Bank of America CEO Brian Moynihan late Wednesday was named chairman of the Charlotte-based bank, becoming the lender’s first chief executive to hold the post since Ken Lewis was stripped of the title five years ago.
The move rolls back a rare victory for shareholders who voted in 2009 to split the CEO and chairman roles in the fallout from the bank’s handling of its Merrill Lynch purchase. Stockholders supported separating the roles as billions in losses piled up at Merrill, which the bank had acquired under Lewis’ watch.
On Wednesday, the board of directors amended the bank’s bylaws to remove the requirement that its chairman be independent. Chad Holliday Jr., whom Moynihan is replacing, said in a statement that the board made the decision after “careful deliberation” and “supports the strategy that Brian has set.”
Moynihan, 54, immediately succeeds Holliday, who will remain on the board.
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The move surprised some analysts and angered some investors, who said keeping the roles separate provides better oversight.
“It just kind of flies in the face of what is judged to be good governance these days,” said independent bank analyst Nancy Bush, who also owns Bank of America shares. “To me, it just sends the wrong signal.”
Jonathan Finger, a partner with Houston-based Finger Interests, which owns approximately 900,000 Bank of America shares, said he was not happy that the board has combined the roles.
Finger was among investors encouraging other shareholders to vote for the roles to be split in 2009.
“If the board has somehow been able to circumvent the expressed desire of Bank of America shareholders without their consent, then we are disappointed,” he said.
A source familiar with the issue said the bank’s board has been reviewing its corporate governance model for about a year. The board looked at other big banks and public companies, the source said.
Dramatic 2009 vote
The appointment reverses a move the bank made after a historic vote at the bank’s 2009 shareholders meeting in Charlotte. Investors narrowly approved a proposal to amend the company’s bylaws to require the chairman to be an independent director.
Within hours, the bank announced that Lewis was stepping down as chairman, while remaining CEO. The board elected Walter Massey chairman and continued having an independent chair when Holliday replaced him in 2010.
The 2009 vote to split the roles was highly unusual at the time. The year before, Wachovia CEO Ken Thompson had been stripped of his chairmanship, but that move was made by the board and not after a vote of shareholders. Thompson left the bank a few weeks later.
In Bank of America’s 2010 proxy filing, the bank said it amended the bylaws to provide for an independent chairman, calling the move “appropriate in response to our stockholders vote in April 2009.” As recently as this spring’s proxy, the bank said it was committed “to strong, independent board and committee leadership and a belief that objective oversight of management is a critical aspect of effective board leadership.”
But in a securities filing on Wednesday, the bank said the board amended the company’s bylaws, including deleting a paragraph that required the chairman to be independent.
Bank of America spokesman Lawrence Di Rita declined to comment.
Moynihan, 54, became CEO and a member of the bank’s board of directors in 2010. Since then, he has overseen the bank’s recovery from the worst economic crisis since the Great Depression.
“There’s more work ahead, but Brian’s strategy to simplify the company and connect it with the real economy continues to build value for shareholders,” Holliday said in a statement.
Jack Bovender Jr., a Bank of America director since August 2012, will become the board’s lead independent director. The bank said his duties will include approving board meeting agendas, acting as a liaison between the board and the CEO and calling meetings of the independent directors.
Bovender, who was 68 at the time of the spring proxy filing, was CEO of Nashville-based HCA, a major for-profit hospital operator, from 2001 to 2009. He was chairman for much of that period as well. Bovender has bachelor’s and master’s degrees from Duke University and is vice chairman of the university’s board of trustees.
Bank of America previously had a lead director when Lewis held the CEO and chairman positions.
Other big banks
Among the nation’s 10 largest banks, only Citigroup currently has separate CEO and chairman posts. The New York bank’s last CEO and chairman, Chuck Prince, was forced out of the bank in 2007.
Wells Fargo, Goldman Sachs, JPMorgan Chase & Co. and Morgan Stanley are among the big banks whose CEOs also hold the chairman title.
Shareholder activists have pressed some banks to separate the positions, but the proposals haven’t won majority support.
Last year, JPMorgan Chase & Co. shareholders voted overwhelmingly to support CEO Jamie Dimon keeping his chairman role. Dimon had come under criticism after disclosure of a $6 billion trading loss. Only 32 percent of shareholders voted to recommend stripping the chairman title from Dimon.
Wells Fargo CEO John Stumpf was supported by a comfortable margin in a similar vote at this year’s shareholder meeting.
Across corporate America, splitting the job of chairman and CEO has become more common over the last decade. Last year 45 percent of S&P 500 companies had separate chairmen and CEOs, according to executive search and consulting firm Spencer Stuart. That’s up from 23 percent a decade earlier.
In their study, however, Spencer Stuart analysts noted that companies often start out with a CEO who eventually becomes chairman.
Only 4 percent of S&P 500 companies have a formal policy requiring the jobs be split. The other 96 percent of companies decide whether to combine the chairman and CEO roles on a case-by-base basis, Spencer Stuart said.
Supporters of separate CEO and chairman roles say it helps make boards more objective.
“I think most companies would benefit from that structure,” Finger said. “I think it also makes it more likely that the board of directors will be representing shareholders rather than management.”
Roger Altman, deputy Treasury secretary under former President Bill Clinton, said combining the roles can make for less confusion. He said he’s seen situations at some companies where the chief executive, who runs the company, can come into conflict with the chairman, who calls the meetings and runs the board.
Having the CEO and chairman roles split can be destabilizing, he said.
“It’s more coherent and it’s more efficient” to combine the roles, he said.
Strengthening his grip
Adding the chairmanship is another sign that Moynihan has strengthened his grip on Bank of America’s helm.
When he was selected to replace Lewis in December 2009, he wasn’t the first choice for many board members, and his hold on the job later seemed precarious after a series of blunders, including a rejected dividend increase by the Federal Reserve, a national outcry over a proposed debit card fee and mounting legal settlements.
Just this week, the Securities and Exchange Commission slapped the bank with a $7.65 million civil penalty to settle charges resulting from the bank miscalculating its capital ratios.
Moynihan joined the bank in 2004 when Bank of America bought FleetBoston Financial. He became a fixer who frequently changed positions within the bank, although he nearly lost his job in 2008 when he declined to move to Delaware to take over the company’s credit card unit.
Moynihan has an office in Charlotte, but continues to live in Boston. He has elevated a number of former Fleet colleagues to top positions on his management team.
Moynihan’s overall compensation reached $14 million in 2013, about 17 percent higher than the previous year. He received no compensation for serving as a director.
As chairman, he will preside over a board that has largely been reshuffled since he became CEO. Not counting Moynihan, eight of the other 14 members of the board have joined since January 2010.
He has spent most of his tenure slimming down the bank and settling crisis-era lawsuits, mostly related to the lender’s 2008 purchase of Countrywide Financial. He’s under pressure now to show the bank can increase earnings after working through most of its legal problems.
“I think what he has done is clean up the mess” he inherited in the wake of the financial crisis, Bush, the analyst, said. “I think the board is looking at the entirety of what has happened between 2009 and now and saying, ‘OK, it’s a lot better than it was.’
“I think they’re trying to reward Brian for a job well done.”
In other measurements, the bank is still recovering from the financial crisis.
The bank won approval from the Federal Reserve this year to raise its quarterly common stock dividend from 1 cent per share to 5 cents. But its stock price still remains below its peers, closing Wednesday at $16.82. Staff Writers Andrew Dunn and Ely Portillo contributed.