California's biggest pension fund turned up the heat on Bank of America Corp.'s board Tuesday, saying it would vote its 22.7 million shares against all 18 directors at today's annual meeting.
The California Public Employees' Retirement System joined with other activist shareholders irritated by the company's failure to tell shareholders about the financial woes of Merrill Lynch & Co. before the bank bought the brokerage last year.
The California State Teachers' Retirement System also has said it would vote against all BofA directors.
New York Atty. Gen. Andrew Cuomo disclosed last week that Bank of America Chief Executive Ken Lewis said he was pressured by the federal government to go through with the takeover despite alarm over Merrill's rising losses.
Instead of backing out of the deal, Bank of America received a second large infusion of government capital in January. The bank's shares are down 42% this year, compared with a 28% drop in the BKX index of 24 major bank stocks.
"The entire board failed in its duties to shareowners and should be removed," CalPERS Board President Rob Feckner said in a statement.
CalPERS cited "the poor condition of the company, the failure by directors to disclose the extent of Merrill Lynch's losses prior to consummation of the merger, the payment of billions of dollars to Merrill executives in bonuses for failure, and the failure of the board to act in the best interests of shareowners in overseeing management."
The Service Employees International Union, which has its own agenda against Bank of America, has been organizing protests in front of some of the bank's branches in advance of the annual meeting.
A separate shareholder measure on the BofA ballot seeks to split the chairman and CEO jobs at the bank, in what amounts to a referendum on Lewis.
Although ousters of corporate directors are very rare, CalPERS' stance could help turn other Bank of America shareholders against management, resulting in a symbolically significant minority of "no" votes.
CalPERS' stake in Bank of America is less than 0.4%. For the move to jettison BofA's board to succeed, it would have to garner votes of much bigger stakeholders, including Vanguard Group, Los Angeles-based Capital Group (parent of American Funds) and Fidelity Investments.
Historically, it has been much harder to gain dissident support from investment firms than from public pension funds.