Corporate Governance for Dummies: Ken Lewis & BofA

There are plenty of topics on which I could opine this morning. Originally, I was going to comment on Holman Jenkins' column in yesterday's Wall Street Journal regarding GM's and Chrysler's looming bankruptcies. But, really, the major point of that was to highlight Jenkins' review of the realities of how government regulation fed the UAW's bloated compensation demands, while GM, Ford and Chrysler, to varying degrees, acquiesced.

That, in itself, is a sort of corporate governance story. Jenkins and I agree that the UAW and the federal government are both getting the just desserts of their earlier behavior.

But yesterday's news featured a much more sharply-defined example of corporate governance. And not a good one.

Ken Lewis was rejected by shareholders as Chairman of BofA but, for now, remains CEO. Personally, I agree with the Journal columnists who noted Lewis' gigantic mistakes of late, i.e., overpaying for Countrywide, then foolishly buying a dying Merrill Lynch, all the while contending that both were fabulous deals for BofA.

As the details of Lewis' intimidation by Bernanke and Paulson have come forth, one wonders why any shareholder would trust Lewis to run anything material anymore. He's clearly a seat-warmer without principles or much common sense.

But, faced with three examples of clear cut, anti-shareholder behavior, the morons who still hold BofA stock seem unable to get rid of him.

How is this possible? Is this appropriate 'corporate governance?'

Jason Zwieg, a columnist in the Wall Street Journal, wrote a piece a few months ago castigating those who, like me, take the position that one should simply sell the shares of companies whose behavior varies from what one would desire.

Is there any clearer case today of a company run ineptly by a clueless CEO? One who has now publicly admitted being guilty of Sarbanes-Oxley felonies?

But they still can't get rid of him. Some say that Lewis only has 'one more chance' left.

My God! I wish the rest of us had so many chances to screw up at several million dollars per year of total compensation.

My point is, Zwieg is wrong, and I am right. For the average shareholder, rather than, say, Carl Icahn or Eddie Lampert, there's just no leverage or percentage in holding the equity of a poorly-run company. Hoping that, over time, you and a few thousand other, unknown shareholders will somehow, magically, nominate another candidate to be CEO, or replace all of the board members, who will then fire the sitting CEO, only happens in a movie. If then.

In a fair world, Lewis would be gone. But the board is in his pocket. That they are insensitive to shareholder wishes is clear by their support for Lewis as Chairman, while the owners whom they are supposed to represent voted to split the job from CEO.

You just can't, in my opinion, get a clearer example of a company in which the CEO should be fired, and then probably charged with a felony, yet he continues to hold his job.

That's what you get for believing in the fairy tale of 'corporate governance.'

Here's the reality- you don't like what's going on at a company? Sell the shares. Period.