BofA Shareholders Strip Lewis of Chairman Role

Bank of America's shareholders voted to oust Chief Executive Kenneth Lewis as chairman of the board on Wednesday after months of mounting criticism of his stewardship of the largest U.S. bank.

The bank's board "unanimously" expressed support for Lewis to stay in the CEO post despite the fact that shareholders "narrowly" approved a proposal to require an independent chairman.

Lewis, who will remain chief executive, will be replaced in the chairman post by Walter Massey, a director of the bank's board since 1998 and also a director of McDonald's

AP Kenneth Lewis

Shareholders also voted to re-elect the rest of the board, according to a person with knowledge of the vote tally who spoke on condition of anonymity because he was not authorized to disclose the results. But bank executives said at the meeting they needed more time to count the ballots for the other proposals that were put to a shareholder vote.

The company said it was aiming to release the vote totals later Wednesday, but the announcement was met by boos and some in the audience of more than 2,000 got up to leave.

Big investors including California's pension fund have called for shareholders to oust Lewis and his fellow directors at the meeting.

And shareholders lined up early in the gathering to speak at microphones, and many hurled criticism at Lewis and the Bank of America board, especially for the company's Jan. 1 purchase of struggling Merrill Lynch.

"I find it incredible you didn't have the guts to stand up to the U.S. government," said Judith Koenick of Chevy Chase, Md., who said she lost thousands of dollars when BofA shares plunged after the Merrill Lynch purchase.

The government pressured Bank of America into buying Merrill Lynch during the same weekend in September that another investment bank, Lehman Brothers, collapsed, setting off one of the most intense periods of the financial crisis.

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On his way into the meeting, shareholder John Moore, of Charlotte, said, "I think now is the time for Mr. Lewis to resign. We thank him and the board for their service."

But one shareholder who spoke early in the meeting was also complimentary of the CEO.

Joe Baker, who said he was from Mississippi, said, "We need Ken Lewis and his board in control." The audience applauded.

Lewis was also greeted by applause as he took the stage. In his remarks, he defended the company's acquisition of Merrill and another troubled company, mortgage lender Countrywide Financial.

Lewis said the companies are providing "the positive counterbalance to our traditional banking businesses, which at this point of the business cycle are under much more stress from rising credit losses."

"Countrywide and Merrill Lynch are two of the most important reasons Bank of America is the most profitable financial services company in the United States so far this year," Lewis said. "Today, I can state without reservation that these acquisitions are not mistakes to be regretted. Both are looking more and more like successes to be celebrated."

The Charlotte-based banking giant and Lewis have been under intense scrutiny because Bank of America is one of the biggest recipients of government bailout money and because $15 billion in fourth-quarter losses at Merrill Lynch turned out to be much higher than anyone expected.

Shareholders who have been calling for Lewis to resign or be dismissed as chairman and CEO are also irate over the precipitous drop in the company's stock price.

Bank of America has fallen 42 percent since the beginning of the year, closing Tuesday at $8.15 and rising to $8.58 Wednesday afternoon in a general stock market rally. But shares fell as low as $2.53 in late February.

The shares rose 6.5 percent to close at $8.68 Wednesday.

In his remarks Wednesday, Lewis said, "I know the Merrill deal has played a role in the decline of our stock price. But I do not believe it is solely responsible for its decline." He said every major commercial bank in the country is under pressure.

On Tuesday, two people familiar with the matter said the Bank of America and Citigroup will need to raise more capital if they can't convince regulators that "stress test" results were mistaken.

Results of the tests, which are designed to determine if the banks can weather more economic turmoil, are expected to be released next week.

BofA and Citi are preparing their appeals of the government's assessment, said the people, who spoke on condition of anonymity because everyone involved in the process has been ordered not to discuss it.

- AP contributed to this report.

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