Ken Lewis Ousted As Bank Of America Chairman, John Thain Laughs Heartily From Park Bench
John Thain will be giggling into his Jobseekers Allowance this morning with the news that Ken Lewis, the Bank of America chief that oversaw the much-maligned Merrill takeover last year, has been ousted as chairman by angry shareholders. He stays on as CEO and president though.
After Barclays and Citigroup weathered their shareholder meetings without incident, despite their respective lack of shareholder deference and general incompetence, Ken might have thought he was going to get away scot free. And he had moments of glowing support – applause when he said he gave away more than he earned last year (nice way to deflect those early bonus payments); scourge of shareholder meetings Evelyn Y. Davis gave Ken her “full support”; and bozos too scared of change overused their aquatic metaphors – “When the water gets rough, do you take the man who knows the most about the problems and throw him overboard?”, “We really need leadership when the water gets rough”.
But nevertheless, the motion to split the CEO and chairman positions passed, and Ken finds his absolute grip on BoA compromised. Perhaps talking complete jive, like saying the government didn’t have a hand in the Merrill deal despite testifying to the contrary just a couple of months ago, annoyed everyone a touch. Saying that actually buying up the bank was “good value” and good idea in the long run, when it announced $15bn in losses after the deal and helped drag down the BoA share price by 77%, also can’t have gone down well with the shareholders who had their heads out of the sand.
Why would Ken gloss over how Paulson leaned on him to go through with the Merrill deal? Paulson didn’t want the bank to go the way of Lehman, and so gave BoA a $20bn bailout to help absorb it. At the time, Ken didn’t disclose how the government intervened, was forced to testify that they had, and is now going back to his original line that there wasn’t government intervention. The only explanation is that he doesn’t want to look weak in front of his shareholders, but it’s really not that shameful to buckle under the pressure of the US government, and while the takeover wasn’t great for BoA, it probably stopped another panic in the credit markets. It happened, Ken! The sooner you admit that, the sooner we can move on with our lives!
Of course, the shifting of positions could be seen as merely having “symbolic meaning”, as David Weidner suggests in today’s WSJ (he focuses instead on the potential storm of crazy unleashed by Morgan Stanley spinning off their trading division, worth a read). “It’s not particularly significant in terms of how the bank will continue to be run”, says one New York asset manager to Bloomberg. As for the board itself, they expressed “unanimous support” for Lewis continuing in his new roles.
But others are suggesting that it’s the beginning of the end for Ken. “This is an unambiguous vote of no confidence…Whether he chooses to remain as CEO or not, the dominant influence that he had at Bank of America is now a thing of the past”, Campbell Harvey, finance professor at Duke University, told Reuters. “It’s kind of the first step toward the end for Lewis…I just don’t think he’s going to last”, said portfolio manager Ralph Cole.
I wonder how much John Thain’s front page WSJ fightback on Monday affected things – it drew Lewis closer to the scandal that saw bonus payments made before the deal went through and those massive losses were announced. Of course, Thain wasn’t saying anything particularly new, but its interesting that he timed his refresher course just before the shareholder meeting. He’s got a partial victory at least, and potentially instilled a sufficient amount of doubt in Lewis’s abilities to eventually bring him down. Maybe he just wants him fired so he’s got someone to play chess and drink extra-strength cider in the park with.
Posted by Ben Beaumont-Thomas in Hot Money | April 30, 2009 11:03AM |