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Florida SBA to engage Bank of America on separating CEO, chairman roles

CalPERS, CalSTRS say positions shouldn't be combined

5. Bank of America
$30.4 billion

Florida State Board of Administration officials plan to meet with Bank of America Corp. management on Wednesday to discuss the company’s proposal seeking shareholder approval of a corporate bylaw amendment allowing the board of directors discretion to determine its leadership structure on whether to have an independent chairman, said Dennis D. MacKee, FSBA communications director.

Michael P. McCauley, senior officer, investment programs and governance of the Tallahassee-based FSBA, which oversees $173.2 billion, and his staff have scheduled a discussion on the issue by phone with Bank of America management.

Mr. MacKee didn’t have the names of the management participants.

“We haven’t made a decision yet” on how FSBA will vote its Bank of America shares, Mr. MacKee said.

”Our proxy-voting guidelines generally support an independent structure” but Mr. McCauley and his team make decisions on a case-by-case basis, Mr. MacKee said.

FSBA holds 21.6 million voting shares, Mr. MacKee said. The shares are valued at $337 million based on the Bank of America’s $15.58 a share closing price Tuesday.

The $292.9 billion California Public Employees’ Retirement System, Sacramento, and $191.3 billion California State Teachers’ Retirement System, West Sacramento, sent a joint letter Monday to Jack O. Bovender Jr., lead independent director at Bank of America, declaring their “intention to vote against the board’s amendment” to the company’s bylaw, “which would provide for either an independent chair or a lead independent director.”

“We believe the roles of CEO and chair of the board have inherent conflicts, which require the two posts to be separate and independent. Since (Brian T.) Moynihan’s appointment as CEO in January 2010, the company has continued to underperform, has failed important Fed stress tests, and has perpetuated a subpar engagement with its shareholders,” said the letter from Anne Simpson, CalPERS’ investment director, global governance, and Anne Sheehan, CalSTRS’ director of corporate governance. “Given these missteps, we do not believe now is the time to reduce oversight of management by combining the roles of CEO and chair.”

Shareholders voted in 2009 to separate the roles but the Bank of America board in October changed the company’s bylaws without seeking shareholder approval to name Mr. Moynihan chairman.

CalPERS and CalSTRS hold a combined 63.6 million Bank of America shares, valued at $990 million, the letter states.

CalPERS and CalSTRS spokesmen would not comment further.

CtW Investment Group urged shareholders to vote against Bank of America’s proposed amendment, according to a letter to shareholders filed Aug. 28 with the Securities and Exchange Commission.

“CtW Investment Group works with pension funds sponsored by unions affiliated with Change to Win, a federation of unions,” the letter said.

Berkshire Hathaway Inc. is effectively Bank of America’s largest holder, according to the Bank of America proxy statement. But Berkshire Hathaway has no voting rights. In 2011, Berkshire Hathaway bought $5 billion in Bank of America 6% preferred stock that came with warrants allowing Berkshire Hathaway to buy 700 million common shares at $7.14 per share any time before Sept 2, 2021, according to Berkshire Hathaway’s 2011 annual report.

Those common shares are valued at $10.9 billion.

In Berkshire Hathaway’s annual report, Warren E. Buffett, chairman and CEO, said, “We are likely to purchase the shares just before expiration of our option.”

Berkshire Hathaway spokesmen couldn’t be reached for comment.

Lawrence Grayson, Bank of America spokesman, said in an e-mail, “The board believes that having the same flexibility on board leadership that 97% of the S&P 500 now have, while still providing strong independent oversight, is in the best interest of stockholders. No company has dug out of a deeper hole since the financial crisis, turned back to health with solid earnings, and accumulated record levels of capital and liquidity — all to the benefit of our shareholders. The board respectfully recognizes that stockholders hold varying views on this matter, which is why the board committed to putting it to a vote.”

The Bank of America special meeting is Sept. 22.