Embattled Bank of America CEO Lewis to retire, 2 years early

Charlotte ObserverSeptember 30, 2009 

CHARLOTTE — Embattled Bank of America chief executive Ken Lewis will leave the Charlotte bank he helped build at the end of this year, stepping aside as he faces mounting pressure from investigations of his Merrill Lynch acquisition.

Although he had been a target of critics for months, the timing of the decision came as a surprise. Lewis, 62, had clung to the job he has held since 2001, insisting he wanted to stay on until the bank shed its troubles. But on Wednesday, he told the board he was ready to move on.

The decision means the end of Lewis' four-decade career at the company and raises questions about whether the bank can continue its tradition of hiring its leader from within. The move also raises concerns about the bank's Charlotte headquarters, which has become more entrenched under Lewis.

The bank said the board will continue "ongoing planning" to ensure a successor is picked by year's end. In August, Lewis shuffled his management team, creating a competition among a handful of executives to succeed him. Directors could also consider outside candidates.

In a statement, Lewis said he made his own decision. A person who has talked to him recently said he had become fatigued by the "mud being thrown on him day by day." Regulatory sources said the bank had not been pressured by the government to make the change.

Lewis will retire as CEO and as a director, the bank said.

"Bank of America is well positioned to meet the continuing challenges of the economy and markets," Lewis said in a statement. "I am particularly heartened by the results that are emerging from the decisions and initiatives of the difficult past year-and-a-half."

In his departure, Lewis is eligible to take with him a pension worth $53.3 million, deferred compensation of $10.6 million and restricted stock worth $8 million, according to the bank's latest proxy filing. That money was accrued during his career. He worked without a contract, so he receives no additional severance.

Bank spokesman Bob Stickler said that Lewis decided on his own "that this was the time." For the past week, he had been talking to chairman Walter Massey about leaving, he said.

Massey had assured him that the bank's board — overhauled in recent months under government direction — remained behind him, Stickler said. The decision was not made as the result of any conversations with law enforcement authorities, regulators or the board, he added.

Massey called for a 5 p.m. board meeting, which was held by phone, and Lewis delivered the news. Lewis had been in New York for a market visit and made the call from the bank's One Bryant Park tower in Midtown. He told his direct reports of the decision just before the directors' meeting.

Looking back, Stickler said people who know Lewis suspect he's been pondering the move since a vacation at his Colorado vacation home this summer. He returned with a beard, which surprised people who knew him.

"It was very much unlike Ken," he said. "In hindsight, it was a sign of what he was thinking."

Stickler said headquarters' decisions would be up to the CEO and board, but he said he has not heard "any discussions whatsoever" regarding moving the headquarters.

Massey plans to set up a nominating committee to help select the CEO. It would be up to the board as to whether it searches outside the company, Stickler said.

Ken Thomas, a Miami-based banking consultant, said it was difficult to determine how the bank might change without knowing who the new CEO will be.

"If it's an insider, we'll see an institution run pretty much the way Lewis ran it," Thomas said. "But if they bring in someone from the outside, that could really change things around. . . . Someone could come in and say, 'All these branches in small towns? We don't want them.'"

The announcement tonight was welcomed by some who said Lewis needed to leave to clear the air at a bank under fire on numerous fronts. Others said the bank was losing an important leader.

"Ken is a great leader," former Bank of America CFO Marc Oken said. "He has accomplished a lot over time as CEO. I have nothing but admiration for what he has done for the company."

The 62-year-old Lewis and his bank, where he's spent his entire career, have had a swift fall from grace in the public view. Last year, Lewis was hailed as a hero for buying the struggling Merrill. He looked even more successful as other big banks were brought to their knees, including cross-town rival Wachovia.

But since then, the bank has taken out $45 billion in government loans, drawing the ire of some taxpayers and lawmakers. Investors were angered by the falling share price and slashed dividend, and in April they voted to strip Lewis of his title as board chairmanship. The bank is facing multiple investigations over what it should have revealed to shareholders before asking them to vote for the Merrill deal, with probes by the

Securities and Exchange Commission, the attorneys general of New York and North Carolina, and the House Oversight and Government Reform Committee. The bank also faces lawsuits from shareholders who say they were misled into voting for the Merrill deal.

The bank has already shaken up its board of directors and its executive ranks, replacing the chief risk officer, the general counsel and other leaders. But some analysts had speculated that the bank would have to get rid of its CEO if it really wanted to show that it was changing for the better.

Tom Hazen, a UNC Chapel Hill professor who teaches securities law, said it was unusual that Lewis had survived this long.

"Ordinarily, it's the CEO who's gonna walk the plank in a case like this," Hazen said.

In his statement, Lewis said his controversial Merrill Lynch and Countrywide Financial acquisitions were on track and bringing value to the company.

"Our board of directors and our senior management include more talent, and more diversity of talent, than at any time in this company's history," he added. "We are in position to begin to repay the federal government's TARP investments. For these reasons, I decided now is the time to begin to transition to the next generation of leadership at Bank of America."

Massey called Lewis a "key architect in building a truly global financial franchise." He said the board would move in a "deliberate and expeditious manner to select a worthy successor to Ken Lewis."

At 62, Lewis is 2 1/2 years away from the traditional CEO retirement age at Bank of America.

Born in Mississippi and raised by a single mother, Lewis put himself through Georgia State, then joined a bank predecessor in 1969.

He quickly became a key lieutenant to predecessor Hugh McColl Jr. and helped lead the bank's acquisition blitz in the 1980s and 1990s. After moving to the corner office in 2001, Lewis began his own takeover campaign, spending more than $120 billion on deals.

Asked by the Observer this spring when he might retire, Lewis said he wanted to repay the bank's government loans, boost earnings to $30 billion a year, and "then I'll regroup."

"I have never had a conversation with a single person, including my wife, about my job," Lewis said at the time.

Lewis is highly respected as a smart and efficient bank manager, but he's made enemies over the years after firing other executives. Because of the publicity of congressional hearings and other investigations, he's also become the individual against whom ordinary Americans direct the wrath they feel against the banking industry.

The regulatory pressure on Lewis has increased even more in recent weeks, as the SEC signaled that it will likely go after individual executives instead of just Bank of America as a whole.

Longtime bank analyst Dick Bove said earlier this week that he hoped Lewis would keep his job, since he's "absolutely the best guy" to run the bank.

But, he added, "This guy is not the sweetheart of Sigma Chi. He's a tough, hard, driven individual, and that's why his bank is No. 1 in the country."

"This isn't about Ken," Mahoney said.

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