ISS Opposes Bank of America Proposal Allowing Board to Combine Chairman, CEO

By Joann S. Lublin And Christina Rexrode 

Proxy-advisory firm Institutional Shareholder Services is recommending that Bank of America Corp. shareholders vote against a board proposal that would let Chief Executive Brian Moynihan keep the title of chairman.

The advisory firm said in a note Friday that shareholders would benefit from stronger independent board oversight as the bank works through operational and performance issues.

Shareholders are scheduled to vote on the proposal at a special meeting on Sept. 22.

The recommendation is the latest step in what could be a showdown between the bank and its shareholders over Mr. Moynihan's role. ISS rival Glass Lewis also recommended shareholders vote against the proposal.

The bank's board last year added the title of chairman for Mr. Moynihan, the CEO since 2010. It was an unusual move because shareholders had voted in 2009 that the roles should be held by separate people. The bank, though, has argued that it is no longer in crisis mode as it was in 2009.

ISS found that argument unconvincing. "While the near-term viability of [Bank of America] is no longer in question, its performance and governance continue to raise concerns," the firm wrote, noting, for example, the bank's missteps on the Federal Reserve "stress tests."

However, ISS also said the vote wasn't a referendum on Mr. Moynihan, but on his board members. It called the proposal to re-separate the roles "a corrective action for board overreach."

"In the coming months, the board must work to regain shareholders' trust, " ISS added.

A bank spokesman said Friday that the board wants the same flexibility that most other big U.S. companies have, to determine whether they should combine the roles of CEO and chairman. (Only about half of the S&P 500 companies actually do combine the roles, though.)

The bank has also pointed out that it created the role of lead independent director when it made Mr. Moynihan the chairman. That role, held by Jack Bovender, has "authority, duties and responsibilities" that "extend beyond industry practice and expectations," the spokesman said Friday.

"The board continues to adopt corporate-governance enhancements through engagement with stockholders and in direct response to shareholder feedback," he added. "The board recognizes and respects that some have a fixed view on board leadership structure and others hold differing views, which is why the board committed to putting it to a vote."

ISS's recommendation was expected. Its views can influence big shareholders: The firm earlier this year recommended that Bank of America investors vote against Tom May, chairman of the board's corporate-governance committee, which was in charge of the decision to make Mr. Moynihan the chairman.

It also recommended that shareholders vote against the other three members of the corporate-governance committee. Shareholders re-elected Mr. May with 67% approval. The average approval rating for a director at an S&P 500 company is around 97%, according to ISS. The other three directors on the corporate governance committee got 72% support.

Mr. May, a longtime ally of Mr. Moynihan's, remains head of the corporate governance committee.

Write to Joann S. Lublin at [e-mail] and Christina Rexrode at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

September 04, 2015 20:32 ET (00:32 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.