Investors have backed Bank of America’s (BofA) leadership in a proxy vote, despite calls for a ‘no’ vote to protest a $4 bn accounting error that prompted the suspension of a long-awaited dividend increase.
Shareholders re-elected all 15 directors, including the five audit board members, says BofA in a press release. They also approved the reappointment of PwC as the bank’s independent auditor and backed an advisory proposal on executive compensation. The bank has not yet released the final voting tally and made no further comment.
Investors including CalSTRS and CalPERS declared before the vote that they would oppose the re-election of the board’s audit committee members after the bank announced last week it had severely miscalculated capital levels over the last several years.
Stress tests show the bank failed to properly account for certain liabilities it took on when it acquired Merrill Lynch in 2009. BofA was forced to lower its capital calculations by $4 bn and the US Federal Reserve then suspended the bank’s proposal to increase its dividend from $0.01 per share to $0.05 per share. It was the Fed’s second suspension of a proposed BofA dividend since 2010.
Proxy advisory firm Glass Lewis had also recommended votes against at least two of the audit board members. ‘We believe the audit committee and the company’s auditor bear responsibility for [these] regulatory capital calculation lapses that, at best, will delay the company’s capital actions and may, depending on the [Fed’s] decision, cause material changes to them,’ Glass Lewis wrote to investors, reports the Financial Times.
‘While we appreciate BofA promptly disclosing this error to regulators, we have serious concerns with the fact that this crucial financial metric was overstated for six years,’ CalSTRS notes in a press release. ‘This issue raises new questions about board oversight, risk controls and the external auditor, specifically given the auditor’s tenure over the entire period.’
But Warren Buffet, who invested $5 bn in BofA in 2011, publicly stated before the vote that he would forgive bank management for the $4 bn error. ‘That error it made does not bother me,’ Buffett said last week after the bank’s announcement. ‘You do the best you can.’
