B of A Seeks Liability Exemption for Directors
BankAmerica, citing “difficulties in attracting qualified directors,” has asked its shareholders to relieve board members of liability to the corporation and its shareholders in instances of “gross negligence in performance of their duties.”
BankAmerica also asked shareholders to authorize the issuance of new securities that could be used “to make more difficult a change in control” of the company. BankAmerica recently fended off an unwanted takeover attempt by First Interstate Bancorp of Los Angeles.
The proposed changes were included in a proxy statement, dated Friday, for BankAmerica’s annual meeting May 28.
The parent of loss-ridden Bank of America also asked shareholders to retroactively enhance the rights of BankAmerica officers and directors to indemnification by the company in the event they incur personal liability or expense as a result of certain litigation against them.
BankAmerica said it proposed the new provisions to take advantage of recent changes in Delaware corporate law. BankAmerica, like many major companies, is incorporated in Delaware. “Virtually all the big bank holding companies are doing this,” BankAmerica spokesman Peter Magnani said.
“It is in the shareholders’ interest that we be able to attract and retain qualified directors,” he added.
BankAmerica said it believes that the new provisions would eliminate a shareholder’s right to sue directors for monetary damages in connection with breaches of fiduciary duty--including gross negligence--in connection with takeover and merger proposals involving the company.
Richard D. Greenfield, a Pennsylvania lawyer who has two lawsuits pending against BankAmerica’s officers and directors, agreed that the changes proposed by BankAmerica were “largely standard.”
The proposals, he added, “are consistent with the attitude taken by the Delaware Legislature in its attempt to keep corporations incorporated there.”
Still, Greenfield asserted that “without a full and fair disclosure relating to the board’s culpability for prior events, any vote on the proposed changes will be tainted” and, in his view, not enforceable.
“If you are asking someone to pardon your future activities, you should at least confess to your wrongdoing in the past,” Greenfield said.
If the proposed changes are enacted, directors would remain liable for breaches of their duty of loyalty to the corporation and its shareholders, as well as for acts--or omissions--not in good faith or involving intentional misconduct.
The proxy statement also discloses that BankAmerica, whose directors’ and officers’ liability insurance policy was canceled in 1985, was able to obtain a new policy late last year through a mutual insurance company created to provide insurance for banks.
The new coverage is in addition to self-insurance provided by an insurance company owned by BankAmerica in the Cayman Islands.
The substitute coverage, BankAmerica said, “involves substantially higher premiums, higher deductibles and less coverage.”
Some 20 lawsuits alleging mismanagement and other charges have been filed against BankAmerica’s officers and directors in recent years, though some have been consolidated or dismissed.
The proxy statement also asked BankAmerica’s shareholders to increase the authorized number of common shares to 300 million from 200 million and to boost the authorized number of preferred shares to 50 million from 20 million.
The company said such increases would give the company “greater flexibility” in future financings.
BankAmerica also acknowledged that “under certain circumstances,” authorized but unissued shares “could be used to create voting impediments or to frustrate persons seeking to effect a takeover or otherwise gain control” of the corporation.
