Bank of America had a chance to stand up for good corporate governance — and send a positive signal to taxpayers. The message to both: drop dead.
The all-American cult of the imperial chief executive was bolstered today when Brian Moynihan won a vote to remain both chairman and CEO of Bank of America.
The bank’s shares fell 1.27 percent after the decision.
The best corporate governance separates the two roles. The CEO is the head of management, accountable to a board of directors overseen by an independent chairman, representing shareholders — in the best of circumstances, stakeholders, too.
An independent chairman and board hold the CEO and management accountable. They even — how quaint — prevent the good ole boys/girls club on the compensation committee from awarding outrageous pay to the top. That’s the way it’s supposed to work.
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And indeed, BofA shareholders passed a resolution in 2009 requiring an independent chairman for this troubled TBTF institution, which paid $70 billion in fines to settle lawsuits for behavior arising out of the financial meltdown — and might have faced worse had the Obama administration applied the rule of law to the banking industry and Wall Street. Among these was a record fine for knowingly selling toxic subprime mortgages to investors.
But in the fall of 2014, the board quietly revoked the bylaw and named Moynihan both chairman and CEO.
The move, along with the bank’s missteps, caused a shareholder revolt — and not merely among the usual nuns and do-gooders. The New York City Employees’ Retirement System, the Illinois State Board of Investment, Ferguson Wellman Capital Management and the powerful Calpers, the California Public Employees’ Retirement System all wanted the jobs split.
Even this was not enough to overcome the entrenched system of executive featherbedding.
More than shareholders lose. Not one of the Too Big to Fail banks has a separate chairman. So taxpayers and the economy will continue to be held hostage to the whims of these unaccountable moguls.
A small but telling footnote: Moynihan, who cut his teeth at FleetBoston before it was eaten by Hugh McColl Jr.’s merger machine, doesn’t even live in Charlotte, BofA’s headquarters city. He’s said not to like it, and has been shifting his top reports to New York. This is especially lamentable for a city that owes its sparkling center city and decades of philanthropy to BofA and its predecessors.
McColl, for all his faults and role in pushing TBTFs, deeply loved Charlotte and was invested in the city’s health. It was not unusual to see him, even at the height of his power, walking downtown, no bodyguards. Now, like all his fellow oligarchs, Moynihan is a citizen of nowhere.
Today’s Econ Haiku:
World’s eyes are on us
And Seattle’s reaction?
The traffic is worse