A key factor that stands to hinder Bank of America's ( BAC)
profitability may also victimize CEO Ken Lewis: Unemployment. Following a shareholder vote on Tuesday that stripped Lewis of his chairman title, speculation abounds as to how long the 62-year-old BofA veteran will remain as president and CEO. Lewis has said he plans to stay on as leader of the company until its $45 billion in government funds are paid off. At the meeting on Tuesday, Lewis once again characterized his future tenure more as an obligation than a job he is pursuing for pleasure or personal gain. He responded to criticism about his pay package by saying that, "unfortunately because of my pledges I do actually give away more than I make," and defended the company's deal for Merrill Lynch, which has been besieged by criticism.
"My decision and the board's to go ahead with the merger was not about a selfish decision to keep our jobs." Lewis said, referring to
pressure from federal regulators, who supposedly warned that management would be replaced if they walked away from the Merrill deal. "Everyone on the board, myself included, would be all right if we lost our jobs." But whether Lewis is clinging to his desk in downtown Charlotte, N.C., or collecting his paycheck as a civic duty to dole out millions to charity, is largely irrelevant. The question is, how long he will remain at the helm? There are two camps speculating about Lewis' remaining tenure: Those who are counting the days, and those who believe he will stay on board until the bank is out from under the government's wing -- a position that may take a few years.
Some of those railing for Lewis' ouster say his decisions regarding the acquisitions of Merrill Lynch -- and, to a lesser extent, Countrywide -- represent failures of leadership, and did not protect shareholder value. Others don't necessarily share that view, but believe Lewis has lost so much confidence and goodwill that it will be impossible for him to lead the company effectively. "Ken Lewis is on his way out," says Julia Plotts, a former investment banker at Banc of America Securities who teaches clinical finance and business economics at the University of Southern California's Marshall School of Business. Indeed, investor groups that led campaigns to unseat Lewis as chair came out with fresh statements on Wednesday to support his replacement as CEO. "
Shareholders delivered an unambiguous call for new leadership at Bank of America...At minimum, this includes accelerating the board's CEO succession plan and initiating the longer process of reforming the board itself," CtW Investment Group executive director William Patterson said in a statement. While few are predicting failure or bankruptcy for BofA, Lewis' ouster could follow a pattern set by colleagues at other troubled institutions. At Wachovia, CEO Ken Thompson was replaced by Robert Steel, less than a month after the board stripped him of his chairmanship. Thompson came under fire after paying $24 billion in 2006 for Golden West -- which he heralded as a "crown jewel" -- only to see its toxic mortgage assets ultimately send Wachovia to the brink of failure and into the arms of Wells Fargo's ( WFC).
At Washington Mutual, Kerry Killinger was replaced by Alan Fishman as CEO three months after the board stripped him of his chairman title. Shareholders had earlier urged the split. Killinger's appetite for snapping up financial assets left and right -- once characterizing his vision for WaMu as similar to that of Wal-Mart ( WMT) or Starbucks ( SBUX) -- built the company to new heights, before it ultimately failed under a heap of subprime losses. JPMorgan Chase ( JPM) took over WaMu's deposits. Perhaps the textbook example of a prominent CEO being pried from a firm he built to mammoth proportions and knew better than anyone else is former American International Group ( AIG) CEO Maurice "Hank" Greenberg, who is still offering his opinions -- loudly -- about the now-dismantled insurance giant's future. "If he can go, anyone can go," says Bruce Weindruch, founder and CEO of The History Factory, which studies the history of companies. "He was the most imperial CEO there was." Others take Lewis and bank officials at their word that his positions as president and CEO are not in jeopardy. The board "unanimously expressed its support" for Lewis to remain in those roles on Wednesday. It's also worth noting that shareholders voted to separate the CEO and chairman roles by a very slim margin -- just over one-third of one percentage point -- and, perhaps counterintuitively, re-elected Lewis to the board by a margin of nearly 35 points. At the meeting, several investors pledged their support. "My bottom line is we need Ken Lewis," said Joe Baker, an investor from Southaven, Miss., who said he holds 103 common shares, and 8,422 preferred, later adding: "Look over your shoulder, Mr. Chairman, we're behind you."
Activist shareholder and self-pronounced "Queen of the Corporate Jungle" Evelyn Davis, who usually shows up to wreak havoc on corporate boards and executives, went as far as to kiss and embrace the embattled CEO. "Ken Lewis has my full confidence and my full support," said Davis, who went on to disparage critical shareholders. Prominent bank analyst Meredith Whitney, who runs an eponymous analyst firm, has said she believes it would be too disruptive to shuffle leadership at BofA in the midst of the economic crisis. Lewis, who has served as CEO for over eight years and spent four decades at the bank, has the skills the firm needs to succeed, she asserted. "I think he made a mistake of acting more a good citizen than a good steward of shareholder capital," Whitney said at an event earlier this month. "But does it mean he can't effectively run Bank of America? I think he can." Other analysts made similar assertions following the shareholder vote. Anthony Polini of Raymond James told The Wall Street Journal "there's no one I'd rather have running that company," while NAB Research's Nancy Bush told the paper she expects Lewis to remain until TARP funds are paid back as "his penance." She expects that to take at least three years. Weindruch says that whether Lewis stays or not, he might be well served to take another look at the firm's history. Lewis has only been continuing a succession of CEOs determined to build Bank of America into the bank of America. Founder A.P. Giannini had to "fight and scrap through battle after battle" to expand the firm's reach and scope in the early 1900s. He says Lewis' immediate predecessor, Hugh McColl, had "the same vision, but never the same challenges."
But between those two leaders, the firm's growth dipped and peaked. It was held back at times by regulators who saw expanding market share as a danger to the financial system and a competitive threat, as well as by internal crises that forced BofA to sell assets to thwart hostile takeover bids in the 1980s. Eventually, McColl and Lewis built the firm back up to its current status as the
largest bank in the country. "Whenever a leader of Bank of America gets it almost to the point of achieving the founder's vision, they get slapped," Weindruch says. "A historian's advice to Mr. Lewis would be twofold: One, you're so close to maintaining the founder's vision that you should stay the course. But don't forget what happened to the founder's institution." Still, Weindruch is bearish on the CEO's prospects: "If I were a betting man, I wouldn't be betting on Lewis."