By Christina Rexrode
A faith-based shareholder group is asking Bank of America Corp.
to separate the jobs of chairman and CEO, laying the groundwork for
a potential showdown between the bank and some investors this
spring.
The Sisters of Charity of St. Elizabeth, based in New Jersey,
filed the proposal with the nation's second-biggest bank on Friday.
Other shareholder groups that are also members of the Interfaith
Center on Corporate Responsibility are expected to file similar
proposals this week.
Bank of America angered some shareholders when its board in
October decided to give the additional job of chairman to CEO Brian
Moynihan . It was an unusual move because shareholders had passed a
binding proposal in 2009 requiring the jobs to be held by different
people. Influential pension-fund investors and advisers, including
the California State Teachers' Retirement System and the New York
City Comptroller's Office, have painted the board's decision as a
trampling of the shareholders' will.
The resolution by Sisters of Charity doesn't mention that
shareholders had previously voted to separate the jobs. Instead, it
lays out recent litigation and accusations of wrongdoing against
the bank, then argues that an independent chairman is needed to
better oversee the bank's top management and shore up cultural
problems.
"It is deeply disappointing and distressing to be reminded of
the levels and the extent of the unethical and apparently illegal
activities that have been attributed to our bank and to be aware
that some grievances and investigations are still being processed,"
the proposal says, before listing recent scandals including a
blockbuster settlement of $16.65 billion this summer with the
Justice Department over the bank's selling of mortgage securities,
and a settlement this month over the alleged manipulation of
foreign-exchange rates.
The bank didn't admit or deny wrongdoing in the foreign-exchange
settlement with the Office of the Comptroller of the Currency. In
the Justice Department settlement, it agreed to a statement of
facts describing that it knowingly sold questionable mortgage
securities to investors.
A Bank of America spokesman declined to comment on the
proposal.
Power at the top of a company is a topic of perennial interest
to shareholder activists. But it is a particular flash point at
Bank of America because of the 2009 shareholder vote. A board's job
is to oversee a company's CEO and other top managers, so
shareholder activists have long argued that the person running the
board should be someone besides the CEO.
The bank has said that giving the chairman job to Mr. Moynihan
puts him on an even playing field with peers at other big banks who
hold both roles, including J.P. Morgan Chase & Co. and Wells
Fargo & Co. The 2009 resolution was passed in a different era,
the bank has said, when Bank of America was still in the depths of
the financial crisis, and was meant to apply to then-CEO and
chairman Kenneth Lewis, not Mr. Moynihan.
Several big investors, including Berkshire Hathaway Inc.
chairman Warren Buffett, have also said they support the bank's
decision to give Mr. Moynihan both roles.
The Sisters of Charity proposal says it would apply
prospectively, so as not to make the bank break any contractual
obligations. That means that even if the resolution is successful,
it wouldn't necessarily require Mr. Moynihan to give up the
chairman job.
That flexibility could make other shareholders more willing to
vote for the proposal. But it also is a signal that the Interfaith
Center shareholders won't be satisfied by the bank's argument that
the consolidation of power is an issue that concerned Mr. Lewis,
not Mr. Moynihan.
"The issue is about the culture in the bank," said Rev. Seamus
Finn, chairman of the board at the Interfaith Center, in an
interview. "And the question is, should Mr. Moynihan by himself be
the single person in terms of trying to turn that around."
It isn't clear what the bank's next move will be, but
shareholders' reaction to Mr. Moynihan's new job is something that
the board will likely be forced to address. The California teachers
fund, known as Calstrs, and the New York City Comptroller's Office,
which advises the city's five pension funds, have also registered
their unhappiness over Mr. Moynihan's new role, asking the bank to
put a management-sponsored proposal about splitting the
chairman-CEO jobs on the ballot for shareholders to vote on at the
bank's spring annual meeting.
Dan Fitzpatrick contributed to this article.
Access Investor Kit for Bank of America Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0605051046
Subscribe to WSJ: http://online.wsj.com?mod=djnwires