Financial thoughts

Information Technology Services Qualifications Center is spinning off from Carnegie Mellon University to become ITSqc LLC in order to extend research started at the university.

ITSqc started in 2000 as a consortium of information technology companies and university researchers to study best-practices within the information technology service provider industry. Since then, the organization has developed models and a certification process that can be used by clients and providers to ensure that the right expertise is brought on board and services meet client needs.

“The research was done and the models were created and focus shifted from creating and gathering, which universities are great at, we produced the models and now it’s a more commercial adoption issue,” said company director Jeff Perdue of the decision to spin-off.

The intellectual property was licensed in October and the new company started Jan. 1, Perdue said. The company has three employees: Perdue, an associate professor in the Institute for Software Research within the CMU School of Computer Science; Jane Siegel, senior systems scientist in the Institute for Software Research and the Human-Computer Interaction Institute at CMU; and Bill Hefley, faculty at the Katz School of Business at the University of Pittsburgh business card design.

Hefley was previously with the Institute for Software Research.

Some of the companies involved in the consortium include IBM and Accenture, Perdue said. ITSqc already has six organizations that have licensed the models and are working with clients, he said.

“The evolution of the Internet and the growth of the world’s telecommunications infrastructure now enables companies to seek out IT expertise from providers anywhere on the globe,” said Raj Reddy, chairman of the ITSqc Advisory Board in a written statement. “But without a set of commonly accepted best practices, many providers will routinely fail to deliver on their promises and potential clients will have no basis for comparing prospective providers. By establishing these best practices, the ITSqc has helped to bring order to the outsourcing marketplace.”

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South Korea’s economy expanded at a faster pace than initially estimated in the third quarter, boosted by rising overseas orders for cars and semiconductors plus local spending by consumers and companies.

Gross domestic product increased 3.2 percent in the three months ended Sept. 30, compared with the 2.9 percent gain reported in October, the central bank said in Seoul today. The economy grew 0.9 percent in the third quarter from a year earlier, compared with the previous estimate of 0.6 percent.

“South Korea’s economy has benefited from relatively better exports as well as the effects of expansionary policies,” said Ryu Seung Sun, an economist at HMC Investment Securities Co. in Seoul. “Economic growth will remain relatively strong, even though the pace may weaken somewhat in coming quarters.”

South Korea has led a regional rebound with China and Singapore as companies including Samsung Electronics Co. and LG Electronics Inc. reported a jump in profits. The nation is projected to be one of the first in Asia to boost interest rates as it helps lead the region out of a slowdown caused by the global financial crisis.

LG Electronics Inc., the world’s second-largest maker of liquid-crystal-display televisions, reported third-quarter profit that beat analysts’ estimates, driven by record shipments of televisions and higher sales of appliances.

Government Spending

The central bank and the government have raised their economic forecasts for this year. Finance Minister Yoon Jeung Hyun said the economy will probably post zero growth, reversing an earlier forecast for a contraction, and President Lee Myung Bak said last month GDP may expand 5 percent in 2010.

To help prevent the economy from sliding into a recession, the central bank cut the benchmark interest rate by 3.25 percentage points between October and February to a record-low 2 percent and the government increased spending payday loans for bad credit. The benchmark Kospi stock index has risen 44 percent this year and sales at the nation’s main department stores gained the most in 14 months in October.

Exports, which account for about half of the $929 billion economy, rose for the first time in 13 months in November, a government report showed Dec. 1. Overseas shipments will increase 13 percent to $410 billion next year, boosted by demand for semiconductors, cars and display panels, the government said.

South Korea’s exports of goods gained 5.2 percent in the third quarter from the previous three months, compared with the initial 5.1 percent gain estimated in October, today’s report showed. Corporate investment in factories and equipment climbed 10.4 percent in the quarter, up from the 8.9 percent initial estimate.

Private Consumption

Private consumption rose 1.5 from the second quarter, up from the 1.4 percent earlier estimated. Manufacturing rose 9.8 percent from the second quarter compared with the initial estimate of 8.7 percent, while construction investment dropped 2 percent.

Still, there are signs economic growth may slow in coming months. Manufacturers’ confidence has slipped to the lowest level in four months due to uncertainty about the outlook for domestic demand. Consumer confidence also fell in November for the first time in eight months and factory production unexpectedly declined 3.8 percent in October from September.

