It took a phone call from chief executive Brian Moynihan to get Bank of America to hold a shareholder vote on a controversial move to combine the CEO and chairman roles at the Charlotte bank.
Leading up to Wednesday’s annual meeting, lead director Jack Bovender Jr. spent days talking to shareholders who didn’t like how the bank’s board last fall unilaterally reversed a 2009 bylaw change that separated the positions.
On Saturday, Moynihan called Bovender to say the bank should let investors weigh in, and the bank disclosed the plan on Monday.
“I spoke with him and said, ‘Let’s clear the air,’” Moynihan said after Wednesday’s annual shareholder meeting, held at a SouthPark hotel.
During the meeting, Bovender said the board started mulling the decision to combine the roles last summer because Chad Holliday Jr. was stepping down as chairman. He said shareholders “were right” to complain about the process, although he still backed giving the title to Moynihan.
Bovender, a retired hospital chain CEO who became the bank’s lead director in October, said the vote will happen as soon as “feasibly possible.” He didn’t set a date but said it would be no later than the May 2016 annual meeting. Moynihan said the vote on the bylaw change will be binding.
Heading into Wednesday’s gathering, two shareholder advisory firms had recommended investors vote against some of the directors up for election because of the chairman flap. But Bank of America said preliminary results showed all 13 board members were elected. The vote tallies will be disclosed in a later securities filing.
Shareholders also endorsed compensation packages for top executives, including the $13 million awarded to Moynihan in 2014, a $1 million drop from the previous year. And they voted down all of the shareholder proposals on the ballot, including one that asked the bank to explore breaking up the company.
Wednesday’s meeting, which drew around 150 stockholders, employees, directors and executives, took place at the Charlotte Marriott SouthPark, instead of the traditional location uptown.
Outside, the protests that normally surround the meeting didn’t materialize. Inside, Moynihan faced the usual mix of criticism and praise for his role running the second-largest U.S. bank, but the overall tone was less combative than in years past.
A predatory lending opponent lauded the bank’s work providing mortgages to low-income borrowers, long-suffering investors pushed for a higher dividend, a regular meeting attendee called for Moynihan to retire and a well-known bank analyst repeatedly pressed directors about the chairman decision.
Mike Mayo, a veteran analyst with CLSA, said during the meeting that he opposed the election of four directors on the corporate governance committee, questioning why the board didn’t consult with shareholders before combining the chairman and CEO roles.
“I see the governance of Bank of America as out of step” with its large peers, he said.
After the meeting, Mayo said he was disappointed that it was Moynihan who fielded most of his questions during the meeting. He would have preferred to hear from the directors who made decisions on the chairman role, executive compensation and the bank’s long-term financial targets, he said.
“I still think this is a governance travesty the way they combined the positions, regardless of whether someone thinks he is qualified,” Mayo told the Observer, saying Moynihan was “friendly and cordial” in a brief conversation the pair had after the meeting.
Breakup proposal fails
The most high-profile shareholder proposal on the ballot called on Bank of America to consider breaking itself into parts, a demand that has bedeviled big banks since they played a major role in spurring the financial crisis.
The measure came from Bartlett Naylor, the financial policy advocate for the consumer advocacy organization Public Citizen. He argued that splitting the bank into separate companies would lower the risks for another financial meltdown. It would also benefit investors, he said in an interview.
“It would serve shareholders who have been suffering a stock price that is about one-fifth the level than before the company put together some major pieces,” Naylor said in an interview. “The company is too big to manage.”
Bank of America sought to block the measure from Wednesday’s ballot, saying it had already taken steps to eliminate dozens of noncore businesses since 2010. But the Securities and Exchange Commission in March denied the attempt to exclude it.
Naylor said he didn’t expect the proposal to win approval, noting some of the bank’s biggest shareholders are other large financial firms.
Before the measure was officially defeated, Moynihan spent much of his opening remarks highlighting his efforts to streamline the company, while also outlining the benefits of remaining one of the world’s biggest banks, with more than $2 trillion in assets.
Bank of America’s size helps it serve more customers, and the company’s shareholders benefit from the mix of revenue streams, he said. Referrals between businesses increased to 4.2 million in 2014 from 300,000 in 2010, he said. The goal for 2015 is 5 million.
“We view this as a competitive advantage,” Moynihan said.
In addition, Bank of America has made strides in lowering expenses and working through crisis-era lawsuits and settlements, Moynihan said. Since he became CEO in 2010, the bank has shelled out nearly $200 billion for loan losses, legal expenses and other mortgage-related costs.
Still, revenue is down in recent years, and low interest rates are making it harder for banks to make money.
“We’ve got a lot of work to do,” Moynihan said, “to drive the revenue growth in this company.”