Bank of America CEO Brian Moynihan's job performance comes under the microscope

Bank of America CEO Brian Moynihan's job performance has come under the microscope as shareholders scrutinize whether he also deserves to be the chairman of the bank's board.

Two large shareholders, owning roughly $1 billion worth of Bank of America stock, have written a letter saying they don't think Moynihan, who took over as CEO in 2010, also deserves to be chairman.

"Since Mr. Moynihan’s appointment as CEO in January 2010, the Company has continued to underperform," according to a letter by the California Public Employees’ Retirement System (Calpers) and the California State Teachers’ Retirement System (Calstrs) to Jack Bovender, the bank's lead director.

The two public pension funds cited BofA's stock price relative to its peers, as well as the company's troubles passing a government stress test that seeks to determine how well the largest banks will perform during another financial calamity. The nation’s second largest bank received a conditional pass of its March stress test due to “deficiencies” in its revenue modeling and internal controls, the Federal Reserve said.

The central bank ordered BofA to correct the deficiencies and re-submit its capital spending plan by the end of September.

BofA disagreed with this assessment of its performance, citing vast improvements in the bank since it acquired a boatload of troubled assets and regulatory scrutiny in its 2008 acquisition of Countrywide financial.

"No company has dug out of a deeper hole since the financial crisis, turned back to health with solid earnings and accumulated record levels of capital and liquidity — all to the benefit of our shareholders," spokesman Lawrence Grayson said. "The board respectfully recognizes that stockholders hold varying views on this matter, which is why the board committed to putting it to a vote," Grayson added. 

Shareholders will vote on the bank's decision to give Moynihan the chairman role on September 22nd. The vote will be binding, which means the board must abide by shareholders' wishes. 

BofA shareholders have grappled with this issue before, in 2009, when they passed a proposal to split the chairman and CEO roles at the height of the financial crisis. At the time, the vote was directed at then-CEO Ken Lewis, who resigned from the bank six months later amid criticisms of his acquisition of Merrill Lynch.

Moynihan replaced Lewis and was named chairman of the board in October 2014 in a move that did not involve shareholders. BofA has said it gave Moynihan the chairman role in light of a pending resignation from its previous chairman, Charles Holliday.

"While we agree that the 2009 vote may have been a referendum on the circumstances prevalent to Bank of America at that time, we believe the current conditions at the Company still warrant an independent chair," the Calpers and Calstrs joint letter said.

BofA's decision to make Moynihan chairman has also led to criticisms by noted bank analyst Mike Mayo, who has said BofA's decision to unilaterally give Moynihan the chairman role suggests the board needs more oversight, not less.