Kenneth Lewis at the National Urban League Conference in Chicago in July.
Less than a year ago, Bank of America’s chief executive, Kenneth D. Lewis, celebrated his daring takeover of Merrill Lynch as the crowning triumph of a long career. On Wednesday, that conquest proved to be his downfall, as he announced his resignation after months of legal and political scrutiny over the star-crossed merger.
Mr. Lewis, who started at the bank in 1969 as a low-level loan officer and rose through the ranks to build it into a financial powerhouse, told board members in a 5 p.m. conference call that he had decided to take early retirement, said four people briefed on the discussion.
The board appeared caught off-guard by the timing of his announcement but accepted it even though members were not immediately prepared to name a successor. He had already discussed the matter with the chairman and a small group of directors, the people said.
Mr. Lewis leaves as Congress, the attorney general of New York and investors turn up pressure on both him and the bank over not disclosing Merrill’s losses and bonuses to shareholders. A federal judge recently refused to accept a settlement that had been brokered between Bank of America and the Securities and Exchange Commission, saying the bank and the commission never fully explained how the decisions had been made.
The controversy is likely to occupy the bank even after the departure of Mr. Lewis, who has already had to testify to Congress on the matter.
“This was a necessary and overdue change,” said Michael Garland, a spokesman for Change to Win, an investment group that has been pressing for Mr. Lewis’s ouster for months. “The onus is now on the board to engage with shareholders to name a successor who can quickly restore Bank of America’s credibility with regulators and investors.”
Federal officials did not call on Mr. Lewis to step down and were notified of his decision late in the afternoon, according to two people briefed on the situation. However, regulators have urged other management and board level changes at Bank of America, Citigroup and other financial firms that have received taxpayer lifelines.
Mr. Lewis is not entitled to severance pay but stands to collect pension benefits worth $53.2 million, largely from a retirement program that was frozen in 2003, according to an analysis of corporate filings by James F. Reda & Associates, an independent consulting firm. Mr. Lewis also will walk away with $81.8 million in stock and other compensation that he accumulated over his career, the analysis found.
The government-appointed compensation czar, Kenneth R. Feinberg, does not have authority over any pay that was legally binding as of last February, so much of Mr. Lewis’s compensation package may go untouched. However, Mr. Feinberg is likely to examine whether all of Mr. Lewis’s exit compensation is beyond his office’s reach.
Mr. Lewis is the latest of more than half a dozen Wall Street chiefs to be unseated by the credit crisis. Charles O. Prince III of Citigroup, Richard S. Fuld Jr. of Lehman Brothers, G. Kennedy Thompson of Wachovia Corporation, and John A. Thain, the Merrill Lynch chief executive whom Mr. Lewis forced out after the merger, lost their jobs in the fray.
There are no immediate successors to replace Mr. Lewis. The board plans to interview a number of his current deputies, but will seriously consider outsiders, according to people who have spoken with board members. Robert K. Steel, a former Treasury official who briefly ran Wachovia before its collapse, is one possible contender.
In Mr. Lewis’s tenure as chief executive, shares soared to a high of $54.85 in the fall of 2006, from around $25 in April 2001. But after the Merrill Lynch deal, its stock price plummeted. Bank of America shares, which were trading around $33.74 right before the deal was announced, fell to a mere $3.14 a share, although they have since rebounded. On Wednesday, they closed at $16.92.
Mr. Lewis approached a group of about five Bank of America directors on Monday with his plans to retire, according to a person briefed on the discussions. They praised his work and tried to persuade him to stay, this person added, but he remained steadfast in his decision to retire.
Charles K. Gifford, a board member at Bank of America, said in an interview that Mr. Lewis’s decision came as a surprise to many directors.
In the conference call, Mr. Lewis, speaking in a measured voice, told the 15 directors that he knew it was time for him to retire, Mr. Gifford said.
“He said he felt it was the time, and that he was the only one who could understand that,” Mr. Gifford said. “The guy just cares so much about the institution. I mean, that’s what he told us.”
Mr. Gifford said the board had never discussed asking Mr. Lewis to resign and that several members expressed respect for him on the phone call. However, no one asked him not to resign, Mr. Gifford said, adding that Mr. Lewis sounded as though he had fully made up his mind.
