Ken Lewis Keeps His Day Job (BAC)

Ken Lewis got a slap on the hand. Shareholders of Bank of America (BAC) voted to separate the chairman’s role from the CEO’s and the bank’s board was forced to elect a new chairman, Walter E. Massey, a college president who has been on the firm’s board for so long that he is as responsible for the bank’s trouble as anyone else involved in the company’s governance.

Despite some brief humiliation, Lewis got the one things he wanted: he still runs Bank of America and has a rubber-stamp board that supports him.

Lewis is a narcissist and a coward who spends as much of his time as possible defending himself in the media. He tried to excuse the mistake of buying Merrill Lynch by saying that the government forced him to close the transaction. As the sitting head of a public company he should not have agreed to the request if he believed it was not in the best interests of the bank.

Lewis has also been heavily criticized for putting the bank in a financial position where it is unlikely to pass the government’s bank stress test which means it will have to raise more money. Among other things, this will dilute common shareholders and may even jeopardize the value of some of the bank’s bonds.

The B of A board must have made its decision to keep Lewis based on one of two things. The first is that he did the best he could with a difficult set of circumstances that face most large banks. The second is that no one else would take the job. Lewis can fairly make the claim that B of A shareholders have not done too badly since the Merrill troubles were disclosed. Since the first of the year, the firm’s stock has done nearly as well as Wells Fargo’s (WFC) and much better than Citigroup’s (C).

Now that the board has backed Lewis through a remarkably difficult period in which there was pressure from many quarters to oust him, his job is almost certainly safe and will be for a long time. It is very likely that the government did not give the board an ultimatum about Lewis’s future because, if it did, the action would have been disclosed and Lewis might be gone.

Almost no one gave Lewis a chance of surviving in his job as post as he has. His critics cannot get much satisfaction about his fate. He still have the corner office and a board that loves him despite his best efforts to be unlovable.

Douglas A. McIntyre