News May 20, 2009, 3:31PM EST

Can BofA CEO Ken Lewis Keep His Job?

He might, if Bank of America can manage to turn a profit. But BofA officials fear Washington wants to push the CEO out

By Dean Foust

Browse Issues

Browse the BusinessWeek Archive

David Burke

McColl: The former CEO has been one of Lewis' biggest champions Nell Redmond/AP Photo

Story Tools

The pressure on Bank of America (BAC) Chief Executive Officer Kenneth D. Lewis is growing by the day.

It was bad enough that shareholders recently voted to strip Lewis of his chairmanship—a revolt the 62-year-old executive called a "humbling experience." Now some powerful policymakers in Washington want to push out Lewis altogether, according to people close to the bank. "It's a battle of wills," says a person close to the board. "If the bank turns a profit, Lewis is fine. But if there's another blip down, the board may have to succumb." A Treasury spokesman declined to comment.

In the weeks since the government released the results of stress tests on big U.S. financial institutions, regulators have made it clear that banks needing extra money from Washington could face a management shakeup. The BofA board, which so far has resisted pressure to replace Lewis and has stood by him, is quietly preparing for that possibility and will soon create a list of potential successors. Regulators also want the bank to revamp its board.

"This May Be Payback"

Why some officials might want Lewis out isn't entirely clear. The bank's loan losses last year prompted a $45 billion capital infusion from the U.S. Some people close to the bank and industry experts suspect that dethroning Lewis could help the Administration defuse further taxpayer outrage over the billions being spent to bail out troubled banks. Earlier this year, Lewis criticized the government, claiming in a now-public deposition that in late 2008 then-Treasury Secretary Henry Paulson bullied BofA into its ill-fated purchase of Merrill Lynch. "What it comes down to is the exercise of power," says Bert Ely, a banking industry consultant in Alexandria, Va. "This may be payback."

For now the board—which is heavily influenced by three men, former CEO Hugh L. McColl Jr., longtime shareholder C.D. "Dick" Spangler Jr., and director O. Temple Sloan Jr.—seems resolute in its support for Lewis as CEO. While McColl once privately worried whether Lewis had the vision to lead such a massive institution, people with ties to the bank say McColl has professed strong respect for his protégé's operational prowess. McColl also has been the CEO's biggest champion in the eight years since he stepped off the board. "Hugh [McColl] came to realize that Lewis' success was part of his own legacy," says one former BofA executive. Current directors also say shaking up the management team would further disrupt the organization, which is still laboring to integrate its acquisitions of mortgage lender Countrywide Financial and Merrill.

As the political backlash intensifies, the bank is taking a number of steps to appease the government and investors. In recent weeks, Lewis has been making the rounds in Washington, calling on top Administration officials. At the behest of regulators, newly appointed BofA Chairman Walter E. Massey is leading an effort to recruit more bankers and financial experts for BofA's board. He also will put together a succession plan that will be presented to regulators in coming months, a requirement that in part came out of the recent stress tests. Any such list would likely include Chief Risk Officer Amy W. Brinkley, the only executive to accompany Lewis on a recent meeting with Sheila C. Bair, chair of the Federal Deposit Insurance Corp. Other possible candidates: Brian T. Moynihan, head of global banking and wealth management, and Chief Financial Officer Joe L. Price.