South Korea’s corporate earnings may fall short of analyst estimates in 2010 as costs climb and the benefits from stimulus measures fade, according to Samsung Securities Co., the nation’s top-ranked brokerage.

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It’s probably cold comfort, but Goldman Sachs couldn’t have done it without your help.

The New York-based investment firm turned another eye-popping profit Thursday, earning $3.2 billion in the third quarter, as revenue from trading rose fourfold from a year ago.

As Wall Street firms typically do, Goldman set almost half that sum aside to compensate its workers. Through the first nine months of 2009, the firm socked away $16.7 billion, enough to pay the average Goldmanite $526,814.

The bonus pool is on pace to hit $21 billion for 2009, which would match the record bonus payout of 2007.

Goldman said it won’t decide the size of the bonus pool till year-end. In any case, the payments will be substantial — and will come just one year after huge sums of taxpayer dollars were funneled to financial institutions.

Critics charge that the lion’s share of Goldman’s profits comes from making big bets using cheap dollars printed by the Federal Reserve. Plus, given the crisis that followed the failure of Lehman Brothers, there’s a sense that government officials won’t let big firms go bust. That in effect gives too-big-to-fail firms a license to bet the house.

"This is almost an ‘in your face’ kind of setup here," said Michael Panzner, a Wall Street veteran who blogs at financialarmageddon.com and who wrote a 2007 book predicting economic disaster. "They’re rolling the dice, and so far they’re winning," said Panzner.

Goldman denies that it is taking on too much risk and leaning on the government for support. "We don’t operate the company that way," said financial chief David Viniar in response to a question on Thursday morning’s Goldman media call. "We stand on our two feet as a financial institution. None of our bondholders has ever talked to us about" an implicit government backstop.

And, of course, Goldman (GS, Fortune 500) looks like a paragon of virtue compared to many of its peers in the financial sector. Unlike Citi (C, Fortune 500) and Merrill Lynch, for instance, Goldman never paid out billions of dollars in bonuses while losing huge sums of money. Even last year, when the firm took big writedowns and posted its first quarterly loss as a public company, Goldman managed to stay profitable.

Goldman repaid its $10 billion Troubled Asset Relief Program (TARP) debt with interest this past spring. And in contrast to the likes of Lehman Brothers, which dithered while it could have saved itself, Goldman raised $11 billion in capital over the past year, including a preferred stock sale on Warren Buffett’s tough terms.

Still, there’s no denying Goldman has had a lot of help.

It was one of the nine big banks that received loans from Treasury last fall. It received $13 billion in the costly, widely questioned September 2008 rescue of insurer AIG (AIG, Fortune 500). It has sold $22 billion in federally guaranteed debt under a plan the feds started to restore capital markets activity. And it has been a major beneficiary of the low interest rates the government has adopted in hopes of restarting the economy.

Of course, Goldman wasn’t the only beneficiary of those moves, but it has certainly been among the most nimble in cleaning up. That has attracted the attention of investors.

"There’s a perfect storm of arguments against paying that much," said Tim Smith, a senior vice president at Walden Asset Management, a $4 billion Boston-based asset manager focusing on socially responsible investments.

He notes that Walden, which owns a small amount of Goldman stock, sponsored a resolution last year calling for Goldman to allow investors to advise the firm on compensation practices. The measure failed, but it did score a 46% vote, Smith said. He is hopeful that a similar resolution this year will pass.

"There are many faces to this discussion," Smith said, "but the outrage over the bonuses is going to be focused on the larger context, with foreclosures and job losses."

While Goldman churned out $3 billion in profits in the third quarter, the economy shed 768,000 jobs, and home foreclosures set a new record.

More than a million Americans have filed for bankruptcy this year, according to the American Bankruptcy Institute. A September survey of state finances by the Center on Budget and Policy Priorities think tank found that state governments faced a collective $168 billion budget shortfall for fiscal 2010.

Goldman, by contrast, is sitting on $167 billion in cash, in the name of making sure it can withstand another market meltdown if that day comes.

