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 Bank of America Corp.'s (NYSE:BAC) CEO Ken Lewis will retire at the end of the year with more than $50 million in pension. As CEO of BofA for eight years, he's had a nice run, and pretty much followed in the footsteps of his predecessor Hugh McColl in building up Bank of America through acquisitions. But let's not forget that McColl made BofA, the culture of the bank and essentially Lewis' career. Lewis, perhaps learned too much from McColl and the culture that he built over at BofA. Lewis joined BofA in 1969 and played an essential role as the operator and integrator of McColl's aggressive acquisition strategy, focusing in on the business operations, as Shawn Tully of Fortune Magazine pointed out in his 2005 article. "At first NCNB [BofA's predecessor] struggled to book piddling profits. McColl sent in Lewis in 1985 [to manage sales operations and management in all of the bank's McColl was acquiring]. In three years he transformed the sleepy branches into selling machines," Tully wrote. Lewis attracted McColl's attention during the1980s and early 1990s when BofA -- then North Carolina National Bank -- started acquiring smaller, midsized and then larger banks to became the behemoth the Bank of America.McColl started his acquisitions off small and and built up over time, taking on greater risk and generally paying in full or overpaying in many transactions. The '90s were the heyday of bank consolidation and McColl took NCNB from a regional bank in North Carolina to a bank with national reach. It was a decade of eat or be eaten, and McColl was one of the hungriest predators. When McColl left Bank of America in 2001, Lewis promised shareholders he would focus on operations and digesting the acquisitions the bank had made over the years. There was also the hope he would organically grow BofA's investment-banking division. However, in 2004, Lewis started BofA's second buildup by acquiring FleetBoston Financial, which was an overpriced deal, but worked out for BofA. So Lewis kept acquiring bigger companies in overpriced deals, eventually spending over of $130 billion on acquisitions, according to Reuters DealZone. Along with Fleet, he purchased credit card lender MBNA Corp., troubled mortgage lender Countrywide Financial, U.S. Trust Co. and LaSalle Bank in Chicago. For years Lewis had struggledto organically grow investment banking -- a problem he solved with the $29 per share Merrill Lynch deal. "He was good at operations and the basic banking business. Those were his core strengths. His biggest challenge was focusing on size, market share and return on equity. He didn't appreciate the risk that came along with acquisitions," explained longtime BofA activist investor Jonathan Finger of Finger Interests Number One Ltd. Finger to The Deal. Finger added: "What they really needed Lewis to do was to digest the acquisitions and focus on customer service. But he was focused on making it bigger and certainly paid full price in a number of cases like when they purchased the old Bank of America. It has really always been the legacy of the company." Now with Lewis on his way out, there will be a new set of challenges for the bank. Perhaps Lewis expressed it the best in his letter to The Business Journal of the Greater Triad Area: The next great set of challenges for our company -- executing across
our businesses to achieve our potential, and imagining how our company
must continue to evolve to meet the changing demands of the global
marketplace -- are for our next chief executive officer, and for our
Executive Management Team... They begin the next chapter in our company's history
with a franchise unique in the world: a bank with primacy in U.S.
retail and commercial banking, global wealth management and corporate
and investment banking. The board is forming a nomination committee Friday, according to Bloomberg. They may hire an interim CEO, one that may stay for two or three year or they might not. While placing an interim CEO in the spot could focus on operations and integration issues, it might not be the best route for BofA, as The Telegraph points out: Sure, it's tempting. If nothing else, it could assuage the egos of in-house executives who might feel slighted and then bolt if an external candidate were appointed over their heads. That might apply especially to the three who seemed to be in the race to be Lewis's longer-term successor over the summer: Sallie Krawcheck in wealth and asset management, Tom Montag in investment banking and Brian Moynihan in the retail division. Avoiding yet more management upheaval sounds smart. But more likely, bringing in a short-term CEO would end up just delaying it: a stop-gap boss would find it hard to command the troops, especially the handful of strong-willed lieutenants battling to fill his or her shoes a few months later. It might simply replace one corner-office distraction - Lewis's increasingly untenable hold on power this year - with another that could last even longer. BofA's board now gets to decide if it wants a chief executive to remain on the same growth path or try digesting and reshaping and wringing out efficiencies. The choice will be fascinating. Will the board opt for someone who did not come up through the bank -- or that's even a commercial banker? Will it look outside BofA? Will it consider someone from outside Charlotte? Or will it seek yet another local banker with big ambitions, like McColl and Lewis. As for Lewis' future in retirement-- well, he can begin that after his date with Judge Jed Rakoff in February. - Maria Woehr
Also see: BofA shareholder Finger points to Lewis' successors
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