China's stock market was quieter on Wednesday, and U.S. stocks are eking out more gains: The Dow Jones Industrial Average (^DJI -3.57%) and the benchmark S&P 500 index (^GSPC -4.04%) are up 0.35% and 0.38%, respectively, at 1:20 p.m. EDT.
Bank of America's efforts to maintain CEO Brian Moynihan in his role as chairman of the bank's board has suffered another setback as proxy advisory company Glass Lewis recommended shareholders vote against a proposal this month to allow the dual role.
B of A's board elected Moynihan to the chairman's role on Oct. 1 last year. The "promotion" was announced without any justification in a press release. The announcement did not specify that the election was only possible after the board approved a change to the bank's corporate bylaws, which had previously required the chairman to be "independent" of the company. That change was revealed in a user-unfriendly filing with the Securities and Exchange Commission.
Shareholders approved the requirement to split the roles in a 2009 vote at the apex of the financial crisis; despite this, the board somehow thought it was appropriate to reverse that vote without any consultation, even informal, with shareholders.
The board was then forced to put the dual role to a shareholder vote once large shareholders voiced their discontent (of course, the dual role was by then a fait accompli).
I agree with my Foolish colleague John Maxfield that this month's vote isn't a referendum on Moynihan's job performance. This is how Berkshire Hathaway CEO Warren Buffett rated that performance at the beginning of 2012 (my emphasis):
I think [Brian Moynihan] got handed a terrible situation, with all of the problems -- particularly of Countrywide more than anything else, but some of their own, too. So he was handed a mess. [...] And what he has done is he's working through the problems he inherited, and you can't do them in a day or in a week or a month, particularly ones that involve litigation. He's pared off some of the assets that aren't central to it. He's done exactly what I would do if I was in there.
Berkshire is one of B of A's largest shareholders following a $5 billion "Buffett seal of approval" preferred share investment in 2011. Another large shareholder, CalSTRS, has also praised Moynihan.
My cursory review of the literature suggests that the evidence regarding the impact of combining the roles of chairman and CEO on corporate performance is mixed. As such, I'm willing to acknowledge that it is neutral, on the whole. However, I think there is a stronger rationale for splitting the roles at Bank of America than at almost any other company. Why?
The financial crisis proved in a spectacular fashion that banks, and particularly large banks, play a critical role in the economy... and can represent a substantial threat. As a so-called "global systemically important institution" (G-SSI), B of A is at the heart of that concern. Its status as a G-SSI demands unusual care in terms of independent oversight; an independent chairman is obviously better suited to supporting that imperative.
Would an independent chairman of the board have curtailed former CEO Ken Lewis' unbridled empire-building and prevented B of A from going to the brink of collapse during the crisis? Maybe, maybe not -- we'll never know. One thing we do know: Chairman of the board Ken Lewis was not going to be the one to restrain CEO Ken Lewis.