Bruised by a year of financial catastrophe, some bank shareholders are out for revenge as the corporate annual meeting season approaches -- with Bank of America Corp. Chairman and Chief Executive Kenneth D. Lewis a prominent target.
His critics, who are calling on shareholders to vote him off the company's board at its annual meeting April 29, cite the bank's moves last year to acquire two struggling firms, mortgage giant Countrywide Financial Corp. and brokerage powerhouse Merrill Lynch & Co.
The $50-billion Merrill deal was followed by huge losses at the Wall Street firm and a scandal over bonuses paid to its employees -- developments that Lewis should have foreseen, the critics say.
BofA shares have nose-dived 69% since the Merrill deal was reached, compared with a 54% decline for an index of 24 bank stocks.
"You can argue about the strategic issues from here to eternity, but they're never going to be able to justify the acquisition" of Merrill, said Michael Garland, director of value strategies at CtW Investment Group, an advisor to union-sponsored pension funds that is calling for a "no" vote on Lewis.
When the transactions were announced, Lewis and some analysts said the acquisitions would eventually yield huge profits for the Charlotte, N.C., firm, which already was the largest U.S. bank by deposits as well as the No. 1 issuer of credit cards.
In a recent interview, Lewis, 61, called dealing with the Merrill fallout the worst experience of his career. But he argued that it would take two or three years before the Merrill and Countrywide acquisitions could be fairly evaluated. He wouldn't discuss most details of the Merrill transaction, citing lawsuits brought by shareholders.
Merrill recorded a surprise $15-billion loss for the fourth quarter and paid out $3.6 billion in bonuses before the deal closed Jan. 1. Lewis has said he had no way to stop the widely criticized payments because Merrill was a separate company at the time.
The first round of federal bailout money, distributed after the Merrill deal was announced, included $15 billion for BofA and $10 billion for Merrill. When it became clear that Merrill's losses would be far greater than expected, Lewis threatened to back away from the takeover. He ultimately let it go through -- but only after the government invested $20 billion more in BofA and guaranteed $118 billion in troubled assets.
