have pushed for Bank of America to allow shareholders to vote on the bank’s decision last year to give CEO Brian Moynihan the chairman title.
In making that move, Bank of America’s board rolled back a proposal approved by shareholders in 2009 that led the bank to strip former CEO Ken Lewis of the chairman’s title.
On Friday, a spokesman for Stringer’s office indicated the comptroller is no longer seeking a binding shareholder vote on the issue, but Stringer’s office “will continue to engage on that issue with the board.”