Saturday, January 17, 2009

Ken Lewis - CEO of America, Inc.

On Friday, Bank of America announced a fourth quarter loss of $1.79 billion, which does not account for a loss of $15.3 billion at Merrill Lynch, whose acquisition by BOA closed just a few days ago. The government agreed to loan BOA $20 billion and guarantee assets totaling $118 billion. This is on top of the billions of dollars the bank has already received from the government in prior months. In regards to the decision to go forward with the Merrill Lynch acquistion that was annouced in the fall, Bank of America CEO Ken Lewis had some choice quotes in this article:

“We did think we were doing the right thing for the country,” Lewis said.

"We just thought it was in the best interest of our company and our shareholders and the country to move forward," Mr. Lewis explained...

Funny, I thought the job of the CEO of a corporation is to protect the interests of SHAREHOLDERS. Ken Lewis's motivations point towards the first quote being accurate while the second quote makes no sense. What part of knowingly going forward with a terrible acquisition represents the best interests of shareholders? To me it looks like he put the desires of government officals ahead of the interests of his shareholders.

Is Ken Lewis the CEO of America, Inc.? I guess so, since that is apparently whose interests he is looking out for, at the expense of BOA shareholders. Anyone still holding BOA shares has a pretty obvious lawsuit on their hands. Ken Lewis clearly broke his fiduciary duty as CEO.

Government, rather than shareholders are now calling the shots at the major US banks. The line between big business and government went from blurred to invisible in the last six months. Anyone disagree?

1 comments:

JB said...

Barry Ritholtz says it's time for Ken Lewis to resign: http://www.ritholtz.com/blog/2009/01/drumbeat-for-ken-lewis-resignation-builds/

I say, why stop there? The senior management and boards of all these banks need to be ousted. More taxpayer money? Where is the outrage?