Mr. Lewis, 62, has been under immense pressure since the bank merged with Merrill Lynch at the height of the financial crisis. The deal capped a string of bold acquisitions — including the mortgage lender Countrywide, the credit card lender MBNA and FleetBoston Financial — that transformed Bank of America into the nation’s largest consumer bank. But Merrill quickly turned into one headache after another, though Merrill’s units are performing well now.
Some have defended Mr. Lewis, saying that while he was initially eager to snap up Merrill, he was given little choice by federal regulators when they urged him to move forward with the deal even when Merrill’s losses turned out to be larger than first thought. Mr. Lewis has defended the merger as strategically important to the long-term prospects of Bank of America and has said the deal is already paying off in improved operating profit.
But shortly after the merger was sealed, shareholders began questioning whether Mr. Lewis paid too much for Merrill. Investment bankers left as the cultures clashed. And the merger pushed the bank toward a second bailout from the government soon after its completion, upsetting many investors who worried about the $45 billion taxpayer lifeline, and who saw the value of their shares evaporate. In the spring, they voted to strip Mr. Lewis of his chairmanship.
According to people close to Mr. Lewis, he believed that accepting the second bailout was one of his biggest mistakes because it put Bank of America into the “extraordinary” bailout category, alongside Citigroup and the American International Group, and Mr. Lewis considered his bank to be much stronger than those companies.
Executives at the bank believe it has recovered sufficiently to repay its bailout money, and they have pressed their case in Washington. But even optimists at the bank concede that the bank’s immediate prospects are uncertain given the fragile state of the economy.
Mr. Lewis also disliked the added attention that came with the bailout, these people said, and he said that he hoped to return the bailout funds or a portion of them before he left the company.Adding to the pressure was the firestorm that erupted over whether he adequately disclosed the risks of the acquisition to his shareholders. After Mr. Lewis clinched his deal, Merrill lost a staggering $15.3 billion during the fourth quarter, but paid out billions of dollars in bonuses that Bank of America shareholders were unaware of when they voted to approve the deal. He has since hired his own legal counsel.
Mr. Lewis began thinking about retiring while he was on vacation in Aspen, Colo., in late August, according to the sources briefed on his decision. He surprised colleagues when he returned to work sporting a beard, something no one could remember him doing in decades.
The bank chief was visiting New York on Wednesday when he told the board of his decision. He ended the call by saying, “I remain sure of what I am doing,” said two people who were listening to the call. Soon afterward, he boarded a plane and flew home to Charlotte, N.C.
<div>By <a title=”More Articles by Louise Story” href=”http://topics.nytimes.com/top/reference/timestopics/people/s/louise_story/index.html?inline=nyt-per”>LOUISE STORY</a> and <a title=”More Articles by Eric Dash” href=”http://topics.nytimes.com/top/reference/timestopics/people/d/eric_dash/index.html?inline=nyt-per”>ERIC DASH</a></div>
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Kenneth Lewis at the National Urban League Conference in Chicago in July.
Less than a year ago, <a title=”More information about Bank of America Corp” href=”http://topics.nytimes.com/top/news/business/companies/bank_of_america_corporation/index.html?inline=nyt-org”>Bank of America</a>’s chief executive, <a title=”More articles about Kenneth D. Lewis.” href=”http://topics.nytimes.com/top/reference/timestopics/people/l/kenneth_d_lewis/index.html?inline=nyt-per”>Kenneth D. Lewis</a>, celebrated his daring takeover of <a title=”More articles about Merrill Lynch & Co.” href=”http://topics.nytimes.com/top/news/business/companies/merrill_lynch_and_company/index.html?inline=nyt-org”>Merrill Lynch</a> as the crowning triumph of a long career. On Wednesday, that conquest proved to be his downfall, as he <a title=”Bank of America announcement.” href=”http://newsroom.bankofamerica.com/index.php?s=43&item=8543″>announced his resignation</a> after months of legal and political scrutiny over the star-crossed merger.
Mr. Lewis, who started at the bank in 1969 as a low-level loan officer and rose through the ranks to build it into a financial powerhouse, told board members in a 5 p.m. conference call that he had decided to take early retirement, said four people briefed on the discussion.
The board appeared caught off-guard by the timing of his announcement but accepted it even though members were not immediately prepared to name a successor. He had already discussed the matter with the chairman and a small group of directors, the people said.
