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Bank of America Chief Ken Lewis has been removed as Chairman. Saul Loeb/AFP/Getty Images
The Bank of America (BAC) shareholder meeting was primed for high drama. More than a dozen TV camera crews surrounded the entrance to the Blumenthal Performing Arts Center in Charlotte, N.C., button-holing investors and BofA employees as they tried to make their way into the building. Protestors were out in force, using the gathering to call for CEO Kenneth D. Lewis' scalp, and put pressure on BofA on everything from making affordable loans to not financing utilities that burn coal.
Following the Apr. 29 meeting and an extended vote count, Lewis was out as chairman, though he remained president and chief executive, as shareholders narrowly approved a resolution requiring an independent chairman. Walter E. Massey, a longtime board member and president emeritus of Morehouse College in Atlanta, was elected chairman. All 18 board members, including Lewis, were reelected.
Lewis has been the focal point for criticism because of the bank's controversial acquisition of Merrill Lynch last year and the sharp drop in the value of the company's shares. Activist investors, including California's public employees pension fund, had called for shareholders to vote against reelecting Lewis and other board members. At the same time, dissidents had called for stripping Lewis of his role as chairman, while keeping him on as CEO. The success of that measure is a rebuke to Lewis and a signal that the board should assume a larger role in overseeing the bank's operations.
Seven other shareholder proposals, including limits on executive compensation, failed.
When the meeting started, Lewis received a long round of applause from the audience, which included many BofA employees. That was followed by a lengthy parade of shareholders, some of whom grumbled about a cut in the dividend or complained about the deal for Merrill, Lynch, which reported huge losses shortly after the deal was completed.
A couple of shareholders were furious with Lewis for going through with the Merrill Lynch merger. And they didn't accept the story that Lewis gave to New York prosecutors in a recently released deposition, that then-Treasury Secretary Henry Paulson had threatened to oust him and the BofA board if he didn't go through with the Merrill acquisition.
One woman recalled how in 1973, U.S. Attorney General Elliot Richardson resigned on the spot rather than accede to President Richard Nixon's orders that he fire the special prosecutor investigating Watergate. "I don't understand how (BofA's) code of ethics allows you to say, 'My job is more important than you being honest with what went on at Merrill Lynch," she said. "I find it incredible that you didn't have the guts to stand up" to regulators.
Lewis responded that "we did not make our decision based on that threat."
Lewis also received support from community leaders who praised the bank's corporate citizenship and from one elderly shareholder who urged investors to stick with Lewis. "When the water is rough, do you take the man who knows the most about the boat and throw him overboard?" he asked. "I keep wondering…if we don't have Ken, who do we have?"
In his own remarks, Lewis contritely admitted he was aware of the pain that shareholders had felt. "This has been a very difficult year for the economy, for the financial-services industry, and for Bank of America," he said. "Our company's shareholders have carried a heavy burden."
But Lewis defended the controversial acquisitions of subprime mortgage lender Countrywide and Merrill Lynch, arguing that the acquisitions "are two of the most important reasons Bank of America is the most profitable financial-services company in the United States so far this year." On Apr. 20, BofA reported first-quarter profits of $4.25 billion, more than 10 times what most analysts expected. However, most of those profits came from one-time events.
Lewis also denied any suggestions that he acceded to Treasury Dept. pressure to complete the Merrill Lynch deal, even after he learned how troubled the investment bank was, just to keep his job. He said the decision to proceed with the Merrill deal "was not about a selfish desire to keep our jobs. Every member of this board, including me, would be alright if we had to leave the company. But we took very seriously the likelihood of a systemic meltdown, and the negative impact that would have had on the company at a critical time."
For his part, Lewis also assured stockholders that he was out of the merger game. "We see no imperative in any market for this company to consider further acquisitions for the foreseeable future," he said.
Although results of the vote were expected at the meeting, they were delayed until late afternoon because of what bank officials said was a heavier than usual volume of same-day votes cast at the meeting.
Foust is chief of BusinessWeek's Atlanta bureau.