Bank of America Vote Brings Out Broader Complaints

A growing number of Bank of America Corp. investors are pressing for broader changes to the company's board as a contentious shareholder vote approaches on Chairman and Chief Executive Brian Moynihan's combined roles.

With the Sept. 22 vote about a week away, several large shareholders have pressed for changes to the bank's board beyond the question of whether Mr. Moynihan should continue to serve in both roles.

Some investors would like the longest-tenured directors on the board to leave. Others would rather see more financial experts or new blood on the board's governance committee, which led the controversial decision last year to combine the CEO and chairman roles under Mr. Moynihan despite a 2009 shareholder vote to separate those positions.

The way Bank of America's directors handled that process "indicates that they need to get fresh eyes," said Jonas Kron, who runs shareholder engagement at Trillium Asset Management. Trillium, which often favors separate chairmen and CEOs at its holdings, voted its 400,000 shares against the bank's proposal, which asks for shareholders' blessing to let directors structure the roles as they see fit.

Korea Investment Corp., South Korea's sovereign-wealth fund and a top-20 shareholder of Bank of America according to FactSet, also plans to vote against the proposal, in part due to concerns about the bank's recent dividends and a share price that has trailed peers, a person familiar with the $85 billion fund said. Bank of America's share price is down about 10% so far this year, compared with a 4% decline in the KBW Bank Index.

Bank of America has defended its board and its handling of the chairman issue, noting that the 2009 vote to separate the jobs took place during the financial crisis under a different CEO.

"Shareholders can speak now," said Gary Lynch, the bank's general counsel, referring to the coming vote in an interview. "You tell us what you want us to do, and the board is going to abide by that."

In recent meetings with investors, some bank officials have said the vote could go either way, according to people familiar with the situation.

Some investors' concerns about the board go deeper, however. Jonathan Finger, a partner at Finger Interests Ltd., said he would like to see some directors who have been on the board since before the financial crisis make room for someone new.

"It's unnatural to have people on the board for over 10 years," said Mr. Finger, who has already voted the firm's approximately 900,000 shares against the bank's proposal.

It isn't clear if discontent over the board will boil over into next week's vote or if director changes are likely any time soon. One official at a large Bank of America shareholder said it asked bank officials about changing some directors at a meeting this summer, but bank representatives including lead director Jack Bovender made no commitments, the official said.

Some investors have speculated the bank could make a director change, either in response to a vote or before one in an effort to generate more "yes" tallies. The bank declined to comment on its plans.

Some big investors will likely vote in the bank's favor despite some misgivings about the board's action last year. That is because some institutional investors will probably decide based on what is best for the bank's share price; the stock price could fall if Bank of America loses the vote.

Other, more activist investors are likely to vote against the bank as a matter of principle, believing that having someone besides the CEO as board chairman makes the board more willing to challenge the CEO.

In 2009, before Mr. Moynihan became CEO, regulators ordered the bank to add more board members with regulatory and banking experience because of a perceived paucity of that expertise.

Bank of America added financial experts to the board, but some of them have since left. The bank says its board has evolved appropriately as it has moved further away from the financial crisis. In a presentation it sent to investors last week, it also said that board candidates are reviewed by regulators.

Mr. Moynihan said in a speech this month that Bank of America had "a very strong board with a very good skill set." He also praised several board members including Mr. Bovender, who aren't banking experts but bring knowledge of different industries such as cruise lines, hospitals and pharmaceuticals.

"They're never going to experience running a company with $100 billion in revenue and 200,000 employees and the fifth most valuable company in financial services in the world, but what they have is experience from other dimensions," Mr. Moynihan said.

Tom Brown, who runs the hedge fund Second Curve Capital, said he would vote for the bank's proposal, echoing statements supportive of Mr. Moynihan from Berkshire Hathaway Inc. CEO Warren Buffett. Mr. Brown described the board as "very active," and said that Mr. Moynihan has enough experience that he no longer needs a separate chairman.

Still, some said the bank, a major player in a highly regulated industry, should be held to particularly high standards.

"This is not Joe Bob's Machine Shop," said William Atwood, executive director of the Illinois State Board of Investment. The fund, which manages 10.3 million shares, will vote against the bank's proposal. The fund usually tends to vote for separating the roles, but Bank of America directors in particular haven't "cloaked themselves in glory" with their handling of the chairman-CEO issue, he added.

Several investors including Mr. Atwood didn't have specific suggestions on how the board should be changed, though CtW Investment Group, which works with union pension funds that hold about 21 million shares, says it thinks the head of the bank's governance committee, Thomas May, should step down, since that committee led the decision to make Mr. Moynihan the chairman.

An official of another institutional investor predicted the bank could clinch this month's vote if Mr. May steps down from the board before then. Mr. May received only 67% approval at the bank's annual meeting this year.

Mr. May, through representatives, declined to comment.

Shasha Dai contributed to this article.

Write to Christina Rexrode at christina.rexrode@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

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