CHARLOTTE, North Carolina
Ken Lewis was ousted as chairman of Bank of America Wednesday after shareholders angry about the company’s acquisition of Merrill Lynch voted to separate the job from that of chief executive.
Lewis will remain the CEO of the bank, but board member Walter E. Massey, president emeritus of Morehouse College in Atlanta, will become Bank of America Corp.’s chairman.
The rebuke from the company’s shareholders was a stunning turn of events for Lewis, who a year ago was at the top of the banking industry and whose job as CEO is still marked by uncertainty.
Shareholders narrowly voted at the bank’s annual meeting Wednesday to split the jobs following months of rancor over the Merrill Lynch & Co. acquisition. After the deal was sealed Jan. 1, Merrill Lynch reported $15 billion in fourth-quarter losses and it was learned that Bank of America had approved the early payout of billions of dollars in bonuses to Merrill Lynch employees.
Lewis, 62, who was chairman and CEO since 2001, has spent much of this year defending his actions and did so again during the angry four-hour meeting.
Results of the voting were delayed for several hours, and Bank of America Wednesday evening issued a statement that the board of directors had met, elected Massey as chairman and unanimously voted to keep Lewis as CEO.
The bank said the shareholder proposal to separate the chairman and CEO jobs had passed 50.34 percent to 49.66 percent; it was the only shareholder proposal to be approved. Shareholders re-elected all 18 of Bank of America’s directors, including Lewis.
Big investors including California’s employee pension fund had called for shareholders to oust Lewis and his fellow directors at the meeting, which was attended by more than 2,000 people.
One of those investors, Michael Garland, director of Value Strategies for CtW Investment Group, praised the ouster of Lewis. His group handles 33 million BofA shares and works with union-affiliated pension funds.
“It’s huge,” he said. “It’s an enormous victory for shareholders.”
“We’ll have an independent board chairman, and now the CEO will be accountable to a board chaired by an independent director. It’s a critical critical first step,” Garland said.
At the meeting, Garland openly criticized Lewis, saying bad management decisions led to a dramatic drop in Bank of America stock.
Shareholders lined up early in the gathering to speak, with many hurling criticism at Lewis and the Bank of America board for the government-brokered purchase of Merrill Lynch.
“I find it incredible you didn’t have the guts to stand up to the U.S. government,” said Judith Koenick of Chevy Chase, Maryland, who said she lost thousands of dollars when BofA shares plunged after the Merrill Lynch purchase.
The government pressured Bank of America into buying Merrill Lynch during the same weekend in September that another investment bank, Lehman Brothers Holdings Inc., collapsed, setting off one of the most intense periods of the financial crisis.
Shareholder Gerald Abrams, of Boca Raton, Florida, also had an exchange with Lewis about the deal, asking, “what happened to due diligence” in Bank of America’s investigation of Merrill Lynch’s finances.
Lewis responded that Bank of America didn’t anticipate the worsening credit conditions in the country, which elicited from Abrams, “Why do the deal?” Lewis replied that it wasn’t in the best interest of shareholders for Bank of America to pull out of the agreement.
In his remarks, Lewis defended the bank’s acquisition of Merrill Lynch and another troubled company, mortgage lender Countrywide Financial Corp.
Lewis said the companies are providing “the positive counterbalance to our traditional banking businesses, which at this point of the business cycle are under much more stress from rising credit losses.”
Bank of America has received $45 billion in government aid as part of the Troubled Asset Relief Program, and additional guarantees backing hundreds of billions more in risky investments after it took over Merrill Lynch in January.
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