Goldman was guarded in its assessment of the future — Viniar said he has seen signs markets have stabilized without necessarily improving. But Panzner believes many Americans have been caught up in the massive stock market rally. On the next downturn, he said, they could be left nursing huge losses again.

Meanwhile, Washington has made little progress in recasting a financial system that only a year ago was on the verge of collapse. "We need to be mindful about the dangers of complacency," said Doug Hamilton, deputy director of the Pew Economic Policy Group. "We can’t go back to the old way of doing business." 

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Should private equity get a new name? Carlyle’s David Rubenstein reckons the leveraged buyout business should rename itself "change capital" or "value-added equity."

He has a point. Some private equity firms and funds are public themselves, and U.S. regulators may step up the public disclosures required from buyout firms. So "private equity" isn’t the best description of the industry any more. But other possible names may be closer to reality than Rubenstein’s suggestions.

"Underwater equity," for instance. The historical record of the private equity business is pretty good. The better firms have delivered high returns for pension funds, college endowments and other investors.

But with private equity’s secret sauce, high leverage, now out of the picture, the valuations of the holdings in their funds have fallen. Some companies are worth less than what is owed to creditors — several mega-buyouts may be in this position, including Harrah’s and Clear Channel. That means equity investments in these companies are underwater too — and may remain so for quite some time.

Or how about "fee-squared capital?" Private equity firms may make money investors, but not before raking off plenty themselves. Rubenstein, for instance, was recently ranked at number 123 on the Forbes 400 list of the richest Americans.

Most money in private equity is made by charging annual management fees of 1.5% or so and then taking 20% of any profits. But private equity firms collect additional fees when they buy companies, while they own companies, and again when they sell companies — whether or not investors make money.

Or just maybe "Pupa equity." It sounds like something leading to a transformation. But it stands for "private until public again." Buyout firms like to tout the value of taking a company off the public market.

Sometimes it can be easier to make messy decisions — like firing staff or changing top management — when a company isn’t in the public eye. But to make any money, private equity firms need to sell their holdings for a profit. Sometimes that involves suddenly deciding the public market would be best again for the company concerned.

Blackstone (BX), for instance, has told investors it plans to float a clutch of companies now that stock markets have improved, including Team Health and Merlin Entertainments. But the buyout barons don’t always leave much on the table for new public shareholders — and sometimes the companies concerned carry more debt than heir peers, making them less resilient to downturns.

Rubenstein thinks the private equity industry is due a transformation. But maybe it needs to go back to its roots and haul itself up by the bootstraps. 

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"You are evil, thieving bastards."

That’s just one of the scathing comments from Ann Minch, a disgruntled Bank of America (BAC, Fortune 500) customer who says in a YouTube video that the bank "jacked up my interest rate to a whopping 30% APR."

Her rant went viral, and Minch says the bank scaled her rate back to its original 12.99%. Citing customer privacy, a Bank of America spokeswoman said she could not comment on individual accounts but confirmed "we did … reach a mutually agreeable resolution based on additional information that we reviewed."

The video, titled "Debtor’s Revolt Begins Now!," has been streamed about 350,000 times and earned a five-star user rating since it was posted on Sept. 8.

In the video, Minch claims she wasn’t over her credit limit and hasn’t been late with payments, despite the fact that she doesn’t have a full-time job.

She says she tried to negotiate with Bank of America, where she has been a customer for 14 years, "but they weren’t willing to negotiate anything."

"I could get a better rate from a loan shark," she adds.

Betty Riess, the Bank of America spokeswoman, said customers receive advance notice of rate hikes and can choose to pay off their balance at the current rate to close out the account.

True to her YouTube handle, Rockerchic4God, Minch sports fiery red hair and kohl-rimmed eyes that glare into the camera for the duration of the 4-1/2 minute video.

"You have reaped ungodly profits in your behemoth casino scams, then lost, only to turn around and usurp the wealth of this great nation by the outright rape and pillage of middle-class Americans whose sweat and toil built it," she says.

Calling the bailout "the biggest rip off in the history of the world," Minch lays out her terms: If Bank of America refuses to reinstate her previous, lower interest rate and monthly payments, she won’t pay "one more red cent on your 30%."

Minch tells her viewers that she is "willing to sacrifice [my credit score] in order to take a stand for what’s right," and she calls on them to join her in an "American debtors’ revolution."

