Texas Teacher Retirement System, Austin, and Ontario Teachers’ Pension Plan, Toronto, will vote against ratification of the Bank of America Corp. corporate bylaw amendment allowing the financial company’s board of directors discretion to determine its leadership structure on whether or not to have an independent chairman, said their proxy-voting disclosures.
In addition, Institutional Shareholder Services recommends its clients also vote against the ratification.
The C$154.4 billion ($116.2 billion) OTPP “believes that the separation of the chair and CEO is a fundamental corporate governance principle,” it said in a statement about its voting decision. “As leader of the board, the chair is responsible for setting the tone for the board and establishing the standard of an independent mindset. One of the most important roles of the board is to evaluate the CEO, and as the leader of the board the chair bears responsibility for this function creating, in our view, an inherent conflict of interest when the roles are combined. Given the integral role a chair has in the functioning of a board, we believe their independence is a critical minimum standard. Therefore, we do not support this proposed bylaw amendment.’
OTPP held 11.5 million Bank of America shares, as of June 30, according to its SEC filings. The OTPP’s shares were valued at $186.1 million as Tuesday’s closing price of $16.16 a share.
TRS had 8.1 million Bank of America shares as of last Friday, Howard Goldman, TRS’ director of communications, said in an e-mail. The TRS shares are valued at $132.4 million as of Tuesday’s closing price.
The $132.4 billion TRS “voted in accordance with the recommendation of our independent advisory service,” ISS, Mr. Goldman said.
An ISS report on its recommendation said the board’s naming of CEO Brian T. Moynihan as chairman last year unilaterally nullified an independent chairman requirement in the company's bylaws that was approved by shareholders in 2009. The invalidation “suggests that stronger independent board leadership is necessary,” the report said. “The board should restore the independent chairman requirement so that shareholders might benefit from the strongest form of independent oversight as the company continues to address operational and performance issues.”
Bank of America’s “share price is essentially flat during Moynihan’s tenure as CEO, and it remains far below its pre-crisis levels, leaving many longtime investors underwater,” the report said.
“This proposal is ultimately a referendum on the board, not on Moynihan as CEO or chairman,” the report said.
Lawrence Grayson, Bank of America spokesman, said in an e-mail, “The board is asking for the same flexibility that 97% of the S&P 500 (companies) already have in determining its leadership structure. The authority, duties and responsibilities of our lead independent director extend beyond industry practice and expectations. Also … the board continues to adopt corporate governance enhancements through engagement with stockholders and in direct response to stockholder feedback. The board recognizes and respects that some have a fixed view on board leadership structure and others hold differing views, which is why the board committed to putting it to a vote.”
Bank of America, which has 10.4 billion common shares outstanding, has scheduled its special meeting for Sept. 22.