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It’s never easy to guess what what “the last straw” will be in corporate governance. Boards of directors and American shareholders are a compliant lot and they would rather lose millions, or even billions, of dollars, than vote out a sitting CEO.

Many reasons have been suggested for this. Frequently-cited is the “Costly Firing” explanation – finding a good CEO is hard; interruptions in leadership, especially during a crisis, can exact serious penalties; the new person might be worse - better the devil you know that the devil you don’t; firing a CEO could give the wrong signal to the market and send the stock plummeting, plus there will probably be a big severance package to pay and even the risk of legal action.

An alternative explanation for CEO entrenchment is the old-boy network - executives and fat cats looking out for each other, often with the knowledge that the board is complicit in the various decisions that drove a company into a wall.

But either way, sometimes enough is enough and tomorrow’s Bank of America shareholder’s meeting will be interesting.

I started buying Bank of America about a year ago when it was around $40/sh and paying a fat dividend. Over the years I’ve done well buying strong companies in wounded industries. On the day the markets opened after 9/11 I bought Southwest Airlines, for instance. And Bank of America was a pretty strong bank, and well-positioned, so I bought more as it fell.

But then a funny thing happened. Last September, with Wall Street firms falling to the ground like autumn leaves, Bank Of America acquired Merril Lynch, virtually overnight. An article in the January 28, 2009 issue of Business Week reported that BofA had only 24 hours to review Merrill’s books - and this with a staff called in at 2AM after working a 14-hour day on another crisis.

Last week the reason for this became clear. In testimony to investigators from the New York Attorney General’s office looking into fishy bonus payments, BofA CEO Ken Lewis said that he was pressured by Hank Paulson and Ben Bernanke to make the purchase - and to keep quiet about his reservations.

Let’s reflect on that for a moment. Under law, a CEO is required to disclose to shareholders any information that might materially affect the value or prospects of the company. Not only did Lewis break the law, but according to his testimony he was urged to do so by the two most senior government officials involved in the US economy - the heads of Treasury and the Fed. For the record, both deny that they urged Lewis to cover-up.

But now that Lewis has admitted in sworn testimony that he failed to meet his legal obligations and that he bought a company that he suspected would drag down shareholder value, I cannot fathom why we should keep him on. I proxy-voted my shares against him for the chair a month ago, before the latest news,  and several major institutional shareholders have since indicated their intention to vote against him tomorrow. If he survives tomorrow it’s likely the lawyers and prosecutors will get him before long anyway, but the sooner BofA starts its spring cleaning the sooner it can get its house in order.

( artwork copyright © Peter Nelson )

When my car registration renewal arrived yesterday from the Massachusetts Registry of Motor Vehicles it came with sponsorship. Seven 3.5 by 6.5 inch advertisements - perfect for a business envelope – fluttered out along with my registration form. Known as “buckslips”, these advertising inserts promoted car insurance, oil-change services, a local gym and other businesses trying to reach an audience of automobile owners still in a spending mood despite the economy and the State’s $41 registration fee.

My wife and I take pains to avoid being advertised-to. We keep a recycling bin on the way from the mailbox to the house and junk mail never gets past it. We have strong spam-blocking on our email and ad-blockers on our browsers and we don’t watch TV. But how do you block out the government?

According to the Tax Foundation, Massachusetts has the highest per capita total state debt in the country at over $10,000 per citizen – about three times the national average. Years of political fiscal mismanagement have put the “Commonwealth” into a hole deeper than the Big Dig – one of the major contributors to the problem. In the case of the Registry of Motor Vehicles this has resulted in commercial sponsorship, cutbacks in hours of operation, elimination of license-renewal reminders, and such desperation-measures as printing registrations on cheap paper instead of the traditional card stock at a savings of about 2 cents per driver.

Any revenues gained or money saved do not go to the Registry, but instead are directed to the State’s general funds, which virtually eliminates any incentive for Registry staff or managers to look seriously at cost-saving ideas.

Times are tough all over, and the Registry’s travails are only a small slice of the Commonwealth’s shrinking fiscal pie. But when you’re in hock as deep as Massachusetts, your fiscal wiggle-room is more limited because debt-service is one part of your budget you can’t cut, so everything else must absorb deeper cuts. Programs all over the state are being chopped and local aid has been slashed, so local governments are also cutting and pink-slipping. It’s hard to see the light at the end of the tunnel when the tunnel is closed because its maintenance workers have been laid-off.