"Stick that in your bailout pipe and smoke it," she says, smirking.

A response

Minch attracted a lot of media attention, and word of her crusade apparently got through to one of Bank of America’s top brass. In a follow-up video posted Sept. 19 Minch says Jeff Crawford, the bank’s senior vice president of existing customer credit services, called her to discuss her concerns.

He told her that she had two late payments, which was why her rate was hiked, and he tried to convince her to agree on a 16.99% interest rate.

Minch replied that Bank of America is receiving "money from the Fed at 0% interest … 12.99% is a more-than-generous profit margin." Crawford agreed to that original rate, although Minch says her most recent online statement shows a 23.99% APR.

Still, the credit-card crusader is significantly more subdued in her follow-up video, in which she updated viewers about her predicament and noted that Crawford "was very polite."

But Rockerchic4God isn’t completely mollified. She’s launching a Web site at DebtorsRevoltNow.com, and says her next project is "a tax revolt."

"That won’t involve anybody having to go to jail for not paying their taxes," she says. "There’s a way around that, so stay tuned."

Minch’s original video has spawned more than 5,000 comments — some praising her, others condemning her "revolt." One detractor, billb0313, writes: "Banks need a bailout b/c people like Ann defaulted on their unsecured loans left and right."

Other posters are in Minch’s corner. "You’re not alone," writes tommosm. "[My] Chase is at 33% … I’m paying more in finance charges than the minimum payment."

What do you think? Tell us by posting your own comment below. 

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Journalism is often called the first draft of history. The credit crisis has presented an unusually large share of professional scribes a chance to make their marks for posterity.

And they’re not alone. A slew of former financial professionals and public officials, including ex-Treasury Secretary Hank Paulson, are flooding the market with books offering their take on the meltdown. But it’s questionable whether demand will meet supply.

It’s not just a matter of separating the seminal works from the banal. After all, even though each book may present its own spin, few readers are likely to want to — or have the time to — worm their through every single tome.

And some may prefer insider accounts to ones written by reporters: former Lehman Brothers banker Lawrence McDonald’s take on the demise of his firm, A Colossal Failure of Common Sense has already made it into the New York Times bestseller lists, for example.

There’s also the fatigue factor. Interested readers have lived with near-blanket coverage of the crisis for two years in all media formats from print to TV to blogs. Many news organizations have already run in-depth reports on elements of the crisis that could count as mini-books themselves. CNBC anchor David Faber turned one such broadcast into print, with And Then the Roof Caved In: How Wall Street Greed and Stupidity Brought Capitalism to Its Knees.

That’s not to say the coming raft of credit crisis tell-alls will bomb low interest rate personal loans. Some, such as William Cohan’s Bear Stearns book House of Cards, have already garnered decent sales. But with so many books to choose from in coming months, it’ll be harder for any to distinguish themselves as the defining one of the era — think Liar’s Poker or Barbarians at the Gate for Wall Street in the 1980s, still in demand 20 years later.

Moreover, there are already signs that publishers handing out advances during the peak of the panic acted as profligately as bond investors buying subprime paper during the boom. Two books about Bernie Madoff have flopped, including one by the journalist who in 2001 first questioned his investment business; and another by an investor who had an affair with the Ponzi king. Advance leaks about that apparent rendezvous failed to sell books.

Sure, sales may pick up after the Lehman anniversary. But early performances of the few books out on the subject must leave some publishers worried about covering their costs, let alone making money. Or perhaps they should just take a longer-term view. After all, John Kenneth Galbraith’s classic on The Great Crash of 1929 wasn’t published until 1955. 

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Cadbury turned up the heat in its defense against a takeover from Kraft as its Chairman Roger Carr said it was an “unappealing prospect” being absorbed into Kraft’s low growth conglomerate business model.

In the letter to Kraft’s Chairman and CEO Irene Rosenfeld on Saturday, Carr reaffirmed the British confectionery group’s rejection of Kraft’s bid, initially valued at 10.2 billion pounds ($17 billion), as it fundamentally undervalued Cadbury.

“Under your proposal, Cadbury would be absorbed into Kraft’s low growth, conglomerate business model, an unappealing prospect which contrasts sharply with our strategy to be a pure play confectionery company,” Carr said in the letter seen by Reuters.

