Civil War is breaking out on the board of directors of Bank of America over the selection of a successor to CEO Ken Lewis, pitting board members favoring Greg Curl, a long-time BofA executive located in the bank's home city of Charlotte, N.C., with those who favor Brian Moynihan, who came to the company after its purchase of the Boston-based Fleet Financial, people close to the company say.
The North-South rivalry is threatening to indefinitely delay the selection of Lewis's successor. Further complicating matters is analyst and investor pressure to chose a new CEO from outside the company's ranks. The board's selection committee is expected to interview this week a handful of outside candidates either for the first time, or for a second interview, these people say.
"So far, nobody from the outside really wants the job," said one senior executive at the firm. "That leaves the most likely scenario being an internal candidate. But the Boston guys are fighting with the Charlotte guys over Curl and Moynihan and that's holding the whole process up."
The infighting over Lewis's successor has been unsettling for investors. Shares of Bank of America initially rose sharply after CNBC first reported on September 30 Lewis's intentions to leave the job by the end of the year amid numerous investigations into his purchase of Merrill Lynch last year during the height of the financial crisis.
The New York Attorney General's office and the Securities and Exchange Commission are investigating whether Lewis made proper disclosures about billions of dollars in losses at Merrill and bonus money paid to Merrill executives before shareholders voted to approve the ill-fated deal that eventually led to a government bailout of the bank.
But after rising as high as $18.59 cents in mid October, shares have come down to levels below where they were before the resignation announcement. On Friday, share of BofA closed at $15.05. Analysts blame the stock's decline on uncertainty over Lewis successor and speculation that BofA's troubled loans may force the bank to raise more capital.
Despite having a succession plan in place well before Lewis's made his resignation plans public, picking his successor has been a messy affair.The board initially signaled its intention to selection an insider with Curl and Moynihan at the top of its list.
Analysts and investors pressured the firm to look at outsiders with banking experience like Robert Diamond of Barclays Capital, who turned down the job, and Robert Kelly of Bank of New York , who told the board he isn't yet interested though under the right circumstances he might take the job, bringing the board back to where it began with an internal candidate being the most likely choice.
Meanwhile, the rift over the two internal candidates Curl and Moynihan continues to grow on the board, underscoring the deep cultural divides at the company. Bank of America grew is size and importance amid a series of acquisition by Lewis and his predecessor, Hugh McColl, one of the biggest being the bank's purchase of Fleet Financial in 2004. Some of its board members come from the old Fleet bank, and have cast their vote for Moynihan, while other remain loyal to the executives based in the company's Charlotte, NC headquarters, and favor Curl.
"There clearly is a rift on the board," said another senior company executive who spoke on the condition of anonymity.