5 hot topics for BofA shareholders Wednesday

For rank-and-file Bank of America shareholders, Wednesday marks the only time during the year when they get to directly question – and complain to – the lender’s chief executive.

Brian Moynihan, CEO since 2010, is expected to once again face tough questions on a range of issues as Bank of America shareholders from across the country gather in Charlotte for the bank’s annual meeting of investors.

Under Moynihan, 55, the Charlotte-based bank has taken steps in the past year to deal with some of its lingering challenges. Those steps include continuing to slash the bank’s expenses in its unit that services troubled mortgages and resolving costly litigation stemming from the financial crisis.

Still, as they gather for Wednesday’s meeting in SouthPark, five burning issues are on investors’ minds.

1. Can the bank manage fallout from combining top roles?

Nothing will be decided Wednesday, but executives may well be asked about the bank’s controversial decision last fall to recombine its chairman and CEO roles. The move made Moynihan the bank’s first CEO to hold the chairman’s title since then-CEO Ken Lewis was ousted as chairman six years ago.

Some shareholders have said they were stunned that the bank made the move without consulting them first.

The recombination nixed a change to the bank’s bylaws approved by shareholders in 2009 to split the roles. In that vote, approval was given to a binding shareholder resolution, delivering a rare victory to investors.

Bank of America initially defended the recombination, even though some large investors expressed frustration that shareholders were not given a say beforehand.

On Monday, the bank surprised investors when it announced it would allow a vote on the change “to be responsive” to shareholders. That move also came after two influential advisory firms – Institutional Shareholder Services and Glass, Lewis & Co. – urged shareholders to oppose the re-election of some of the bank’s directors at this year’s meeting.

It is unclear when the vote will take place, but it is expected no later than the bank’s 2016 meeting. It will not take place Wednesday.

2. Will any directors be ousted?

The controversy over the chairman and CEO recombination raises the question of whether certain directors are at greater risk of not being re-elected this year.

Bank of America is asking shareholders to vote for the 13 members of its board standing for re-election, and some see that as the most likely outcome. But last fall’s recombination puts more scrutiny on the four directors who serve on the bank’s corporate governance committee, which recommended Moynihan be made chairman.

ISS is advising shareholders to vote against all four members of the corporate governance committee. Glass, Lewis & Co. is suggesting a vote against just the committee’s chairman, Thomas May.

Some investors say they have already cast votes against all of the directors. Others say they have voted against some directors.

The North Carolina Retirement Systems on Tuesday said it voted against only the four directors on the governance committee. The state pension fund reports holding 11.4 million shares in Bank of America.

3. Will breakup proposal get any attention?

Another item the bank’s shareholders will vote on Wednesday is a proposal that calls on the lender to examine ways to break itself up.

The advisory firms of ISS and Glass, Lewis & Co. are joining the bank in recommending shareholders oppose the breakup proposal. The proposal comes from Bartlett Naylor, the financial policy advocate for the consumer advocacy organization Public Citizen. He argues splitting up the bank into separate companies would lower the risks for another financial meltdown. Post-financial crisis regulations may not go far enough to avert another disaster, Naylor says in the nonbinding proposal.

Bank of America sought to block the measure from its proxy filing of items that shareholders vote on at its annual meeting, saying it has eliminated dozens of noncore businesses since 2010. But the Securities and Exchange Commission denied its attempts to exclude it.

4. When will the stock recover?

Bank of America investors have watched as the lender’s stock price has fallen since the start of the year, even as some of its peers have posted gains.

The bank’s shares rose 13 percent during 2014, better than the increase in the S&P 500 index. But the stock’s price is down about 9 percent from the beginning of the year, while shares for rivals JPMorgan Chase & Co. and Wells Fargo are up.

That lagging performance comes at a time when Bank of America’s shares are trading well below their peak of more than $50 in 2006. It shares closed at $16.35 Tuesday.

The bank also continues to pay a lower dividend than it did before the financial crisis. That has affected the retirement income of some investors, including those living in the Charlotte region.

Last year, the bank won approval from the Federal Reserve to increase the common dividend from a penny per quarter to 5 cents per quarter. Still, that’s far below the 64 cents the bank was paying as recently as 2008.

5. Can the bank address stress test ‘deficiencies’?

Wednesday will offer investors their first chance to question executives on the “weaknesses” and “deficiencies” the Federal Reserve found earlier this year in the bank’s capital planning process.

Those issues were discovered in the regulator’s annual exam of whether the largest U.S. banks have enough capital to keep operating in another major economic downturn.

The Fed has given the bank until Sept. 30 to fix the deficiencies and resubmit its capital plan. Staff writer Rick Rothacker contributed.

This story was originally published May 5, 2015 at 4:48 PM with the headline "5 hot topics for BofA shareholders Wednesday."