CalPERS says it will vote to oust Bank of America's board
California's biggest pension fund today turned up the heat on the Bank of America Corp. board, saying it will vote its 22.7 million shares against all 18 directors at Wednesday's annual meeting.
The California Public Employees’ Retirement System joined with other activist shareholders who are aggravated by BofA’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 last week disclosed that BofA Chief Executive Ken Lewis said he was pressured by the federal government to go through with the takeover, despite BofA’s alarm over Merrill’s rising losses.
The deal required BofA to seek a second large infusion of government capital in January. The bank’s stock is down 42% this year, compared with a 28% drop in the BKX index of 24 major bank shares.
"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 BofA, has already 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 nobody really expects the entire BofA board to be ousted, CalPERS’ opposition could help turn other shareholders against management, resulting in a symbolically significant minority of "no" votes.
CalPERS’ stake in BofA 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, Capital Group (parent of the American Funds) and Fidelity Investments.
Historically, it has been much harder to gain dissident support from investment firms than from public pension funds.
-- Tom Petruno
Photo: Protesters outside a BofA office in New York today. Credit: Emmanuel Dunand / AFP/Getty Images