Bank of America
Owners Declare War on Taxpayers: Jonathan Weil
Commentary by Jonathan Weil
May 1 (Bloomberg) -- The votes are in at Bank of America Corp. And
the message to America is unmistakable: Itís them versus us.
The big news from Bank of Americaís annual meeting this week was
that a majority of shareholders are content with the performance of
the companyís directors. All
18 of them, including Chief Executive Officer
Kenneth Lewis, were re-elected with at least 63 percent of the
votes cast. All except Lewis and lead director
Temple Sloan got more than 72 percent.
This outpouring of satisfaction leads to a question surely on many
good citizensí minds: What in heavenís name could the geniuses who
voted for these people have been thinking?
The same goes for the shareholders who cast their ballots last week
to re-elect all of Citigroup Inc.ís
directors, each with more than 70 percent of the vote. Even
Vikram Pandit, got a decisive majority.
Almost two years into Americaís great financial fondue, we still
havenít tamed our nationís systemically dangerous banks. Thatís not
just the fault of captive banking regulators, or cash-craving
congressmen, or willfully blind credit-rating companies, or the people
who run the banks. The shareholders who
own the banks are just as much to blame.
Keep the Bums
Sure, Lewis is now out as chairman of Bank of Americaís board,
after a bare 50.3 percent of votes were cast in favor of splitting the
bankís chairman and CEO positions. Yet far from a revolt, this was
more like throwing the bums in. Lewisís replacement as chairman,
Morehouse College President Emeritus
Walter Massey, has been on the bankís board since 1998. Doing
what, exactly, is far from apparent.
These votes were the best chance we had for a taste of
accountability at Citigroup or Bank of America, which together have
received $90 billion of taxpayer bailout money. The banksí
shareholders rose to the challenge by flipping us all the bird.
Itís not as if anyone was asking them to place the countryís needs
ahead of their own. No, the worst part is that so many of them were
too lazy or stupid to vote in their own best interests.
Who in their right mind could be satisfied with the boards of
Citigroup or Bank of America, which in the past year have
destroyed most of their
stock-market value, crawled like beggars in search of government
rescue money, and turned their brand names into household curse words?
Donít Rock Boat
There are some logical, if cynical, explanations. Perhaps some
shareholders feel fortunate to have anything left of their stakes at
all, and decided to reward the banksí directors for driving such hard
bargains with the taxpayers. Or maybe a bunch of institutional
investors that do business with the banks, such as brokerage firms
that vote their customersí proxies, chose not to risk retaliation by
rocking the boat.
The good-governance pundits say we should take note of all the
votes withheld from the companiesí board members as a sign of
Charles Elson, the oft-quoted director of the John L. Weinberg
Center for Corporate Governance at the University of Delaware,
told a Bloomberg News reporter that the size of the opposition to
Lewis and Sloan ďsymbolizes the deep level of discontent with the
management of the companyĒ and that shareholder activists had ďmade
The main point I see, however, is that the majority of these banksí
shareholders need to have their heads examined.
They have to know they face even more dilution of their stakes
because the banks probably donít have enough capital to avoid
returning to the bailout trough. And Bank of Americaís shareholders
must remember how Lewisís board royally hosed them in December, by not
disclosing the 11-figure losses at Merrill Lynch & Co. until after the
purchase of Merrill was completed.
Or maybe not. Iím all for shareholder rights and protecting
investors from wayward managers and boards. This time, however, the
investors needing protection are the American people, who seem
destined to become the majority owners of these banks.
The rest of the shareholders at Citigroup and Bank of America are
lucky they havenít been wiped out already. They certainly deserve to
Weil is a Bloomberg News columnist. The opinions expressed are his
To contact the writer of this column: Jonathan Weil in New York at
Last Updated: May 1, 2009 00:01 EDT