Bank of America executives said Tuesday that they plan to step up efforts to interact with shareholders after CEO Brian Moynihan survived calls to strip him of his chairman title.
At a special meeting in Charlotte, about 63 percent of voting shareholders approved a measure allowing Moynihan to hold both titles, the bank said. The Charlotte-based lender held the special meeting to appease shareholders upset that it made Moynihan chairman last fall without giving investors a vote on the matter first.
Meeting with reporters after the vote, bank executives said Tuesday that they have heard “loud and clear” from shareholders who want the bank to interact with them more.
“We’re going to be engaged with our large institutional shareholders and other shareholders on a more proactive way than we’ve been in the past,” said Jack Bovender, the bank’s lead independent director. “That was the message in discussions, that they do want more contact.”
Promises for such changes came after the bank was caught off guard by shareholder backlash over its board’s decision in October to nix a bylaws requirement for an independent chairman. Shareholders in 2009 had narrowly approved the requirement, stripping then-CEO Ken Lewis of the chairman title.
Tuesday’s outcome, which was being closely watched across corporate America, notches a victory for Moynihan, who has led the bank through a morass of mortgage and legal troubles he inherited when he became CEO in 2010.
Moynihan said he was happy with the results. “It’s one more piece in the path to this company getting normal,” he said.
But the outcome wasn’t enough to satisfy critics of the bank’s October decision to combine the CEO and chairman roles. Opponents continued on Tuesday to voice broader concerns about the board of the second-largest U.S. bank by assets.
“Even though it mustered a majority, Bank of America’s leadership emerges wounded and weakened from today’s shareholder vote,” said Michael Pryce-Jones, corporate governance director at CtW Investment Group, which advocates for labor union pension funds. “The bank has a long road back to credibility, and it can start restoring shareholder trust by initiating real reforms to its board.”
Pryce-Jones said that for a first step, Tom May, the director who leads the bank’s corporate governance committee, should step down. May, seen as a strong Moynihan ally, returned to the board this spring with just 66 percent of the votes cast after proxy advisory firms had recommended against his re-election.
Anne Sheehan, director of corporate governance for the California State Teachers’ Retirement System, said the board “needs to regain the trust of their shareholders by continuing to engage with their investors.”
Bank of America executives said Tuesday that they went into the vote expecting at least 35 percent would be cast against the chairman/CEO recombination, based on the average support other companies have received for proposals to split the roles.
Receiving 63 support for the recombination is a “huge victory,” executives said.
Independent bank analyst Nancy Bush called Tuesday’s outcome “less narrow than expected.” In 2009, the bank’s shareholders voted 50.3 percent in favor of having separate people in the chairman and CEO positions.
Less than 15 minutes
Tuesday’s meeting, held at 1 Bank of America Center near the bank’s uptown headquarters, lasted less than 15 minutes. Fewer than 100 people attended.
Only four shareholders spoke, far below the typical number of speakers at Bank of America’s annual meetings, which are held in the spring and take up more issues for shareholder consideration.
Tim Newman, former Charlotte Regional Visitors Authority chief, spoke in favor of Moynihan remaining chairman, saying the bank’s current leadership “has transformed this company into an earnings powerhouse, once interest rates begin to rise.”
Analyst and Bank of America critic Mike Mayo spoke against a single person holding the chairman and CEO positions. He cited gaffes the bank has made in its “stress tests,” annual exams federal regulators have required since the financial crisis to make sure lenders can weather another downturn.
“The board needs an upgrade,” said Mayo, who has had a sell rating on the bank’s stock for years.
If a speaker went over the allotted two minutes, a chime sounded and a bank representative took away the microphone. CtW’s Pryce-Jones said he was surprised the bank did not let the speakers go longer.
“It’s hardly the investment in shareholder relations that they claim they’re going to be making going forward,” Pryce-Jones said.
Moynihan said Tuesday that the bank learned through interacting with shareholders over the chairman issue that it also has not been touting recent initiatives enough. Those include a change, announced in March, allowing shareholders to make nominations to the bank’s board if the shareholders meet certain criteria, Moynihan said.
Bovender said he and Vice Chairmen Anne Finucane and Gary Lynch, who led the efforts to meet with the lender’s big investors ahead of Tuesday’s vote, and other independent directors plan to make contact with shareholders more frequently.
Bovender, who was named lead independent director when Moynihan was made chairman, said that outreach won’t just take place in proxy season – the period ahead of an annual meeting when public companies typically interact with shareholders before they cast votes.
Some critics have called for more people with banking experience to serve on Bank of America’s board. Bank executives defended the board on Tuesday. Moynihan called it “a very strong board.”
Recently, the lender asked board member Charles Gifford, who at 72 has hit the upper age limit for a new director, to remain on the board for another year. After that request, Gifford was re-elected by shareholders earlier this year.
How move unfolded
The bank provided more details Tuesday about the lead-up to Moynihan being named chairman.
Former Chairman Chad Holliday first indicated to the board last summer that he was looking to leave the position, and the board’s corporate governance committee began meeting to determine his replacement.
The succession planning, however, was sped up when Holliday said he needed to leave earlier than originally expected. The board consulted with legal counsel and named Moynihan chairman in October. Later that month, Royal Dutch Shell announced that Holliday had become chairman at the petroleum company.
Bovender said when the bank first learned that Holliday would be leaving, the board approached him to see if he was interested in serving as chairman or lead independent director. The board didn’t want to name an interim chairman, he said.
“The decision was, that does not have good optics to it, to the Street or to the public as a whole,” said Bovender, a retired health care executive who has been a director since 2012. “The very fact that you’re not doing that, does it not look like there’s not full confidence in your existing CEO?”
Bank officials said Tuesday that they received little feedback from investors when the change was first announced in October but began getting more calls as the annual meeting approached in May. The bank announced it planned to hold a vote on the issue shortly before the stockholder meeting.
Shareholders will be looking for the board to make improvements ahead of next spring’s annual shareholder meeting, said Pryce-Jones, of CtW.
“Some good-faith changes and maybe Bank of America can start to begin moving away from yet another crisis of their own making,” he said. “But if they don’t take proactive action, they are going to face another circus in May of next year.”
Asked by a reporter whether the bank would have consulted with shareholders first if it could redo the October decision to combine the chairman and CEO roles, Moynihan didn’t speculate.
“You’re going to find out something about me, if you know me: You don’t look back,” he said. “You just keep driving forward. I’m not sure I’d venture a question on that. We learned a lot in the process.”
Bank of America shares were down less than 1 percent Tuesday, closing at $15.57 on a day when major stock indices also posted declines.