Buffett backs Moynihan’s dual BofA role

Warren Buffett on Tuesday lent timely support to Brian Moynihan, the chairman and chief executive of Bank of America, who is caught in a governance dispute over the board’s decision last year to combine the two roles.

In October BofA’s board granted Mr Moynihan, then chief executive, the additional role of chairman, angering investors who had voted to separate the roles five years earlier in the wake of the financial crisis

The bank offered shareholders the chance to approve the change to the company’s bylaws, but several institutions and proxy advisers have come out against it in recent days, suggesting that a vote at a special meeting on September 22 may be close.

However, speaking on CNBC, Mr Buffett — the chairman and chief executive of Berkshire Hathaway, which bought $5bn of non-voting BofA shares and warrants in 2011 — dismissed the spat as “no big deal”. He said Mr Moynihan had “done a first-class job” in the five years since he took over from Ken Lewis, who sanctioned the ultimately costly acquisitions of Merrill Lynch and Countrywide.

Mr Moynihan “took a company that was just a terrible mess . . . the public hated it, the government hated it, they had all kinds of lawsuits coming in and employee morale was terrible, and he’s resuscitated it”, said Mr Buffett. “If he is the chairman as well as the CEO, God bless him.”

Mr Moynihan’s fate is likely to hinge on the position of BofA’s biggest institutional investors. Over the past couple of weeks the bank has been contacting them individually to claim that splitting the roles again would be unnecessarily disruptive — an argument that appears to have some resonance with investors.

An executive at one leading asset manager said it would be voting to ratify recombining the roles, although it was also demanding changes to ensure BofA’s board is more shareholder-friendly in future.

“The jury is out on whether this board really understands its shareholders,” the investor said, “but there are just too many moving parts to risk destabilising the company on a point of principle.”

ISS and Glass Lewis, the two biggest proxy advisory firms, have recommended that shareholders vote against the move to recombine the roles. If the proposal is rejected, BofA’s board has said that it will “promptly” implement a plan to reverse its 2014 bylaw amendment.

Joint chief executives-chairpersons in the US are not unusual. As of May, the roles were combined in 53 per cent of S&P 500 companies, according to ISS QuickScore data. Among BofA’s closest peers, only one — Citigroup — has an independent chair.

Also last October, BofA appointed Jack Bovender, a member of the board since 2012, as lead independent director — a new position with “roles and responsibilities consistent with the duties of an independent board chair”, it said.

Mr Bovender is among a handful of senior executives seeking to win over big shareholders.

“What has frustrated a lot of investors, is that they unilaterally moved to make the bylaw change, which clearly deviated from the signal shareholders sent in 2009,” said Mike McCauley, a senior officer at the Florida State Board of Administration, which oversees about $180bn of assets.

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