Bank of America, marriage of Nations Bank and Bank of America, is having such a hard time finding a new CEO that some analysts are wondering if Ken Lewis might have to stay past his planned December 31 departure.
The nation's largest bank had said Lewis' replacement could be announced by Thanksgiving, but with no obvious right candidate emerging, analysts don't see that happening.
And that may not be a surprise -- this has been no ordinary CEO search. Like other struggling banks that have received federal bailout money, Bank of America is operating under government restrictions, among them having to get approval from federal pay Czar Kenneth Feinberg for how much it can pay its new leader.
"The situation now is far more complex and for more challenging than it was a few months ago," said Anil Shivdasani, a finance professor at the University of North Carolina at Chapel Hill. "Given the extent of the involvement of the U.S. government, the pay czar, a new board, it has been hard to find a capable CEO that would want to take this job."
Lewis' decision to retire, announced in September, capped a year of shareholder fury and regulatory scrutiny over the acquisition of Merrill Lynch & Co. Lewis was stripped of his chairman post in April.
Shareholders who campaigned for Lewis' removal aren't happy with the search.
"The process has been a debacle and has exposed the fact that the board was completely unprepared to address Lewis' succession," said Michael Garland, director of value strategies for CtW Investment Group, which works with union-affiliated pension funds that hold about 33 millin BofA shares, or about less than one half of 1 percent.
Charlotte, N.C.-based Bank of America is under pressure to choose a new CEO who can restore the company's relationship with regulators and members of Congress who have criticized Lewis and the bank since the Merrill Lynch deal closed in January 2009
The New CEO will have to contend with rising losses from failed loans that are expected to continue into 2010 as consumers struggle to keep up with their bills. In the third quarter, Bank of America lost more than $2.2 billion.
The new CEO will also have to come up with a plan to repay $45 billion in bailout funds.
Those challenges, "aren't easy tasks," said Alois Pirker, wealth management research director with Alite Group.
"Unless there's a solid long-term replacement in place, I do think (Lewis) should remain there," Pirker said. "There is no one who knows the day-to-day workings of the bank as well as he does."
The board may be reluctant to ask Lewis to remain as CEO into the new year, "but will agree if backed into a corner," said senior research analyst Jason O'Donnell of Boenning & Scattergood Inc.
It wasnit' immediately clear if the bank's board which meets on Fridays, is meeting this week due to Thanksgiving.
"The selection process is continuing, internal and external candidates are being considered and a decision will be made in the near future." BofA spokesman Scott Silvestri said.
The bank has said it is considering insiders including Chief Risk Officer Gregory Curl and Brian Moynihan, head of consumer banking. Moynihan is considered by analysts to be a top candidate, although House Oversight Committee Chairman Edophus Towns said last week he may lack the needed leadership.
The selection of Moynihan or Curl is unlikely to pass regulatory muster and may anger larger shareholders, O'Donnell said.
"I still think an external candidae with big bank experience represents the best option," he said.
While BofA has not identified any outside candidates, media reports have said some snubbed the bank's advances, including Bank of New York Mellon Corp. CEO Bob Kelly.
"I don't think it really matters if they are from inside or outside of the bank," said Jamie Cox, managing partner of Harris Financial Group in Colonial Heights, Va. "I do think, however, that Ken Lewis needs to go."
COMMENTARY: I have been very critical of the banking industry, from their lack of self-governance, selffishness, greed and the obscene pay of their top executives. These are the scumbags that got us into the financial meltdown at the end of 2008. I am glad that the Feds are putting a stop to these obscene compensation packages, especially those bonuses.
When you need a loan, the banks won't give you one. And when you don't need one, they come calling. At the very high-end, it's not who you are, but who you know. Yet, too many of these banks over-reached, took far too much risk, and placed their banks in jeopardy. Case in point, offering subprime loan mortgages and brokering over-the-counter derivatives. They are the same ones who charge $35 for an overdraft fee, and service charge consumers $2.00 to make a withdrawl at an ATM machine.
The attitude of these banks is, "The FDIC will rescue us", or my favorite one, "We're too big to fail, the Feds would never let that happen." I made these up, but pretty close.
Lewis is a graduate of Georgia State University and graduate of the Stanford Executive Program. Lewis was named "Banker of the Year in 2001" and in the same year was honored as the "Top Chief Executive Officer" by U.S. Banker. In 2008, Lewis was again named "Banker of the Year" for the second time.
In September 2008, Lewis engineered the acquisition of Merrill Lynch for $50 billion. The Merrill Lynch deal was done over a weekend with no due diligence. Merrill Lynch was hemorraging from stock and investment losses, including OTC derivatives based on subprime loans secured by real estate that was plummeting in value as far back as 2007.
Another BofA acquisition engineered by Lewis was the $35 billion acquisition of Wilmington, Del.-based MBNA, the country's largest credit-card issuer. "Yes", he replied to a question, he had to cut 6,000 jobs. (NOTE: 35,000 employees were let go as a result of BofA and NationsBank merger) "But it makes us the largest credit-card company in the world, and if the bank's size and aggressiveness worry many in the industry, so be it. I hope so. I don't necessarily want any of them to like me. I don't mind a little fear when they hear Bank of America." Gee, what values. I am really starting to dislike this guy. By the way, a lot of BofA's current losses are due to consumer credit card losses from you guessed it--MBNA.
Oh, I forgot to mention, Lewis also engineered the acquisition of Countrywide Savings & Loan, the "King" of sub-prime loans. Countrywide went belly-up with the real estate bubble that started in 2007, and Lewis was only too happy to pickup the pieces, including all those "toxic assets" that haunt BofA to this day.
I looked into Lewis' compensation package and here's what I found:
- 2008 - Total Compensation - $99.8 million - Broken down as follows: Salary: $1.5 million, Bonus: $6.5 million, Other: $14.76 million and Stock Gains: $77.04 million. Total BofA stock owned: $145 million. (Source: Forbes)
- 2007 - Total Compensation - $20.;4 million - Broken down as follows: Salary: $1.5 million, Bonus: $4.250 million, Stock Options: $11.06 million.
Lewis took a compensation cut in 2008. I really feel sorry for this snake in the grass.
I don't have any pity for BofA's board either. Where were these scumbags when they approved his compensation package for 2007 and 2008, or those Merrill Lynch, MBNA and Countrywide acquisitions? These are the same idiots who called for his resignation in 2009.
Here's a '60 Minutes' video that you might find very interesting: http://celebgalz.com/ken-lewis-60-minutes-bank-of-america-60-minutes-video/ Lewis quote: "We need to cutback compensation in this (banking) industry." Does this include Lewis?
As a young MBA grad student taking a class in strategic planning, our instructor, the former Sr. V.P. Strategic Planning for BofA, held classes in BofA's board room. Everybody was awe struck. I thought to myself, "Man, it would be so cool, to work for BofA and plot strategy." If you were in that class, give me a ring.
I doubt very few of you reading this, will disagree with me that there is something really wrong with how top U.S. corporate executives are being compensated. Compensation should be performance-based, there should be a reasonable celing, and the boards need to take their share of the blame. Stockholders need to scream at the top of their lungs. If you held BofA stock before its collapse, you know what I am talking about.
Looking forward to your comments, especially from bankers.
Courtesy of an article dated November 28, 2009 by the Associated Press
That is all fresh info for me. Indebted to you for having posted it.
Posted by: Personal Injury Compensation | 09/14/2011 at 07:55 AM