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Bloomberg, May 1, 2009 column



Jonathan Weil


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 Citigroupís CEO, 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 restlessness. 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 their point.Ē

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 be now.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Jonathan Weil in New York at

Last Updated: May 1, 2009 00:01 EDT





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