BAC Bank of America Corporation

By Joann S. Lublin 

Two major public pension funds joined the drive for Bank of America Corp. shareholders to oppose a corporate bylaw change that would let Brian Moynihan serve as both chief executive and chairman.

California Public Employees' Retirement System and California State Teachers' Retirement System sent a letter to the bank Monday disclosing they will vote against the change. Calpers and Calstrs are the biggest and second-biggest pension funds in the U.S. by assets. Together, the two funds own 63.6 million Bank of America shares, valued at about $1 billion and representing less than 1% of the total shares outstanding.

Bank board members angered some investors last October by deciding to change the bank's bylaws and give the chairman role to Mr. Moynihan, their CEO for more than five years. The board didn't consult institutional investors ahead of the switch, even though shareholders had voted in 2009 that the jobs of chairman and CEO must be held by different individuals. The earlier rule won approval during the depths of the financial crisis.

Bowing to shareholder complaints just before its annual meeting in May, the bank announced plans to let investors vote on the board's decision. That vote will occur at a Sept. 22 special shareholder meeting.

In a letter sent Monday to the bank's lead director Jack O. Bovender, the funds said, "Since Mr. Moynihan's appointment as CEO in January 2010, the company has continued to underperform" its peers. The letter continued: "We do not believe now is the time to reduce oversight of management by combining the roles of CEO and chair."

In a statement Monday night, a Bank of America spokesman said: "The board believes that having the same flexibility on board leadership that 97% of the S&P 500 now have, while still providing strong independent oversight, is in the best interest of stockholders. No company has dug out of a deeper hole since the financial crisis, turned back to health with solid earnings, and has accumulated record levels of capital and liquidity--also to the benefit of our shareholders. The board respectfully recognizes that stockholders hold varying views on this matter, which is why the board committed to putting it to a vote."

The action by the public pension funds comes days after an activist labor group sent Bank of America shareholders a letter urging their opposition to the board's bylaw change because the company needs an independent chairman amid persistent challenges.

CtW Investment Group, an arm of the labor federation Change to Win, issued its letter Friday. CtW works with union pension funds that hold about 21 million Bank of America shares, or 0.2% of the total. The group also worked on the 2009 bylaw amendment that separated the top two roles.

The resolution that shareholders will vote on in late September isn't specific to Mr. Moynihan. It asks Bank of America investors whether they think the board should have the right to set its own "leadership structure." The bank has said it would be bound by the vote's outcome.

Bank of America previously pointed out that most big U.S. banks have combined their top two positions, and board members have said Mr. Moynihan deserved the chairman's title for steering the bank through troubled waters since he became CEO at the start of 2010.

Institutional Shareholder Services and Glass, Lewis & Co., which advise big shareholders about how to vote, are expected to issue their recommendations as early as this week.

Write to Joann S. Lublin at joann.lublin@wsj.com

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(END) Dow Jones Newswires

August 31, 2015 22:18 ET (02:18 GMT)

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