Friday, December 07, 2012

Shareholder wealth? (Which language?!)

You can curse him a million times for emptying your pockets; you can praise him a billon for saving other companies... Call him a ‘hero’; call him the ‘Don Quixote’ who led The Bank of America!

Many still ponder over how he could ‘give-in’ to his hidden penchant for the half-dead loss maker, Merrill Lynch (ML) on New Year Day (a cumulated net loss of $37.85 billion during FYs 2007 & 2008). Many still ponder over why he was booted out by Time from its list of the ‘World’s 100 Most Influential Leaders’ in 2008. Many still ponder over whether Bank of America (BofA) will beg for more than ‘just’ the $45 billion Fed-aid (and a further $118 billion worth of guarantees against bad assets). But none ponder over whether Kenneth Lewis, Chairman & CEO, BofA has been credible enough to steer the great American financial ship... He’s done his job well, and despite the fact that February 4, 2009, marked the ‘worst valuation day’ in decades for BofA (with the bank eroding close to $125 billion in Mcap since September 14, 2009; its shares touching a 25 year-old low of a paltry $3.77!), there is no denying that Lewis is the man of the hour for BofA (what?!?).

So what makes us put forward such a claim? Let’s do some reality check here – weren’t the very same critics showering hymns of praises upon Lewis, as recently as 5 months back, when he stepped in boldly to save Countrywide Financial and ML from the vagaries of the meltdown? Yes, the move backfired, but can we so very easily cast that heavy tattered hat of shame on his head, while all he did was to make an effort, even putting his hard-earned reputation on the firing line of all earnest shareholders?

“There were others that wanted to make an investment in ML. Even now, on a longer-term basis, that brand has a lot of value,” is how Lewis publicly defends his act. Shame, we even question him on a decision that only cost BofA ‘way-too-dearly’ in stocks. And in reaction, investors of BofA filed a proposed class action against the entity, on January 20, 2009, charging its top officers on grounds of incomplete information sharing about the health of ML.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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