In hindsight, Bank of America (NYSE:BAC) seems to acknowledge that it's decision last October to appoint CEO Brian Moynihan to the chairman of the bank's board of directors was overly hasty.
In a statement filed with the Securities and Exchange Commission on Monday, the nation's second biggest bank by assets said it will now open the decision up to a shareholder vote scheduled to occur "no later than [the bank's] 2016 annual meeting of stockholders."
The bank's decision to give Moynihan the chairmanship raised eyebrows from investors and analysts alike last year. Underlying the controversy is the fact that, in 2009, Bank of America's shareholders voted to amend the bank's bylaws to require an independent chairman.
In its latest proxy statement, which covers governance issues such as executive compensation and the election of board members, Bank of America defended the move by saying that the circumstances under which the 2009 vote occurred are no longer relevant.
"Our company today, compared with 2009, has evolved significantly," the bank explained. It cited the evolution of its board of directors, which includes 13 independent directors, eight of whom joined the board in the last three years. It also pointed out that under Moynihan's stewardship "the company has rebuilt capital and liquidity, streamlined and simplified its operations, reduced the scope of activities by exiting non-care businesses and products, stabilized performance, increased the return of capital to stockholders, settled its most significant legacy mortgage-related litigation matters, and reduced expenses."
But while the North Carolina-based lender has made progress over the last few years, it's also important to keep in mind that Moynihan's record as CEO isn't unblemished.
Its return on equity is still far below its cost of capital. Its expenses are still embarrassingly high. And it has consistently struggled with the annual stress test administered by the Federal Reserve. In 2014, it had to resubmit its capital plans after discovering a mistake in the way it calculated its capital ratios. And it must do the same again this year to address "deficiencies in its capital planning process."
It's worth pointing out, moreover, that, while Moynihan has adequately manned the ship at Bank of America since 2010 -- though, given the bank's unique plight, we have few benchmarks against which to judge his performance -- there's little to no evidence, outside his incumbency, to suggest he's the right person to lead the nation's second largest bank by assets.
There's little doubt that he's incredibly smart. And, there's also little doubt that having a lawyer manning the ship has been convenient given Bank of America's legal liabilities stemming from the financial crisis. But merely being smart doesn't mean that someone is a good banker, which is more about temperament and business acumen. And, although his legal expertise likely played a prominent role in past few years, it seems safe to assume (at least hopefully!) that it won't be as prevalent of an issue going forward.
The net result is that, given the opportunity, shareholders should think long and hard about whether or not to vote in favor of Moynihan's dual role as chairman and CEO or against it. I, for one, am ambivalent. But, then again, I believe most individual investors should avoid its stock in the first place.