Mr. Lewis leaves<a title=”Statement from Representative Edolphus Towns.” href=”http://oversight.house.gov/story.asp?ID=2617″> as Congress</a>, <a title=”Statement from the attorney general’s office.” href=”http://www.oag.state.ny.us/media_center/2009/sep/sep30a_09.html”>the attorney general of New York</a> and investors turn up pressure on both him and the bank over not disclosing Merrill’s losses and bonuses to shareholders. A federal judge recently refused to accept a settlement that had been brokered between Bank of America and the <a title=”More articles about the U.S. Securities And Exchange Commission.” href=”http://topics.nytimes.com/top/reference/timestopics/organizations/s/securities_and_exchange_commission/index.html?inline=nyt-org”>Securities and Exchange Commission</a>, saying the bank and the commission never fully explained how the decisions had been made.
The controversy is likely to occupy the bank even after the departure of Mr. Lewis, who has already had to testify to Congress on the matter.
“This was a necessary and overdue change,” said Michael Garland, a spokesman for <a title=”More articles about the Change to Win Coalition.” href=”http://topics.nytimes.com/top/reference/timestopics/organizations/c/change_to_win_coalition/index.html?inline=nyt-org”>Change to Win</a>, an investment group that has been pressing for Mr. Lewis’s ouster for months. “The onus is now on the board to engage with shareholders to name a successor who can quickly restore Bank of America’s credibility with regulators and investors.”
Federal officials did not call on Mr. Lewis to step down and were notified of his decision late in the afternoon, according to two people briefed on the situation. However, regulators have urged other management and board level changes at Bank of America, <a title=”More information about Citigroup Incorporated” href=”http://topics.nytimes.com/top/news/business/companies/citigroup_inc/index.html?inline=nyt-org”>Citigroup</a> and other financial firms that have received taxpayer lifelines.
Mr. Lewis is not entitled to severance pay but stands to collect pension benefits worth $53.2 million, largely from a retirement program that was frozen in 2003, according to an analysis of corporate filings by James F. Reda & Associates, an independent consulting firm. Mr. Lewis also will walk away with $81.8 million in stock and other compensation that he accumulated over his career, the analysis found.
The government-appointed compensation czar, <a title=”More articles about Kenneth R. Feinberg.” href=”http://topics.nytimes.com/top/reference/timestopics/people/f/kenneth_r_feinberg/index.html?inline=nyt-per”>Kenneth R. Feinberg</a>, does not have authority over any pay that was legally binding as of last February, so much of Mr. Lewis’s compensation package may go untouched. However, Mr. Feinberg is likely to examine whether all of Mr. Lewis’s exit compensation is beyond his office’s reach.
Mr. Lewis is the latest of more than half a dozen Wall Street chiefs to be unseated by the <a title=”More articles about the credit crisis.” href=”http://topics.nytimes.com/top/reference/timestopics/subjects/c/credit_crisis/index.html?inline=nyt-classifier”>credit crisis</a>. <a title=”More articles about Charles O. III Prince.” href=”http://topics.nytimes.com/top/reference/timestopics/people/p/charles_o_iii_prince/index.html?inline=nyt-per”>Charles O. Prince III</a> of Citigroup, <a title=”More articles about Richard S. Fuld Jr..” href=”http://topics.nytimes.com/top/reference/timestopics/people/f/richard_s_fuld_jr/index.html?inline=nyt-per”>Richard S. Fuld Jr.</a> of <a title=”More articles about Lehman Brothers.” href=”http://topics.nytimes.com/top/news/business/companies/lehman_brothers_holdings_inc/index.html?inline=nyt-org”>Lehman Brothers</a>, <a title=”More articles about G. Kennedy Thompson.” href=”http://topics.nytimes.com/top/reference/timestopics/people/t/g_kennedy_thompson/index.html?inline=nyt-per”>G. Kennedy Thompson</a> of Wachovia Corporation, and <a title=”More articles about John A. Thain.” href=”http://topics.nytimes.com/top/reference/timestopics/people/t/john_a_thain/index.html?inline=nyt-per”>John A. Thain</a>, the Merrill Lynch chief executive whom Mr. Lewis forced out after the merger, lost their jobs in the fray.
There are no immediate successors to replace Mr. Lewis. The board plans to interview a number of his current deputies, but will seriously consider outsiders, according to people who have spoken with board members. Robert K. Steel, a former <a title=”More articles about the U.S. Treasury Department.” href=”http://topics.nytimes.com/top/reference/timestopics/organizations/t/treasury_department/index.html?inline=nyt-org”>Treasury</a> official who briefly ran Wachovia before its collapse, is one possible contender.
