Bank of America Corp. shareholders Tuesday ratified a corporate bylaw amendment allowing the financial giant’s board of directors the discretion to determine its leadership structure, allowing it to combine the roles of chairman and CEO, according to preliminary results announced at the company’s special meeting.
The vote, with 63% in favor, overcame opposition from major North American pension funds as well as proxy-voting advisory firms.
The C$268.6 billion ($203 billion) Canada Pension Plan Investment Board, Toronto, disclosed Tuesday it had voted its 50.4 million Bank of America Corp. shares, valued at $780.8 million in midday trading Tuesday, against ratifying the company’s bylaw amendment, joining other large pension funds.
Other pension funds voting against the amendment include the $292.2 billion California Public Employees’ Retirement System, Sacramento, with 34.5 million shares; $184 billion California State Teachers’ Retirement System, West Sacramento, with 19.1 million shares; $173.7 billion Florida State Board of Administration, Tallahassee, with 21.7 million shares; New York City Retirement Systems, whose combined assets total $165.5 billion, with 25.2 million shares; $132.4 billion Texas Teacher Retirement System, Austin, with 8.1 million shares; C$154.4 billion Ontario Teachers’ Pension Plan, Toronto, with 11.5 million shares; and $90 billion North Carolina Retirement Systems, Raleigh, with 9.5 million shares.
Proxy advisory firms Institutional Shareholder Services and Glass Lewis & Co., both recommended institutional investor clients votes against ratifying the amendment.
Bank of America has 10.4 billion shares outstanding, according to its proxy statement.
Michael McCauley, FSBA senior officer-investment programs and governance, said in an e-mail: “We are disappointed with the voting results, but remain hopeful the board will consider the recent investor feedback and apply it to any future board changes.”
The pension fund opposition was generally characterized in a joint letter Sept. 1 to the Bank of America board from Anne Simpson, CalPERS’ investment director, global governance, and Anne Sheehan, CalSTRS’ director of corporate governance, who wrote, “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. Given these missteps, we do not believe now is the time to reduce oversight of management by combining the roles of CEO and chair.”
The company called the special meeting to ask shareholders to ratify the bylaw amendment the board adopted unilaterally last year when it named Mr. Moynihan chairman to recombine the position of chairman and CEO and tossed aside a 2009 shareholder adopted bylaw that separated the roles.
Matthew Orsagh, director of capital markets policy at the CFA Institute, called the 37% opposition vote significant, saying management proposals typically get about 95% of the vote.
“The board will have some fence-mending to do with shareholders,” Mr. Orsagh said.
“The issue of combining the chair and CEO (roles) is secondary,” Mr. Orsagh said. “This is more of an issue about engagement and communication” between the board and shareholders. “That didn’t happen.”
“The board should take lessons from this (vote) to understand what their shareholders care about as far as governance is concerned and talk with them and engage with them,” Mr. Orsagh added.
“We held today’s vote in direct response to extensive shareholder engagement,” said Jack O. Bovender Jr., lead independent director, in a Bank of America statement. “We appreciate the opportunity so many of our shareholders gave us to discuss this issue, and our board looks forward to continuing this constructive engagement.”
Mr. Moynihan said in the statement, “We are pleased our shareholders had the chance to express their views, and we appreciate their support to continue driving our company forward for them and for our customers and clients.”