By Christina Rexrode
Bank of America Corp. on Friday said it would allow certain
investors to nominate their own directors, bowing to pressure from
three large shareholders.
Bank of America's concession is part of a larger shift this year
as a number of U.S. corporations, including General Electric Co.
and Prudential Financial Inc., embrace a shareholder-friendly
nominating process-- known as "proxy access"--after years of
opposing it. Generally, at U.S. public companies, only directors
who are supported by the company are nominated to the board.
The changes could give pension funds, unions and other big
investors more influence over U.S. companies. Bank of America's
agreement 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 shareholders that helped push for the change--the California
Public Employees' Retirement System, the California Teachers'
Retirement System and the adviser to New York City's five pension
funds--collectively owned about 90 million shares, or about 0.9% of
the total.
Giving shareholders more say over who is on the board "is a
fundamental shareholder right" and necessary for making board
members accountable to shareholders, said Anne Simpson, senior
portfolio manager of Calpers, the biggest public pension fund in
the U.S.
Citigroup Inc. recently decided to support a similar shareholder
proposal, though its strategy differs slightly from Bank of
America's. While Bank of America already changed its bylaws,
Citigroup is supporting a shareholder amendment that investors can
vote on at the annual meeting. That means the measure could still
fail.
Bank of America had previously opposed similar proxy-access
proposals filed by activist investor John Harrington, including one
filed for this year's ballot. 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.
The pension funds' victory Friday came after an unsuccessful
effort at another governance change last fall, when the pension
funds made clear that they were unhappy with the board's decision
to give the chairman role to Chief Executive Officer Brian
Moynihan, which overrode a 2009 shareholder vote requiring the bank
to give the jobs to different people.
One of the funds signaled Friday it hasn't dropped its
opposition to the board's decision on Mr. Moynihan. 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" and "we believe that
shareowners are best served by a board led by an independent
chair."
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 it dropped the proposal after the bank promised to instead
issue a report on its business principles.
The bank worked out a separate compromise this year with another
shareholder group, the UAW Retiree Medical Benefits Trust, which
had proposed that the bank disclose each year whether it had
"clawed back" pay from top executives. The UAW group dropped its
proposal after the bank agreed to adopt a similar measure.
The bank had opposed another shareholder proposal, by the
consumer-advocacy group Public Citizen, asking for a report on
whether the bank should sell off more units. But the Securities and
Exchange Commission ruled this week that it would allow that
proposal to appear on the ballot at the annual meeting.
Write to Christina Rexrode at christina.rexrode@wsj.com
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