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BofA scrambling; strategy for new CEO questioned
2009-10-01
NEW YORK (Reuters) - Bank of America Corp's (BAC.N) board of directors is considering hiring a short-term chief executive, a move that signaled CEO Kenneth Lewis' plan to depart caught the bank flat-footed. The company said Thursday it may hire a chief executive for two years, allowing internal candidates more time to grow into the job. But that decision sends a worrisome message to investors who are looking for stability at the embattled Charlotte, North Carolina-based bank and are weary after more than a year of crises. "Not having an announced successor is going to hurt the bank," said Matt McCormick, a Cincinnati, Ohio-based portfolio manager with Bahl & Gaynor Investment Counsel. "I believe that is going to increase volatility and increase focus on them." The company's stock sank 4.2 percent to $16.21 Thursday, reflecting concern about the bank's plan. The board's evident lack of preparation for Lewis' departure is surprising, experts said. The board has not assembled a search committee or hired an outside firm to manage the hunt for a new CEO, a company spokesman said. But Lewis has been under siege from prosecutors, politicians and the public for months over his handling of Bank of America's acquisition of Merrill Lynch & Co, and critics have called for Lewis' departure for months. "The board should have had a plan in place for this contingency. You don't always have years to groom and plan a successor," said Karen Brenner, a business professor at New York University specializing in corporate governance issues. Picking a short-term candidate quickly, and settling on the permanent CEO later could be a risky strategy, recruiters noted. The wrong temporary leader may delay making necessary changes. Lewis, in an letter to employees announcing his departure, said he expects the next two quarters to be difficult for Bank of America. "This is like playing roulette," said Joel Koblentz, an Atlanta-based executive search consultant. "You don't know who to bet on, but in this case, you have to get it right. This is not one you recover from if you make a mistake." A list of internal candidates include: wealth management head Sallie Krawcheck, consumer banking chief Brian Moynihan, Chief Financial Officer Joe Price, investment bank chief Thomas Montag, mortgage head Barbara Desoer and chief risk officer Greg Curl. Early external candidates cited by various media reports include GMAC Financial Services CEO Alvaro de Molina, a former Bank of America executive who spent two decades at the bank, and Bob Steel, former Goldman Sachs executive and Wachovia Corp CEO when that bank was bought by Wells Fargo in 2008. The bank is hoping to avoid the situation that Citigroup Inc (C.N) faced in late 2007, when its chief executive, Chuck Prince, stepped down, and finding a replacement took several months, the Wall Street Journal reported. (Reporting by Joe Rauch, Steve Eder and Dan Wilchins; Editing Bernard Orr)
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