By Christina Rexrode
Bank of America Corp. on Friday said it would allow certain
investors to nominate members for the bank's board of
directors.
The change had been pushed by pension-fund investors in New York
and California. Bank of America's decision follows a similar shift
by other big companies, including General Electric Co. and
Prudential Financial Inc., to embrace so-called "proxy access"
after years of opposing it.
The investors--the California Public Employees' Retirement
System, the California Teachers' Retirement System and the adviser
to New York City's five pension funds--issued statements applauding
the move.
Anne Simpson, senior portfolio manager of Calpers, the biggest
pension fund in the U.S., said that giving shareholders more say
over who is on the board "is a fundamental shareholder right" and
necessary for making board members accountable to shareholders.
Generally, at U.S. public companies, only directors who are
supported by the company are nominated to the board. The change
could give pension funds, unions and other big investors more
influence over the company, though only the biggest investors are
likely to be able to benefit. Bank of America's change requires
that shareholders own at least 3% of the bank's shares for at least
three years, though up to 20 investors will be allowed to pool
their holdings to reach that threshold. The pension funds that
helped push for the change--New York City, Calstrs and
Calpers--collectively owned about 93 million shares, or about 0.9%
of the total, as of last October.
The three pension funds, which are among the country's biggest,
had previously expressed discontent with the Bank of America
board's decision last fall to give the job of chairman to CEO Brian
Moynihan . Activist investors often argue the two jobs should be
separate, but in Bank of America's case, the board also had to
override a 2009 shareholder vote that had required the bank to give
the jobs to different people. The bank has said that giving the
chairman job to Mr. Moynihan signaled that the bank had returned to
normal after the financial crisis.
The pension funds also signaled that they haven't dropped their
opposition to the board's decision to make Mr. Moynihan the board
chairman. New York City Comptroller Scott Stringer, the adviser to
the city's pension funds, said the funds will "continue to engage
with Bank of America around its board's leadership structure."
"We believe that shareowners are best served by a board led by
an independent chair," Mr. Stringer added, though he also praised
the board for its shift on proxy access.
Another shareholder group that had opposed combining the
chairman and CEO jobs, the Interfaith Center on Corporate
Responsibility, had filed a proposal on separating the two roles.
But the bank promised to instead issue a report on its business
principles and the Interfaith Center dropped the proposal, meaning
it won't appear on the ballot when shareholders gather at the
annual meeting this spring.
Bank of America had opposed similar proxy-access proposals filed
for the past two years by activist investor John Harrington of
Harrington Investments in Napa, Calif., and the proposals had
gained little support. The bank said it had numerous discussions
this year with a range of shareholders on the issue of giving
investors more say over who joins the board before making the
change.
Citigroup Inc. recently decided to support a similar shareholder
proposal, though its strategy differs slightly from Bank of
America's. While Bank of America changed its bylaws, meaning the
change is already in place, Citigroup is supporting a shareholder
amendment that investors can vote on at the annual meeting, which
means that measure could still fail.
The Securities and Exchange Commission disclosed this week that
it would allow Bank of America's shareholders to vote on a proposal
asking for a report on whether the bank should sell off more of its
units.
Write to Christina Rexrode at christina.rexrode@wsj.com
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