Wednesday, April 29, 2009

Musical Chairs with Ken Lewis and Bank of America

Bank of America CEO Ken Lewis was stripped of his Chairman title in a shareholder vote on Wednesday, a move that still leaves him as CEO thanks to his rubber-stamp board. Now what? Can he survive in the top spot?

There are essentially 4 ways to lose your job as CEO:

1. You resign… Well, yes, that’s possible, but I’m not holding my breath.



2. You lose a shareholder vote on a resolution to remove you as CEO… Been there, done that. He didn’t lose.

3. The board fires you… Perhaps I should be clearer, the Bank of America board fires you, and this is one board that loves Ken. They even appointed long-time pal and noted corporate governance “stickler” Walter Massey, President Emeritus of Morehouse College, as the new Chair. Now that’s a tough board for you! If you nasty shareholders are going to pull Ken’s Chair from under him, we’ll show you.

4. The government fires you… Ah, well, here we may have something. Read on.

If Bank of America is too “stressed” to keep going on its own, new capital must come from somewhere. Outsider investors? You’ve got to be kidding. Selling parts of the empire? Maybe. TARP, or son of TARP, or grandson of TARP? This is possible … but can Treasury sink another XX billions of dollars in BofA (or any bank) without doing a Wagoner? That is, as part of the deal, will Treasury make that pesky Ken Lewis walk the plank, the same guy who is all over the Wall Street Journal testifying to NY Attorney General Cuomo that Paulson and Bernanke made him do the Merrill Lynch deal? Now that’s a stress test I can see playing out.

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