U.S. food giant Kraft launched its cash and shares bid for Cadbury Monday in an attempt to create the world’s largest confectionery group. It offered Cadbury shareholders 745 pence a share, but the value of the bid has fallen as Kraft shares have slipped and the dollar has weakened against the pound.

Carr said Kraft’s proposal for his shareholders was to exchange shares in a pure-play confectionery group for cash and shares in a company with a considerably less focused business mix and historically lower growth.

“We are committed to the delivery of optimum value to our shareholders and our board remains convinced that this is achieved through continuing to deliver our standalone pure play confectionery strategy,” Carr added in his letter.

“In addition, the proposal is of uncertain value for Cadbury shareholders as underlined by the movement in the Kraft share price since your announcement,” he said.

Kraft’s bid is worth 300p in cash and 0.2589 new Kraft shares for each Cadbury share. This valued Cadbury at 745p or 10.2 billion pounds ($17 billion) at the time, but this had fallen to around 707p late Friday due to the weakness in Kraft shares and the dollar compared to Cadbury’s close Friday at 775-1/2p.

The deal would bring together Cadbury, the world’s second largest confectionery group after privately-owned Mars-Wrigley, with its Dairy Milk chocolate and Trident gum, together with Kraft’s portfolio of Milka and Toblerone chocolates, Oreo biscuits and Philadelphia cheese.

Analysts say there is compelling logic to a potential deal adding Cadbury’s high growth emerging market business into Kraft’s wide ranging distribution system, with few overlaps which might prompt any anti-trust concerns.

Most independent analysts at brokers not involved in the bid expect Kraft to raise the bid price to between 850-900p, while some believe a bigger cash element is needed to attract Cadbury’s shareholders into acceptance.

(Reporting by David Jones; editing by Andy Bruce)

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Miner Rio Tinto scrapped a planned $19.5 billion tie-up with China’s Chinalco struck at the height of a global financial crisis, turning instead to an iron ore joint venture with rival BHP Billiton and a share sale to slash its debts.

The collapse of the Chinalco deal, put together in February in a bid to halve Rio’s $38 billion of debt, leaves the world’s biggest steel making nation vulnerable to just two suppliers — a Rio/BHP combination and Brazil’s Vale — controlling 70% of global iron ore trade.

Shares in Rio (RTP) jumped as much as 13% to a 7-month high, while BHP (BHP) rose 10%, as investors welcomed an alternative route to resolving Rio’s big debt burden.

"Rio has effectively been talking to BHP behind Chinalco’s back and Chinalco is entitled to feel like a two-timed lover this morning," said Paul Bartholomew at Steel Business Briefing in Shanghai. "This is a big slap in the face for China."

The new plan represents a victory for Rio shareholders who had argued the Chinalco deal favored the Chinese state firm and could give China greater influence over pricing of key resources.

"We were not supporters of the Chinalco transaction. We’re happy to see this alternative approach to solving Rio’s issues with its debt," said Ross Barker, managing director of Australian Foundation Investment Co, Rio Tinto’s sixth-largest shareholder in Australia and a BHP shareholder, according to Reuters data.

"A deal like this was really essential from Rio’s point of view. And it’s a good deal for BHP," he said.

Rio said it would pay Chinalco a $195 million break-up fee.

Rights offer

Rio and BHP, the world’s second- and third-largest iron ore miners, agreed to combine their operations into a 50-50 joint venture, generating savings of at least $10 billion.

A Rio/BHP combination would supply around 270 million tons of ore a year, while Vale supplies around 240 million tons.

BHP will pay Rio Tinto $5.8 billion to take its equity interest in the venture to 50%, but stressed the agreement was non-binding at this stage.

"This deal has been 10 years in the making and well worth the wait," BHP Chief Executive Marius Kloppers told reporters.

To cut debt, Rio said it was raising $15.2 billion through a 21-for-40 rights offer, the fifth-largest rights issue on record, according to Thomson Reuters data.

Rio and BHP agreed to keep their iron ore marketing separate, a key factor designed to win approval from competition regulators, especially the European Commission, which last year raised concerns about BHP’s proposed takeover of Rio due to the impact on iron ore markets personal business cards.

