Bank of America CEO faces test at annual meeting

Bank of America Corp's embattled CEO, Kenneth Lewis, may have to give up the post of chairman as shareholders hold a referendum on his eight-year tenure as head of the largest U.S. bank.

At the bank's annual meeting on Wednesday, Lewis is likely to be re-elected to the board by a wide margin, but the vote on a shareholder proposal to have the bank appoint an independent chairman is likely to be close, The Wall Street Journal said.

Lewis, 62, faces shareholder anger over Bank of America's January 1 purchase of Merrill Lynch & Co, including the failure to quickly disclose huge losses that Merrill was amassing even as it was paying out $3.62 billion in bonuses to employees.

Bank of America needed a federal bailout to absorb Merrill, and Lewis indicated that regulators pushed him to keep quiet about Merrill's losses and not to back out of the merger.

It doesn't make him look strong, said Charles Geisst, the author of Wall Street: A History. It runs counter to his shareholders' interests, so it's a black mark.

Charlotte, North Carolina-based Bank of America has already taken $45 billion of federal bailout money but may need more after results of government stress tests are released, probably next week. The tests gauge banks' ability to weather a deep recession.

Raising capital could dilute shareholders' positions if the bank is forced to issue more common stock. Bank of America shares closed Tuesday at $8.15, down from more than $55 as recently as November 2006.

Several of the 18 candidates for the bank's board also face opposition from a variety of shareholders and governance critics.

News trucks for local media and national networks were lining the streets outside the theater in uptown Charlotte where the annual meeting is being held. Protesters are expected outside.

SEVERAL BIG MERGERS

Since becoming chief executive in 2001, Lewis has spent well over $100 billion on big acquisitions including Merrill, FleetBoston Financial Corp, credit card issuer MBNA Corp, and, last July, mortgage lender Countrywide Financial Corp.

Critics say Lewis often appears interested in making Bank of America bigger rather than better. While the bank had a first-quarter profit of $4.25 billion, much of that came from one-time items and an accounting change, and the results failed to quell criticism.

The proposal to name an independent chairman is one of eight shareholder proposals on the ballot. A similar proposal won 36 percent support last year, the bank said.

Many corporate governance experts favor splitting the posts of chairman and CEO; Citigroup Inc and Wells Fargo & Co are among banks that have divided the roles.

Last year, however, such a split was a precursor to the ouster of the chief executives of two large, troubled banks -- Ken Thompson at Wachovia Corp and Kerry Killinger at Washington Mutual Inc . Wachovia was later bought by Wells Fargo, while Washington Mutual failed.

OPPONENTS

Among Lewis' opponents are several big pension funds, including the California Public Employees' Retirement System, which has said it will vote its 22.7 million shares against the bank's entire board, and the TIAA-CREF pension fund manager.

Three major shareholder advisory services oppose the re-election of Lewis and lead director O. Temple Sloan to the board. Other shareholder critics include the CtW Investment Group, which represents union pension funds, and the family of Jerry Finger, who sold his Charter Bancshares Inc of Houston to a Bank of America predecessor in 1996.

But Lewis was expected to win support elsewhere, including from brokerages, which typically side with management.

Regardless of Wednesday's outcome, Lewis still faces a heap of problems.

Bank of America is the target of a slew of lawsuits over the Merrill merger, and members of the U.S. Congress and regulators, including the U.S. Securities and Exchange Commission and New York Attorney General Andrew Cuomo, are examining the Merrill deal.

Many legal experts say that even if Lewis thought he was acting for the good of the country in bowing to regulators on Merrill, he should have put his shareholders first.

Other proposals on the ballot at the annual meeting would give shareholders a say on executive pay, and would require the bank to disclose more about its credit card practices.

(Reporting by Jonathan Stempel; editing by John Wallace)