A Expiration Date on Good Corporate Governance By: Mark Rogers
In the opinion of Bank of America, after January 1, 2015, their shareholders and customers are no longer entitled to appropriate standards of good governance. As part of BofA’s recently announced settlement with its shareholders over the disastrous merger with Merrill Lynch, BofA adopted certain corporate governance best practices. But, there is a catch, BofA only committed to maintaining these reforms through January 1, 2015.
The BofA settlement came just weeks before a scheduled trial in New York Federal Court where shareholders were going to try to prove that the company failed to disclose key information regarding the proposed merger with Merrill Lynch.
So why has BofA committed to only maintaining these new governance standards through January 1, 2015?
Perhaps the January 1, 2015 date is the bank’s subtle way of announcing that it does not plan to be in business after that date. Or perhaps, the bank has inside information from Congress that new legislation will go into effect that day that mirrors these reforms – and therefore, the reforms mandated by the settlement are no longer necessary. Or maybe, just maybe, it is simply another example of the unmatched arrogance of the financial behemoth, its board of directors and its senior management. In other words, “We know what’s best for you shareholders, but to placate you for the time being, we will put a few measures in place. But just remember, our masquerade as a paradigm of corporate accountability and transparency ends on January 1, 2015.”
How did it come to this? In many ways our government is to blame – its inability to hold BofA accountable can arguably be seen as tacit approval for the path of greed the bank has chosen.
Government initiatives, like Sarbanes-Oxley and Dodd-Frank, are only as effective as the boards that put them into action and the management that heeds their directives.
The reality is that the solution rests with BofA’s shareholders. Ultimately, their own greed, or rather desire for an improved share price (BofA is clinging to a dismal $5 a share), will likely drive them to clean house in terms of the bank’s board and senior management. Not surprisingly, the reforms included as part of the recent settlement with the bank can actually be utilized to accomplish this task.