Chinalco said it regretted Rio’s decision after it had worked hard to try to revise the deal to reflect changed market conditions as well as shareholders’ and regulators’ concerns.

"As a result, we are very disappointed with this outcome," Chinalco President Xiong Weiping said in a statement.

Australia and China, which are trying to start free trade talks, played down the impact of the collapse of the deal, which would have been China’s largest foreign investment, on diplomatic ties or the future of Chinese offshore investment.

"It is a commercial matter, and I think it’s very important that our friends in China focus on that fact," Australian Prime Minister Kevin Rudd said.

In China, an official at the State-owned Assets Supervision and Administration Commission characterized the deal’s failure as "normal market behavior", and state banks said they stood ready to back any future foreign investments by Chinalco.

Massive savings

"My initial reaction is that it will be overwhelmingly positive for both companies because of the cost savings (and) the synergies," said Michael Bentley, resources portfolio manager at Northward Capital.

The cost of insuring Rio Tinto’s debt fell by more than a third, with the spread on its credit default swaps (CDS) narrowing to around 190 basis points from 290 bp.

"We consider these initiatives are a superior outcome for Rio’s credit quality as opposed to the Chinalco deal," Monaural International said, adding it was better for Rio to sell equity instead of convertible bonds, maintain greater ownership of its assets and gain joint venture savings.

The prospects for Chinalco were less clear.

Chinalco Vice President Lou Outing said the firm had not decided whether to participate in the rights offer.

"This is a big thing and is not determined by a single person," Lou told Reuters, adding the decision not to revise the deal with Rio Tinto was made by both sides.

Under the deal agreed in February, Chinalco would have paid $12.3 billion for stakes in Rio’s key iron ore, copper and aluminum assets and $7.2 billion for convertible notes that would have doubled its equity stake in Rio to 18%.

BHP launched a 3.4-for-1 share swap to take over Rio in February 2008, which Rio rejected saying it vastly undervalued the firm and its prospects. BHP dropped the deal last November after commodity markets collapsed.  

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No layoffs — ever!

The global financial crisis has led many companies to slice payrolls, but these employers are staying loyal. Meet 9 of this year’s Best Companies that, as of mid-January, have never had a layoff.

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NEW YORK (CNNMoney.com) — American Express said Monday it will cut 4,000 jobs, or 6% of its global workforce, as part of an $800 million restructuring plan.

Under the plan, the financial services company will also cut investment spending and operating costs.

The 4,000 cuts are on top of the 7,000 positions the company said in October it would eliminate, according to American Express spokeswoman Joanna Lambert.

American Express’ (AXP, Fortune 500) first-quarter earnings call in April had indicated further job cuts were imminent, Lambert said. The reductions will occur across business units, markets and staff groups.

"Cuts were largely expected, but it’s a sizable amount," said Jason Arnold, analyst at RBC Capital Markets.

While the company "has remained solidly profitable," it continues "to be very cautious about the economic outlook and are therefore moving forward with additional reengineering efforts to help further reduce our operating costs," chief executive Kenneth Chenault said in a prepared statement.

Severance and other costs related to the job cuts will result in a $180 million to $250 million pre-tax restructuring charge.

Cuts in marketing and business development are expected to save $500 million, while operating cost reductions should save $125 million, the company said.

The cuts are in addition to the $1.8 billion cost benefit announced in October, and the tone of Monday’s release was "a little more guarded" than that of previous announcements, Arnold noted.

Credit crunch

"Our concern is that the credit issues in this country are substantial," Arnold said. "AmEx especially gets a lot of its revenue from spending, which is obviously under severe pressure."

Especially troubling, Arnold said, is the company’s percentage of charge-offs - when a creditor writes off an account balance as a "bad debt" instead of an asset, usually after six months of non-payment.

AmEx’s charge-offs are in the upper range compared with its competitor group, at 9.9% Arnold said.

JPMorgan Chase (JPM, Fortune 500) and Discover (DFM) have charge-offs of around 8%. Still, Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500)’s rates exceed 10%, Arnold said.

"None of these charge-off rates are good numbers," Arnold said. "Unfortunately, with unemployment and the economic climate being what they are, it’s a tough time for spending." 

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Bank of America’s Ken Lewis may be down, but he’s far from out.

