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| Jonathan Weil: Bank of America owners declare war on taxpayers |
| Jonathan Weil / May 03, 2009, 00:59 IST |
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The votes are in at Bank of America Corp. And the message to America is unmistakable: It’s them versus us. The big news from Bank of America’s annual meeting this week was that a majority of shareholders are content with the performance of the company’s directors. All 18 of them, including CEO Kenneth Lewis, were re-elected with at least 63 per cent of the votes cast. All except Lewis and lead director Temple Sloan got more than 72 per cent. This outpouring of satisfaction leads to a question surely on many good citizens’ minds: What in heaven’s name could the geniuses who voted for these people have been thinking?
The same goes for the shareholders who cast their ballots last week to re-elect all of Citigroup Inc’s directors, each with more than 70 per cent of the vote. Even Citigroup’s CEO, Vikram Pandit, got a decisive majority. Almost two years into America’s great financial fondue, we still haven’t tamed our nation’s systemically dangerous banks. That’s not just the fault of captive banking regulators or the people who run the banks. The shareholders who own the banks are just as much to blame.
KEEP THE BUMS
Sure, Lewis is now out as chairman of Bank of America’s board, after a bare 50.3 per cent of votes were cast in favour of splitting the bank’s chairman and CEO positions. Yet far from a revolt, this was more like throwing the bums in. Lewis’s replacement as chairman, Morehouse College President Emeritus Walter Massey, has been on the bank’s board since 1998.
These votes were the best chance we had for a taste of accountability at Citigroup or Bank of America, which together have received $90 billion of taxpayer bailout money. The banks’ shareholders rose to the challenge by flipping us all the bird. It’s not as if anyone was asking them to place the country’s needs ahead of their own. No, the worst part is that so many of them were too lazy or stupid to vote in their own best interests. Who in their right mind could be satisfied with the boards of Citigroup or Bank of America, which in the past year have destroyed most of their stock-market value, and turned their brand names into household curse words?
DON’T ROCK THE BOAT
There are some logical, if cynical, explanations. Perhaps some shareholders feel fortunate to have anything left of their stakes at all, and decided to reward the banks’ directors for driving such hard bargains with the taxpayers. Or maybe a bunch of institutional investors that do business with the banks, such as brokerage firms that vote their customers’ proxies, chose not to risk retaliation by rocking the boat.
The good-governance pundits say we should take note of all the votes withheld from the companies’ board members as a sign of restlessness. Charles Elson, the oft-quoted director of the John L Weinberg Center for Corporate Governance at the University of Delaware, told Bloomberg that the size of the opposition to Lewis and Sloan “symbolises the deep level of discontent with the management of the company” and that shareholder activists had “made their point.” The main point I see, however, is that the majority of these banks’ shareholders need to have their heads examined.
They have to know they face even more dilution of their stakes because the banks probably don’t have enough capital to avoid returning to the bailout trough. And Bank of America’s shareholders must remember how Lewis’s board royally hosed them in December, by not disclosing the 11-figure losses at Merrill Lynch & Co until after the purchase was completed. Or maybe not. I’m all for shareholder rights and protecting investors from wayward managers and boards. This time, however, the investors needing protection are the American people, who seem destined to become the majority owners of these banks. The rest of the shareholders at Citigroup and Bank of America are lucky they haven’t been wiped out already. They certainly deserve to be now.
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