From the Business Journals
Nancy Bush is torn over Brian Moynihan’s dual roles of CEO and chairman at Bank of America.
While the NAB Research analyst says she generally thinks that two minds are better than one, she says sometimes combining the roles doesn’t really make a difference in how well the company is run.
Shareholders will vote on Moynihan’s dual roles of CEO and chairman at a special meeting Sept. 22.
“The former chairman of Bank of America, Charles Holliday, was not a large factor in the operation of the company and indeed went back to a career in the oil industry, which was his true area of expertise,” Bush wrote in a report published today.
Bush added that the only successful industry pairing of a chairman and a CEO at this time is at Citigroup, where Chairman Mike O’Neill and CEO Michael Corbat led the bank away from its troubled past.
Bush wrote the note before her planned meeting with Moynihan in Charlotte this week.
Her comments come as two large shareholders and a pension fund publicly announced they would be voting ‘No’ on Sept. 22 at BofA’s (NYSE:BAC) special shareholder meeting. The bank’s board said they would put its decision to make Moynihan chairman last fall to a vote after receiving pushback from investors for overruling a 2009 shareholder vote. That vote resulted in the separation of the CEO and chairman roles.
The board has defended its decision to give Moynihan both titles by saying the shareholders’ 2009 vote to separate the roles was made in a “different era” and noted that other big banks have the same person serving as both chairman and CEO.
The bank encouraged shareholders to vote for the amendments to the company’s bylaws in a Securities and Exchange Commission filing this summer.
“And all of that is true, but was still not a sufficient reason to award both roles to Brian Moynihan without shareholder notice and consultation,” Bush wrote. “We think that such a move would have been better timed for the shareholder meeting in 2016, when there should be no doubt that Bank of America has emerged from the overhang of the financial crisis and is well on its way to unencumbered growth.”
Bush says her research firm has “no clue” what the results of the vote will be in September, but her bet would be that the bank gets its way, “due simply to the general environment of stasis that tends to surround any special shareholder vote.”
“It is very clear that the BAC board did not anticipate the pushback that they got and that they are VERY unlikely to again make any significant changes to corporate governance without first putting forth a solid rationale and then gaining the approval of shareholders,” Bush wrote.
Another analyst, Mike Mayo with CLSA Ltd., told Bloomberg today that the bank’s desire to keep Moynihan as CEO and chairman could bring negative attention to the industry.
“The board consolidates power with the Sept. 22 vote at the expense of trading the industry’s reputation,” said Mayo in an interview on Bloomberg Television. “It puts a regulatory target on the back of the banking industry.”
The bank maintains that the board has strong independent oversight.
“No company has dug out of a deeper hole since the financial crisis, turned back to health with solid earnings, and accumulated record levels of capital and liquidity -– also to the benefit of our shareholders,” a BofA spokesman told The Wall Street Journal Monday.