Bank of America Chief Ousted as Chairman

Bank of America Chief Ousted as Chairman
By LOUISE STORY
Copyright by The New York Times
Published: April 29, 2009
http://www.nytimes.com/2009/04/30/business/30bank.html?th&emc=th



CHARLOTTE, N.C. — The applause thundered inside the Belk Theater on Wednesday for a fading star of American finance: Kenneth D. Lewis, the beleaguered head of Bank of America.

Walter E. Massey, the president emeritus of Morehouse College in Atlanta, will replace Kenneth D. Lewis as chairman.

But all those huzzahs, offered up by loyal employees and steadfast believers, did not sway Mr. Lewis’s shareholders.

Mr. Lewis, who helped build Bank of America into the nation’s largest bank, was stripped of his chairman’s title — a stinging blow that leaves his stewardship and legacy in doubt. At a contentious annual general meeting, angry investors held him accountable for what they view as a series of missteps that forced the once-mighty bank to accept not one but two government bailouts.

For Mr. Lewis, the bad news arrived shortly before 6 p.m., after a gathering that seemed to captivate much of Charlotte, where Bank of America’s soaring headquarters punctuates the skyline.

While Mr. Lewis remains chief executive — the board expressed its unanimous support for him — many inside and outside the bank wonder if he can hang on. Mr. Lewis confronts daunting challenges, and many of his investors are losing patience. Even after receiving billions of taxpayer dollars, some analysts say, the bank may still need to raise more to shore up its weakened finances.

“Ken Lewis has now become the lightning rod of controversy, and that is highly distracting,” said Jeffrey A. Sonnenfeld, a professor at the Yale School of Management, who believes Mr. Lewis should resign. “Even if everything he did was appropriate, it has hampered his legitimacy to lead.”

It was not long ago that Mr. Lewis was celebrated for his vision. His daring takeover of Merrill Lynch was the latest in a series of high-profile acquisitions that helped transform Bank of America into a national powerhouse. His conquests included the Countrywide Financial Group, the giant mortgage lender which, for many, came to symbolize the excesses of the subprime era. In December, the American Banker, the daily chronicle of the banking industry, named him 2008 Banker of the Year.

But that was then. Now Mr. Lewis is drawing fire for overpaying for Merrill, whose gaping losses prompted Bank of America to seek a second rescue from Washington. The attorney general of New York is examining whether Mr. Lewis adequately disclosed the risks of the takeover to his shareholders, drawing headlines — and more ire. The timing could hardly be worse. Bank of America is bracing for another wave of loans to go bad as the recession drags on.

Walter E. Massey, the president emeritus of Morehouse College in Atlanta, will replace Mr. Lewis as chairman.

On Tuesday night, before the shareholder gathering, Mr. Lewis seemed chipper as he chatted with colleagues over drinks at Sonoma, a swanky restaurant at the base of the bank’s headquarters. As usual, he and his executives wore red, white and blue Bank of America pins on their lapels.

But by 7 a.m. Wednesday, news crews were setting up outside the bank, expecting a showdown. Employees made their way through the growing crowd.

Jonathan Finger, a prominent bank shareholder and a vocal critic of Mr. Lewis, strode from camera to camera. A few protestors turned up with signs. One of them, Judy Koenick, wore a T-shirt emblazoned with a phrase that summed up the view of Mr. Lewis’s most ardent detractors: “Fire!!! Kenneth Lewis Fire!!!”

Soon the Belk Theater was packed. The throng overflowed into the lobby, where a crowd watched on video monitors. Some 2,200 people turned up, a bank spokeswoman said.

Many of them welcomed Mr. Lewis, a man who helped put Charlotte on the world’s financial map. The applause rang out for more than half a minute. Shareholders took turns at the microphone to offer testimonials.

“If we don’t have Ken, who do we have?” one asked. Even Evelyn Davis, the corporate gadfly who calls herself “Queen of the Corporate Jungle,” defended Mr. Lewis. At one point, she ran up and kissed him on the cheek.

The president of the city’s Chamber of Commerce spoke in support of Mr. Lewis, as did representatives from Habitat for Humanity and several environmental groups. One shareholder suggested Mr. Lewis donate his $1.5 million salary to charity. Someone in the audience yelled: “Oh, stop!”

Mr. Lewis, who has worked for the bank for 40 years, replied: “Unfortunately, because of my pledges, I actually did give away more than I make." Again, applause.

Mr. Lewis shed little light on the Merrill transaction, though he did say in his prepared remarks that both Merrill and Countrywide helped the bank’s first-quarter results.

“These acquisitions are not mistakes to be regretted. Both are looking more like successes to be celebrated,” Mr. Lewis said. “We are building this company for the long run.”

Gradually, the crowd thinned and, after four hours, the meeting broke up, with Mr. Lewis’s fate still unknown. So many shareholders cast votes that it took the bank longer than expected to count them all.

Robert Stickler, a bank spokesman, said some large shareholders had told the bank they voted to remove the chairman title from Mr. Lewis because of corporate governance concerns, not because they did not support him.

In the end, it was close: 50.34 percent of shareholders — 25 million votes — opted to remove Mr. Lewis as chairman. A third voted to remove him from the board altogether. Even before the vote count was final, the bank’s directors were considering replacing Mr. Lewis as chairman because it was clear he had lost the support of so many shareholders.

Carl Wagle, a retired machinist from nearby Greensboro who said he had lost most of his $65,000 life savings on Bank of America stock, left the meeting shaking his head. He said he had come to suggest that Bank of America pay higher interest rates on savings accounts.

“They need to understand what the average American person thinks of banks,” Mr. Wagle said. “They see banks as a place where fat cats live. Americans are not going to start having confidence in their banks until they see the bankers changing.”

Mr. Lewis, hewing to his routine, stopped in at Sonoma. Several executives hugged him. Then he emerged, waved and smiled at people gathered in the courtyard, and disappeared into Bank of America’s headquarters.