The jury is out on how shareholders will vote on Moynihan’s position at Bank of America, but it’s worth putting the tense debate over his future and the US’s attitude to dual roles into some sort of context.
In the wake of the financial crisis the roles at Bank of America were split. Indeed, in 2009 the chairmanship was removed from the then CEO Kenneth D Lewis amid investor anger over the takeover of Merrill Lynch.
At the time there was a mood for change in the fallout from the crisis, which crystallised in the Dodd-Frank reform and a new institution—the Consumer Financial Protection Bureau. Citigroup later split its chairman and CEO role in 2012.
But since the US economy has turned around, the mood has changed and boards have emboldened. Jamie Dimon, CEO at JPMorgan Chase, survived efforts to force him to give up on the chairmanship.
In making Moynihan chairman in October last year, Bank of America, in the words of Fortune magazine, said the “CEO no longer needs to be supervised”.
The underlying problem seems to be board nervousness over the treatment of CEOs who appear to be succeeding, as Moynihan was. Indeed the media widely described his appointment to chairman as a “promotion”, a reward for doing good work. Underlying that is a need to keep a success story on board.
Bank of America’s regulatory filing offered little explanation of why the CEO should also be chairman but comments included from the then chairman, Charles Halliday, gave away hints about the board’s mindset.
“The board strongly supports the strategy that Brian has set and, after careful deliberation, has decided to take these next steps in our governance responsibilities,” said Halliday.
It was as if Bank of America’s trajectory could not be maintained without elevating Moynihan’s status in some way.
Of course, the reason Moynihan’s position is so controversial now is that some shareholders (the pension funds Calpers and Calstrs) believe things have not been so good with the leader occupying both positions.
Which is interesting. It seems to suggest that there is little principled opposition to dual roles as long as things are going well—only when they turn sour.
Which in turn probably means that US corporate culture is a long way from establishing a definitive position over the same executive being both CEO and chairman. And in turn, the outcry following the crisis has had little permanent effect on behaviour.