Should Bank of America Corp. ask Kenneth D. Lewis to extend his tenure as chief executive given the small but growing grassroots support he is getting from analysts? Is it even feasible?
A pair of high-profile analysts issued notes to investors last week urging B of A to keep Lewis — either permanently or by postponing his retirement — as the board struggles to hire a successor. Big investors are said to be opposed to internal candidates, and some high-profile outsiders have rebuffed overtures.
The analysts who spoke out for Lewis, Michael Mayo and Richard Bove, cited his experience and unparalleled knowledge of the company he helped to build over the past 40 years among the reasons for maintaining the status quo.
Mayo, with Credit Agricole Group's Calyon Securities USA Inc., said Lewis should remain CEO for another year "until a new CEO can be more carefully suggested." Though Mayo said he thinks B of A overpaid for Merrill Lynch & Co., he wrote in a note to clients that Lewis remains a well-regarded integrator.
"Bank of America's board may be creating an artificial time frame for selecting a new CEO that might have long-term adverse consequences," he wrote.
Bove, with Rochdale Securities LLC, suggested scrapping the succession process in favor of keeping Lewis. It would take a new CEO "five years to learn what Ken Lewis knows now about this company," Bove wrote. "Someone with authority should get him to change his mind. No decision is irreversible."
Though it is possible that the $2.39 trillion-asset B of A could ask Lewis to stay beyond his planned yearend retirement, few think it could happen. Retaining Lewis have could further antagonize investors, some observers said.
A key concern is whether Lewis would be able to return to the intense, engaged executive who rose up the ranks under predecessor Hugh McColl Jr. Besides fights over the Merrill deal, some said, Lewis' credibility with investors was likely damaged further by media reports of odd behavior, including his return from a summer vacation with a full beard, his sudden retirement announcement a few weeks later and some waffling about retirement in between. There were also communication lapses with chairman Walter Massey over how to disclose his departure.
"I was never in favor of him leaving, but once the decision was made … they should move on," said Marshall Front, the chairman of Front Barnett Associates LLC, which owns about 350,000 B of A shares. "I think it was a mistake for him to bare his soul."
Gary Townsend, the CEO of Hill-Townsend Capital, agreed. "I think Ken is going," he said. "Mentally he has checked out and his tenure is problematic for the company. At best he would be a lame duck, and he needs to go for Bank of America to get greater cooperation from Washington."
Bank of America spokesman Robert Stickler said there "is no change in Ken's situation" and that the Charlotte company does not comment on analyst opinions. B of A is still eyeing Thanksgiving as a general target for announcing Lewis' successor, he said.
Investor sentiment is also unlikely to improve measurably before April's annual meeting, some said. Keeping Lewis could put him and the company at risk of further embarrassment at the hands of shareholders.
In April shareholders publicly stripped Lewis of his chairman's title, and a third of all votes cast backed removing him from the board. Lewis and other directors benefited from the inclusion of broker votes, which have since been nullified by the Securities and Exchange Commission. Ten directors have since left the board, and some outsiders believe disenchanted investors may have the firepower necessary to remove Lewis as a director this spring if he were to stay.
Meanwhile, the Service Employees International Union, which has been at odds with Lewis and B of A for years, has decided to aid the search — with a twist. It took out several ads on Google.com that said: "Big bank needs new CEO. Must be experienced with sinking ships. Willing to reward failure with big money."
