Four months after Bank of America CEO Kenneth Lewis agreed to buy Merrill Lynch and cap a four-decade career at the nation's largest bank, Lewis is under pressure from investors.
Bank of America Chief Executive Kenneth Lewis often made the same joke at management retreats. Eyeing top officers, he called them the best in the world. After a beat he added that if they weren’t, he’d go hire the best.
The response usually was nervous laughter, say bank executives.
The joke may be on Lewis and Bank of America, which has gone through four finance chiefs and five heads of investment banking since Lewis, 61, succeeded Hugh McColl Jr. in 2001.
Lewis’ go-it-alone style means he has few defenders inside the company, said David Watterworth, a 27-year bank veteran and former executive vice president who took early retirement in 2001.
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“Ken has tended to surround himself with people who agreed with him,” Watterworth said. “McColl used to drink beer with his team after work; Lewis prefers to keep to himself.”
Four months after he agreed to buy Merrill Lynch and cap a four-decade career at the nation’s largest bank, Lewis is under pressure from investors.
“Ken Lewis should step down,” said Stephen Lerner, assistant to the president of the Washington-based Service Employees International Union, whose pension fund owns about $900,000 of Bank of America stock.
“He’s made some incredibly poor judgments. His public image has been stained,” said Arthur Levitt, a former U.S. Securities and Exchange Commission chairman. “Can the company sustain the sort of damage their leader has endured? I don’t think so.”
(Levitt is a board member of Bloomberg LP, the parent company of Bloomberg News.)
The Charlotte, N.C.-based bank lost $1.79 billion in the fourth quarter — even excluding $15.3 billion in losses from Merrill — and received a $138 billion package of new capital and asset guarantees from the U.S. government.
The board cut the quarterly dividend to 1 cent from 32 cents Jan. 16, saying it needed to preserve capital, and the stock is near a 20-year low.
“The animus toward Ken in the market is remarkable, and he’s done if the stock price stays at this level,” said Tony Plath, a finance professor at the University of North Carolina in Charlotte who has followed the bank for 20 years.
He’s a fighter
Lewis is no stranger to dust-ups. He told an interviewer in 2004 that his earliest fight came at age 5, when twin boys ganged up on him in Heidelberg, Germany, where his father was stationed in the Army. Lewis’ mother told the twins they’d have to fight him one at a time.
“I won both fights, by the way,” he told Daniel S. Morrow, then executive director of the Computerworld Honors Program, who recorded Lewis’ oral history after the banker received a management award from the Framingham, Mass., foundation.
That competitive spirit helped persuade McColl to choose Lewis as successor, said Rusty Page, a former investor-relations director who left Bank of America in 1996.
McColl, who built the bank through acquisitions over 20 years, often relied on Lewis to manage acquired operations.
Lewis impressed his boss with his zeal in an early 1980s Central Park softball game against then-much larger Citigroup, Page recalled.
Lewis wasn’t bashful about sliding into bases with cleats held high. The Charlotte bank won.
“You could see the gleam in both of McColl and Lewis’ eyes,” Page said.
McColl didn’t return calls seeking comment.
While both men were ambitious and aggressive, they had opposite personalities, said Watterworth, the former bank executive. McColl is talkative and a good listener, he said. Lewis is quiet and analytical.
At a public event at Queens University of Charlotte in 2007, Dennis Thompson, a co-founder of the Lone Star Steakhouse chain and a friend of Lewis’, said it was too bad one title for the banker’s autobiography had been taken: “In Cold Blood.”
In October 2007, after $1.4 billion in third-quarter trading losses related to the housing crisis, Lewis ousted investment-banking chief Gene Taylor, who had been with Bank of America for 38 years. Taylor didn’t return calls seeking comment.
“Everybody viewed Gene as probably Ken’s best friend next to Steele Alphin, so his removal showed that Ken would push aside the people who would have walked through the wall for him,” Watterworth said. “Ken’s management style is Ken’s way.”
Until the credit crisis, Lewis’ way was improving the bank’s stock price. Between April 2001 and November 2006, the shares doubled as he expanded the bank with acquisitions, paying $48 billion for regional lender FleetBoston Financial and $34 billion for credit-card issuer MBNA.
Lewis was raised by his mother, a registered nurse, after his parents’ divorce and has said he once sold shoes for 12-cent commissions. He earned $24.8 million in total compensation in 2007, according to a regulatory filing.
The CEO and wife Donna live in an 8,537-square-foot home in Charlotte valued at $1.87 million, property records show. They own vacation homes in Aspen, Colo., and Blowing Rock, N.C.
Lewis has owned sports cars including a 2008 Mercedes-Benz two-seater, a 2007 Porsche 911 Turbo and a 2003 Porsche 911, according to state registration records.
Last year, Lewis bought ailing mortgage lender Countrywide Financial and agreed to acquire Merrill for $29 a share the same day rival broker Lehman Brothers Holdings filed for bankruptcy.
If he’d waited, he might have bought Merrill for far less, according to a Jan. 22 lawsuit filed by investor Nancy Rothbaum in Delaware Chancery Court.
Lewis wants shareholders to be patient.
“This company will generate huge amounts of profit when we get a normal economic environment,” he said in a Jan. 16 conference call with investors and analysts. “Not even a great one, just a normal one.”