After a humiliating and failed attempt to draw a quality candidate from outside the company to run its troubled affairs, Bank of America (NYSE:BAC), as expected, after Bank of New York Mellon Corp Chief Executive Robert Kelly rejected the position, refocused to within the company for its new CEO, and decided on 51-year-old Brian Moynihan, who now heads up the retail banking unit of Bank of America at this time.
Current CEO Kenneth Lewis will step down on December 31, and Moynihan will step up at that time to run the company, while also taking a seat on the board.
The immediate response to the announcement was positive, as many felt Bank of America needed a practical hand to guide it and not any more major acquisitions and big expansions in the years ahead. Moynihan brings that to the table, and many believe he will not only help operationally, but also in digging into things to the point where he will be able to identify the problems and then have the ability to figure out how to solve them.
This isn’t to say it will be an easy job to accomplish or he is guaranteed success. He will have to deal with the problems associated with the acquisition of Merrill Lynch, along with troubled mortgage lender Countrywide Financial; not a minor task by any stretch of the imagination. How to integrate them better into the company will take some time to work out.
The size alone of Bank of America adds to the challenge, as it’s the largest bank in the U.S. with deposits of almost $1 trillion under its management, along with about 6,000 branches and 18,000 ATMs.
Short term Moynihan also has to do a juggling job, as the bank had for them an extraordinary two quarters of losses after close to twenty years of being profitable. He must get things back in the black without sacrificing the long term prospects of the gigantic financial institution.
while a number of investors felt there was no way the company would hire their next CEO internally, the board did seem to favor that as the road to take, and didn’t make it easy for outsiders to get the job, as the situation with Robert Kelly showed.
Word is the ultimate reason Kelly turned down the job was his reluctance to get into a battle over his nomination as CEO with the portion of the Bank of America board which didn’t back up his selection.
After the rejection of the job by Kelly, Moynihan was the clear favorite to replace Lewis, as the steps to take to extend the CEO search would have put the process on hold for some time, and I don’t think Bank of America believed they could continue operating successfully unless the CEO question was resolved; the reason Moynihan had to have been named so quickly after the Kelly debacle occurred.
Also the more rejections for the job from those on the outside, the more questionable the health of Bank of America looked, and the more questions generated as to what was keeping such quality candidates from taking the job. They no longer had the TARP payment and government interference excuse once that was taken care of, so the board was on the hot seat after being dumped by Kelly. Again, that made a quick hire a necessity, and Moynihan was the obvious beneficiary of that need.