In Mr. Lewis’s tenure as chief executive, shares soared to a high of $54.85 in the fall of 2006, from around $25 in April 2001. But after the Merrill Lynch deal, its stock price plummeted. Bank of America shares, which were trading around $33.74 right before the deal was announced, fell to a mere $3.14 a share, although they have since rebounded. On Wednesday, they closed at $16.92.
Mr. Lewis approached a group of about five Bank of America directors on Monday with his plans to retire, according to a person briefed on the discussions. They praised his work and tried to persuade him to stay, this person added, but he remained steadfast in his decision to retire.
<a title=”More articles about Charles K. Gifford.” href=”http://topics.nytimes.com/top/reference/timestopics/people/g/charles_k_gifford/index.html?inline=nyt-per”>Charles K. Gifford</a>, a board member at Bank of America, said in an interview that Mr. Lewis’s decision came as a surprise to many directors.
In the conference call, Mr. Lewis, speaking in a measured voice, told the 15 directors that he knew it was time for him to retire, Mr. Gifford said.
“He said he felt it was the time, and that he was the only one who could understand that,” Mr. Gifford said. “The guy just cares so much about the institution. I mean, that’s what he told us.”
Mr. Gifford said the board had never discussed asking Mr. Lewis to resign and that several members expressed respect for him on the phone call. However, no one asked him not to resign, Mr. Gifford said, adding that Mr. Lewis sounded as though he had fully made up his mind.
Mr. Lewis, 62, has been under immense pressure since the bank merged with Merrill Lynch at the height of the financial crisis. The deal capped a string of bold acquisitions — including the mortgage lender Countrywide, the credit card lender MBNA and FleetBoston Financial — that transformed Bank of America into the nation’s largest consumer bank. But Merrill quickly turned into one headache after another, though Merrill’s units are performing well now.
Some have defended Mr. Lewis, saying that while he was initially eager to snap up Merrill, he was given little choice by federal regulators when they urged him to move forward with the deal even when Merrill’s losses turned out to be larger than first thought. Mr. Lewis has defended the merger as strategically important to the long-term prospects of Bank of America and has said the deal is already paying off in improved operating profit.
But shortly after the merger was sealed, shareholders began questioning whether Mr. Lewis paid too much for Merrill. Investment bankers left as the cultures clashed. And the merger pushed the bank toward a second bailout from the government soon after its completion, upsetting many investors who worried about the $45 billion taxpayer lifeline, and who saw the value of their shares evaporate. In the spring, they voted to strip Mr. Lewis of his chairmanship.
According to people close to Mr. Lewis, he believed that accepting the second bailout was one of his biggest mistakes because it put Bank of America into the “extraordinary” bailout category, alongside Citigroup and the <a title=”More information about American International Group” href=”http://topics.nytimes.com/top/news/business/companies/american_international_group/index.html?inline=nyt-org”>American International Group</a>, and Mr. Lewis considered his bank to be much stronger than those companies.
Executives at the bank believe it has recovered sufficiently to repay its bailout money, and they have pressed their case in Washington. But even optimists at the bank concede that the bank’s immediate prospects are uncertain given the fragile state of the economy.
Mr. Lewis also disliked the added attention that came with the bailout, these people said, and he said that he hoped to return the bailout funds or a portion of them before he left the company.Adding to the pressure was the firestorm that erupted over whether he adequately disclosed the risks of the acquisition to his shareholders. After Mr. Lewis clinched his deal, Merrill lost a staggering $15.3 billion during the fourth quarter, but paid out billions of dollars in bonuses that Bank of America shareholders were unaware of when they voted to approve the deal. He has since hired his own legal counsel.
Mr. Lewis began thinking about retiring while he was on vacation in Aspen, Colo., in late August, according to the sources briefed on his decision. He surprised colleagues when he returned to work sporting a beard, something no one could remember him doing in decades.
The bank chief was visiting New York on Wednesday when he told the board of his decision. He ended the call by saying, “I remain sure of what I am doing,” said two people who were listening to the call. Soon afterward, he boarded a plane and flew home to Charlotte, N.C.
<div id=”authorId”><address>An earlier version of this article misstated the location of Bank of America where Kenneth D. Lewis’s tenure began. It was a small bank in North Carolina, not South Carolina.</address></div>