Bank of America’s board of directors has begun to split into factions struggling to see their guy get tapped to run the mega-bank.
The primary factions in the internal battle are the old boys gang from Charlotte, North Carolina, and Boston, which had been the headquarters of Fleet Financial Group, the bank acquired by Bank of America in 2004. Both actions were Lewis cronies and deeply loyal to their boss. But with the top guy stepping out of the way, all bets are off.
Three of the six directors serving on the bank’s steering committee to identify the next chief executive come from Fleet’s board, the Financial Times reports. This likely gives the upper hand to Brian Moynihan, a former Fleet executive who heads the consumer banking division and has worked in a wide range of jobs at the bank.
THe Charlotte loyalists, who have been with the bank since its early days as North Carolina National Bank, are fighting against what they view as a Boston take-over of their bank. Led by Hugh McColl, Lewis’s mentor and predecessor, and Meredith Spanger, the bank’s largest individual shareholder, this faction has little representation on the board but exercises influence through extensive loyalty in the executive ranks.
McColl relentlessly built North Carolina National Bank into a major regional bank he dubbed Nations Bank through a series of acquisitions. Lewis was his right hand man during the building years. In 1998 he bought Bank of America and promptly moved its headquarters to Charlotte. It has often been said that McColl wanted to prove the South could have its own financial powerhosue that could rival those of the Yankees and Wall Street.
You can see why the Boston takeover looks like a problem to them. This faction has been trying to create the perception that Moynihan would be the second-coming of Chuck Prince, who was general counsel of Citigroup before becoming CEO. Moynihan is also a lawyer and briefly held the title of general counsel when Bank of America fired its counsel last December.
The FT reports that the Charlotte faction is said to be supportive of James Hance, a former BofA chief financial officer now with the Carlyle Group.
All of this is more evidence of how the mergers that created Bank of America never really worked. Everyone is now familiar with the clashes between Merrill Lynch executives and Bank of America. But the older mergers also created similar ill-will, they just never really got publicized.
Here’s how Christopher Whalen puts it in a new report:
The mergers “worked” because the old NCNB HR department ruthlessly squeezed down personnel costs. These are “process” people, after all, who believe that you can identify tasks that can be done by one person, then train that person and pay him/her well below average. This is what they call “synergies” at BAC. This goal of short-term cost cutting pervades BAC and has led to an organisation that produces narrowly focused employees and business units, with no incentive to innovate or manage risk on an enterprise basis as required by Sarbanes-Oxley, not to mention federal banking laws.
Making matters worse, Lewis jealously gaurded his authority and actively undermined or fired other executives who might have rivaled him. Joe Nocera explained the problem in his New York Times column this weekend:
Mr. Lewis was uncomfortable rousing the troops, or even giving an executive a pep talk. Small talk with underlings was out of the question. He brutally fired many of the firm’s most talented executives, seemingly afraid to be surrounded by potential successors. Despite the size of his company, his board had almost no one with big-time banking experience. Instead, it was made up largely of cronies.