On Wednesday, the veteran banking chief suffered one of the bigger setbacks of his career after the board ousted him as chairman of the bank, stripping Lewis of a position he has held since 2001.

The move came after shareholders narrowly approved a proposal at the bank’s annual shareholder meeting Wednesday requiring the company to separate the roles of CEO and chairman. Lewis was re-elected to the company’s board of directors, however.

Many shareholders have been fuming over a variety of failings that have surfaced on Lewis’ watch, including a floundering stock price and most notably, the company’s ill-timed acquisition of Merrill Lynch last year.

But even as Lewis retreats into his primary role of overseeing the company’s operations as CEO, few believe that he is poised to leave the company where he has served for 40 years anytime soon.

"The change that has occurred is pretty much form over substance," said David Dietze, chief investment strategist of New Jersey-based Point View Financial Services, which owns Bank of America stock.

What Lewis currently enjoys, note experts, is the full backing of the other 17 board members - a group that has the ultimate say over who runs the company. One of those board members, Dr. Walter Massey, was named the new chairman Wednesday.

Massey and several other Bank of America (BAC, Fortune 500) board members who were re-elected by investors at Wednesday’s annual shareholder meeting have served closely with Lewis over the years and may be unwilling to push him out completely.

But with Lewis no longer chairman, those long-time allegiances could very well start to disintegrate, said Espen Eckbo, a professor of finance at Dartmouth’s Tuck School of Business, who also serves as director of the school’s Lindenauer Center for Corporate Governance.

In addition, Lewis received the second-lowest level of support among the 18 incumbent directors, with 67% of shareholders voting in favor of his re-election at Wednesday’s meeting. Many other directors, including Massey, had more than 90% of shareholders voting in favor of their return to the board.

The annals of corporate history are littered with instances in which executives who held the position of both chairman and CEO wound up leaving the company after being stripped of the chairman’s role.

Walt Disney’s (DIS, Fortune 500) Michael Eisner, who was removed as company chairman in March 2004 but had the full backing of the board to continue as CEO, announced a year later he would retire as CEO in September 2005, a year before his contract was set to expire.

More recently, two of Lewis’ colleagues from the banking industry were forced to step down shortly after they lost the chairman’s job online cash advance lenders.

Wachovia’s Ken Thompson was stripped of his title as chairman in June of last year and was ousted from the company altogether just a month later.

Washington Mutual’s Kerry Killinger, who served at the helm of the company since 1990, was also removed as chairman last June. Three months later, he parted ways with the Seattle-based lender — just before WaMu became the biggest bank to fail in U.S. history and was sold to JPMorgan Chase (JPM, Fortune 500).

Yet, there is a case for drawing big distinctions between Lewis and his two fallen peers. Both Killinger and Thompson fueled incredible growth at their respective firms by doubling down on the U.S. housing market - a move that would ultimately prove fateful for both companies.

Lewis, on the other hand, employed a much more cautious approach, relying instead on key acquisitions during those years to help transform his company into the nation’s largest bank based on deposits.

Lewis has maintained that the company’s most recent acquisitions - last year’s controversial purchases of mortgage lender Countrywide Financial and Merrill -will only further that growth trend, leaving Bank of America well poised to benefit when the economy turns around.

Still, one of the shareholder groups that spearheaded the campaign to remove Lewis as chairman said Thursday that the board must go even further.

"By removing Ken Lewis as Chairman and signaling strong opposition to his remaining on the board of directors, shareholders took the critical first steps." said William Patterson, executive director of CtW Investment Group, an investment advisor to pension funds, in a statement.

"The onus is now on the board to act on the underlying management and board concerns that drove [the] shareholder vote. At minimum, this includes accelerating the board’s CEO succession plan," Patterson added.

Experts said the performance of Merrill and Countrywide, as well as BofA’s stock price, may ultimately decide Lewis’ fate. The stock has nearly tripled from its March lows. But at about $9 a share, it is still more than 70% below where it traded before the Merrill deal was announced.

Dietze said that given the economic straits the nation’s banking industry now finds itself in, it may not be easy for Bank of America to provide the type of strong results that investors will continue to demand.

"What happens going forward in some ways is all up to the market," he said. "It’s kind of out of his hands." 

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