Bank of America resisting shareholders on executive pay
Since Brian Moynihan took over as chief executive at Bank of America Corp. at the turn of the year, he has sought to convey a flexible and cooperative attitude.
But the accommodating approach hasn’t been extended to shareholders seeking to put proposals regarding executive pay on the ballot at the company’s April 28 annual meeting.
The bank is “being aggressive in doing whatever they can do to keep shareholders off the ballot,” said John Chevedden of Redondo Beach, a retired aerospace worker who has proposed a number of shareholder resolutions at banks.
The company’s stance is especially notable because other giant financial firms have been unexpectedly willing to allow votes this year on executive-pay proposals.
Those other banks “have been eager to deal with the concerns and the public outcry about what people saw as outsized pay packages,” said Meredith Miller, Connecticut’s assistant treasurer for policy.
Shareholder resolutions often have been given little chance of success, with their proponents dismissed as gadflies or political activists with a liberal, pro-labor agenda. But that has begun to change as investors have become more organized and politicians of all stripes have taken up populist bank-bashing in the wake of the financial crisis.
Last spring, a shareholder vote forced Moynihan’s predecessor as CEO, Ken Lewis, to give up his post as chairman. That episode may explain the bank’s efforts this year to keep other measures off the ballot, said Carol Bowie, who follows shareholder votes for research firm RiskMetrics Group.
“They are well aware that they are under scrutiny,” Bowie said, “and that there may be shareholders voting out of their discontent.”
One of the largest recipients of federal bailout money, Bank of America has been dogged by criticism, especially over its purchase of Merrill Lynch & Co. at the height of the financial crisis.
The company was accused by the Securities and Exchange Commission of lying to shareholders about the Merrill deal. On Monday a federal judge approved a settlement of the SEC’s lawsuit; a similar suit brought by New York Atty. Gen. Andrew Cuomo is pending.
Since becoming CEO, Moynihan has made an effort to engage regulators and lawmakers in Washington. He said this month that BofA wouldn’t fight President Obama’s proposal to create a consumer financial protection agency, something other banks are trying hard to thwart.
But under Moynihan the bank also has asked the SEC to block all six resolutions regarding executive pay that have been proposed by BofA shareholders, according to SEC data. Other major banks have agreed to put one or more pay-related resolutions on their ballots. Also unlike other banks, BofA hasn’t tried to open a dialogue regarding the resolutions it disagrees with, investor activists say.
“The new CEO has an opportunity here, which he has so far not taken, to really open up discussion, as have other banks,” said Andy Stern, president of the Service Employees International Union.
A Bank of America spokesman declined to comment on the firm’s approach to shareholder resolutions.
One of the measures proposed by investor activists at BofA and other financial firms would give shareholders a formal advisory vote on a company’s executive compensation plan. Legislation passed by the House last fall to overhaul the financial industry would mandate such a vote, known as a “say on pay,” at financial firms. Investors including the California Public Employees’ Retirement System, or CalPERS, wrote to 17 financial firms last month requesting say-on-pay votes.
Last year, BofA was required to hold a say-on-pay vote because it owed the government money received under the Troubled Asset Relief Program. The company’s just-approved settlement with the SEC requires it to include a “say on pay” provision on its ballot for the next three years.
Nevertheless, when a shareholder this year proposed a resolution that would make a say-on-pay vote a permanent feature, the bank sent the SEC a 10-page letter asking the agency to block the proposal.
“They went out and paid lawyers to resist this, when they probably could have called the investor and had a discussion, and saved themselves a few billable hours with their lawyers,” said John Keenan, who works on investor issues at the American Federation of State, County and Municipal Employees.
By contrast, a group of Goldman Sachs Group Inc. shareholders withdrew a resolution on executive compensation after the firm said it would allow a say-on-pay vote. Some other banks including JPMorgan Chase & Co. and Bank of New York Mellon Corp. have since also agreed to put their pay packages up for a vote.
Another resolution opposed by Bank of America, brought by the AFL-CIO, seeks to have the company disclose how much of its executive pay is not tax-deductible. The company called the measure “false and misleading,” but the SEC sided with the union this month and said the resolution should go to a vote. Goldman Sachs, Morgan Stanley, Citigroup Inc. and Wells Fargo & Co. are allowing similar resolutions on their ballots.
Richard Metcalf, director of corporate affairs at the Laborers Union, called BofA’s response disheartening.
“One would think after the last year or so,” he said, “that there would be some recognition that the way they were doing business was not sustainable.”