Does Ken Lewis Survive At B of A Past Wednesday? (BAC, C)

Wednesday will potentially mark the apex for the scandals and controversy surrounding Bank of America Corporation (NYSE: BAC) as far as its role in Merrill Lynch bonuses, whether Ken Lewis (and/or other managers) get to stay on, whether mergers were forced, TARP acceptance, strange acquisitions, and other controversies regarding B of A.  The company’s Annual Shareholder Meeting where investors have their one day of the year where they have a say for what goes on inside the company.  This will take place at 10:00 AM EST and the webcast landing page notes that it should last approximately two hours.  Potentially the largest question at stake is around the future of Chairman & CEO Ken Lewis.

In recent weeks, RiskMetrics/ISS Governance Services recommended that its clients vote against Lewis, lead director Temple Sloan, and other directors.  Investor advisory group Glass Lewis recommended shareholders vote against Bank of America’s Lewis to the bank’s board, and CTW also reiterated its opposition to Lewis.

If you trust the “predictions marketplaces” there is a score of only 25 Bid, 30 offer at INTRADE that Ken Lewis will depart as CEO of Bank of America before midnight EST on June 30, 3009.  That implies a mere 27.5% chance at the mid-point of the range that Lewis will be gone.

But the notion that this stress test is showing that Bank of America and Citigroup, Inc. (NYSE: C) both need to raise additional capital could act as a catalyst that goes above and beyond the recent developments.  CEO Vikram Pandit recently survived a shareholder vote, and by a rather large margin when you consider how Citi has been a disaster.

Lewis has said on multiple occasions that Bank of America does not need to raise new capital.  But last night’s news report that B of A needs more capital could raise more last-minute questions.  If that capital that needs to be raised comes from Uncle Sam, then Lewis could at least potentially be forced out by regulators and/or lawmakers.  Otherwise, Lewis is likely to be kept in place for another year.  At least as long as new issues do not arise.

Considering how so many shareholders do not even vote, we’d expect that a large majority keeps Ken Lewis in as Chairman.  CalPERS is now reportedly voting its 22.7 million shares against Lewis and all 18 directors of the bank.

JON C. OGG