There may be rebellion brewing at Bank of America: shareholders are divided on a move to reinstate Brian Moynihan, the firm’s CEO, as chairman of the bank’s board.
The US institution recombined the two roles last October, after initially separating them in 2009, a split that has since been described as a ‘crisis-era measure’ that is no longer appropriate. The decision to rejoin the two positions angered shareholders at the time, especially as they were not consulted by Bank of America’s board and had already voted earlier in 2014 to ensure the roles of CEO and chairman remained separate.
In 2015, however, the board has bowed to shareholder pressure and announced that the issue will be put to a vote at a special shareholders meeting scheduled for September 22.
‘The board believes having the same flexibility on board leadership that 97 percent of the S&P 500 now have, while still providing strong independent oversight, is in the best interest of stockholders,’ writes Lawrence Grayson, vice president at Bank of America, in a statement.
Several big investors are already poised to vote against recombining the roles. Both CalPERS and CalSTRS, two of the US’ biggest pension funds, sent a letter on Monday to the bank’s lead director, Jack Bovender, stating that the roles of CEO and chairman of the board have inherent conflicts that should preclude the two posts being combined.
‘We believe the board’s rationale for making this change is fundamentally flawed and we disagree with many assertions made in the special meeting proxy,’ reads the letter. It adds that Bank of America has yet to provide any valid financial rationale for combining the roles.
Norges Bank Investment Management, one of Bank of America’s top 20 shareholders, told the Financial Times it agrees that the two roles ‘are very different and very demanding, and are therefore best fulfilled by two separate people.’
Labor group CtW, an arm of the labor federation Change to Win, works with union pension funds that hold a significant number of the bank’s shares. The group plans to send a letter to Bank of America’s shareholders to further question the decision to reinstate Moynihan, adding that board members showed ‘a shocking lack of awareness’ toward shareholders regarding the decision.
A so-called consolidation of power, the letter continues, ‘can serve only to stifle the independence, objectivity and breadth of thinking our board needs.’
Proxy advisers Glass Lewis and ISS are expected to publish their recommendations later this week on how shareholders should vote on September 22. ISS’s benchmark voting recommendations advise investors to ‘vote for shareholder proposals requiring that the chairman’s position be filled by an independent director’ and not the company’s CEO, depending on certain factors.
