Two influential investor advisory groups sharply rebuked Bank of America Corp
The reports from RiskMetrics Group Inc
Many investors complain the bank did not thoroughly study Merrill's finances before agreeing to buy it in a shotgun merger. They say the bank also failed to disclose details on Merrill's losses in last year's fourth quarter ahead of a shareholder vote on the deal, which closed January 1.
Both advisory groups, whose recommendations are key for many large investors when casting corporate ballots, recommended that shareholders oppose Lewis' re-election as a director -- which would remove him as board chairman.
They also recommended opposing the reappointment of lead outside director O. Temple Sloan and the election of several other board candidates.
They supported a proposal to split the chairman and CEO roles among different people, a measure proponents say would make the board more independent.
While shareholders are not voting on whether to remove Lewis as CEO, Glass Lewis urged them to question whether Mr. Lewis is the right leader for the company's future.
Bank of America, the largest U.S. bank by assets, said the recommendations were disappointing and it continues to discuss our reasoning with large shareholders.
Spokesman Scott Silvestri also said the bank believes it has acted legally and appropriately in our disclosures around the Merrill Lynch acquisition, and that the acquisition will ultimately create value for Bank of America shareholders.
The bank's annual meeting is set for April 29 in Charlotte, North Carolina, where it has its headquarters.
Bank of America in January got a government bailout, including $20 billion in new capital, to help it absorb Merrill. The funds came after Merrill lost almost $16 billion in the last quarter of 2008.
Bank of America overall has received $45 billion in taxpayer money since October.
Activist investors have called for heads to roll on the board. In its report, RiskMetrics said the board failed to curb Lewis' penchant for empire-building.
The Change to Win Investment Group, which advises a coalition of union pension funds and has campaigned to oust several Bank of America directors, including Lewis, said it welcomed the advisers' recommendations.
The responsibility for effecting this critical and overdue leadership change now rests with shareholders, including the large mutual funds and investment managers whose votes will be decisive, said Bill Patterson, the group's executive director.
RiskMetrics also opposed the re-election of board members Jackie Ward, Frank Bramble, Monica Lozano and Robert Tillman, citing poor oversight of management.
Glass Lewis said it opposed the election of three former Merrill Lynch directors -- Virgis Colbert, Joseph Prueher and Charles Rossotti -- to the board, saying they failed to properly oversee risk controls and executive compensation at Merrill.
A day earlier, another shareholder adviser, Proxy Governance Inc, recommended splitting the CEO and chairman roles but did not oppose Lewis' re-election to the board. It did recommend voting against reappointing Sloan and another director, Thomas Ryan, to their seats.
The bank is set to release first-quarter results on Monday. Lewis' future at the company could hinge on the strength of these numbers, said Anthony Plath, an associate professor of finance at the University of North Carolina at Charlotte.
If Ken Lewis wants to preserve his positions, united under one umbrella, he's got to perform, he said.
(Additional reporting by Jonathan Stempel)
(Reporting by Martha Graybow, editing by Matthew Lewis, Gerald E. McCormick, Gary Hill)