Please read below the article to answer the questions : BoFa’s Moynihan expects

Question

Please read below the article to answer the questions :

BoFa’s Moynihan expects to survive chairman vote

http://nypost.com/2015/09/20/bofas-moynihan-expects-to-survive-chairman-vote/

1- Bank of America chairman and Chief Executive Brian Moynihan is going through rough times with its shareholders activists, as some believe he shouldn’t hold both titles and is responsible for some of BofA decrease in stocks. What could possibly be the issue of having a CEO also holding a chairman position?
2- Besides all the negative rumors, Brian has strong leaders that line up with him and defend that this was a change for the best. Why would other banks bosses would line up with him? Could a possible crises at BofA also affect other banks on a negative aspect?
3- Moynihan who had been CEO since 2010, was granted the chairman tittle after the board argued he deserved a promotion for leading the bank through the financial crisis and boosting its stock price. BofA has its stock’s at a slow but continuous growth, since the crises. What could be some of the reasons BofA haven’t had a good boost in price stock compared to other institutions such as JPMorgan Chase and Wells Fargo? Could that really be related to Moynihan’s dual tittle?

Please answer each question giving your point of view based on the above article

Explanation / Answer

1. A chairman basically protects the interests of the shareholders whereas CEO executes day to day functions. Problem is when CEO becomes the chairman, the active watch over CEO’s role become irrelevant and hence, protection of shareholders becomes difficult. There has to be someone to whom CEO is responsible. If this post goes to the CEO himself, then the accountability factor is not present and he might wield undue influence.

2. Brian might be having potential to run the company in an efficient manner by keeping both the profiles simultaneously which might help tide over the current crises. That’s why these strong leaders are standing with him. But the only issue when the shareholders of the company are against his promotion who are the actual owners of the company, then why this alacrity to get him promoted to the chairman post. Such kind of matters should be dealt with only after getting the confidence of shareholders which doesn’t seem to be so in the current situation.

3. Although stock prices fluctuations are quite normal over a period of time but the same trend should also be visible in other banks as well which is not the case. Other bank are performing well as compared to bank of America which exposes some kind of systemic crises in the company and hence, at this juncture, it is indispensable to have a new chairman in the board to oversee the entire executive functions of the company and ensure its operational efficiency through planning and strategizing. Looking at the things above, yes the crises may be attributed to Moynihan’s dual title and hence, shareholders confidence should be factored in and a decision acceptable to them should be pursued.

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