Bank of America Board’s Split Said to Spur Kelly’s Withdrawal

By David Mildenberg, Brad Keoun and Sree Vidya Bhaktavatsalam

Dec. 16 (Bloomberg) -- Bank of America Corp.’s board was so split over whom to hire as chief executive officer that the top external candidate, Robert Kelly, withdrew instead of trying to unite the factions, people familiar with his thinking said.

Kelly, 55, chairman and CEO at Bank of New York Mellon Corp., dropped out earlier this week after concluding directors were divided between those who sought an outsider and those who preferred an internal choice, one of the people said, speaking anonymously because the talks were private. Kelly also questioned Bank of America’s decision in April to separate the chairman and CEO roles, the people said.

Negotiations with Kelly broke down during discussions about pay, according to people close to the Charlotte, North Carolina- based bank. The Wall Street Journal cited people familiar with the matter as saying he sought $20 million and the chairman’s title. Bank of America spokesman Jim Mahoney declined to comment.

“Mr. Kelly was very flexible on compensation -- in fact it was at the bottom of his list -- but the more important drivers of his decision were the strategic opportunities for growth at BNY Mellon,” Kevin Heine, a spokesman for the New York-based bank, said in an e-mail.

Kelly’s exit left the board with no outsiders actively engaged in talks, a person briefed on the matter has said. That makes it more likely the company will replace CEO Kenneth D. Lewis with either Chief Risk Officer Gregory Curl, 61, or Brian Moynihan, 50, who heads consumer banking. Lewis, 62, plans to leave at the end of the year.

“I think all along the company wanted to go internal,” FBR Capital Markets Inc. analyst Paul Miller said in a Bloomberg Television interview. “It looks like that’s what it’s going to do.”

‘Flexible’ on Pay

Since the CEO search began in October, at least four people have rebuffed approaches, including Citigroup Inc. director Michael O’Neill; former JPMorgan Chase & Co. investment-banking co-head William Winters; U.S. Bancorp CEO Richard Davis; and Eugene McQuade, a former Freddie Mac president who now oversees Citigroup’s largest banking subsidiary, according to people familiar with the matter.

Bank of America lost 10 directors through resignations or retirements since April, after Lewis was stripped of his chairman’s title and federal regulators required an overhaul of risk-management and succession strategies. The board has since added six directors, including ex-Federal Reserve Board Governor Susan Bies and Donald Powell, former chairman of the Federal Deposit Insurance Corp.

Visa’s Ex-Leader

Other new directors include Paul Jones, a former CEO at an Alabama bank, and William Boardman, ex-chairman of Visa International Inc.

The board is being advised in the search by Russell Reynolds Associates, according to a regulatory filing earlier this month.

Bank of America declined 44 cents, or 2.8 percent, to $15.19 yesterday in New York Stock Exchange composite trading. It was the biggest drop in the Dow Jones Industrial Average for the day; the shares have gained almost 8 percent this year.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net; David Mildenberg in Charlotte at dmildenberg@bloomberg.net.