Sources Claim Armacost Was Told to Show Results or Lose Job : BankAmerica Board Impatient With Chief, Reports Say

The BankAmerica board of directors is growing increasingly impatient with the bank’s poor performance, despite repeated public expressions of support for President Samuel H. Armacost, according to board sources.

Armacost, who emerged from a critical board meeting last Monday saying he had received a firm vote of confidence, actually was told he must show concrete results soon or lose his job.

“He’s got to put on a stiff upper lip in public, but he’s been told, ‘You’ve got to make it or you’re going to lose it. This is your last shot,’ ” said an authoritative source familiar with board deliberations.

BankAmerica, parent of Bank of America, lost $337 million last year, including $178 million in the fourth quarter. The bank has been beset by huge loan losses, financial scandals and the departure of numerous senior officers.

The bank’s first-quarter results may hold the key to Armacost’s future, the source said. Armacost told the board that the bank had made $39 million in profit in January and, in his rapid-fire, football-coach style, offered bullish projections for the immediate future.

One board member, however, said Armacost acts certain of board support, “arrogant” even, despite directors’ growing restiveness. He appears to believe that the board is unlikely to dump him because of the damage it would do to the bank’s image of solidity.

Board members, bank officials and other knowledgeable sources declined to discuss the board’s deliberations on the record. But several insiders gave details of the discussions under the promise of anonymity.

Seven-Hour Meeting

At a seven-hour informal meeting last Sunday in advance of the regularly scheduled Monday meeting, Armacost defended management’s record as he asked the board to reject an audacious bid by New York financier Sanford I. Weill to help the bank raise $1 billion in new equity capital in exchange for Armacost’s job. Standing at Armacost’s left as he made his presentation was the bank’s chief outside adviser on the Weill plan, John H. Gutfreund, chief executive of the New York investment banking firm Salomon Bros.

Armacost contrasted the bank’s detailed five-year program for financial recovery with Weill’s two-page proposal. The presence of Gutfreund, a heavy hitter on Wall Street, was calculated to add weight to the bank’s position.

“It was beautifully orchestrated,” a board source said. “He (Gutfreund) stood next to Sam and said, ‘We’ve studied this thing and Sam’s right.’ ”

Armacost’s maneuver killed the plan before it ever came to a formal vote, a board member said.

BankAmerica announced on Monday that the firm’s non-employee directors had unanimously voted to reject the Weill proposal. The bank also said the board had given Armacost the title of chairman of Bank of America but had removed him from day-to-day responsibility for running the bank. That job went to Thomas A. Cooper, who was given the title of president and chief operating officer of the bank.

Armacost, who retained his title of president and chief executive of BankAmerica, the holding company, subsequently said in an interview that he had asked the board for the reorganization and that the moves were the board’s endorsement of his regime.

But Armacost’s comments and BankAmerica press releases masked growing disenchantment with Armacost by at least four directors.

Charles Schwab, chairman of BankAmerica’s discount brokerage subsidiary, is known to be critical of Armacost’s management and the quality of subordinates he has hired and promoted.

Schwab was approached privately by Weill and was said to have been intrigued by his plan. A source close to Weill said Schwab indicated that Weill, the aggressive former president of American Express, would have made a good chief executive at BankAmerica.

Schwab and at least one other director were said to be disappointed that the Weill initiative was not treated more seriously.

Three other BankAmerica directors, who have not spoken out publicly about the company, have been asking increasingly pointed questions in private.

They are Walter A. Haas, chairman of the executive committee of Levi Strauss & Co.; Najeeb E. Halaby, retired chairman of Pan American World Airways; and Robert S. McNamara, former secretary of defense, president of Ford Motor Co. and the World Bank.

“Those three were the most disruptive. They didn’t vote against Sam, but they were the ones asking the nastiest questions,” a board source said.

None of the three could be reached for comment.

Armacost will find the board less hostile after the April 29 annual meeting, however. Haas and Halaby are stepping down because they have reached the mandatory retirement age of 70. At least three other board members also will retire next month.

Uncomfortable Position

The board is in the uncomfortable position of watching the institution suffer year after year of setbacks while being unable to openly break ranks with management.

One knowledgeable industry analyst said the board precipitated the management reshuffle that elevated Armacost to more of a planning position and less of a daily operational role. But the board allowed Armacost to save face by presenting the moves as his idea.

“It wasn’t jammed down Sam’s throat and the board was quite willing to let it look like Sam made the selection” of Cooper as chief operating officer, the analyst said. “They don’t want to create the impression that the CEO is under siege by his own board. But they really had to do something.

Referring to the four directors known to be critical of Armacost, the analyst said, “They’re not alone. Some others are falling into line. I really don’t sense that Sam dominates the board. I think Sam is articulate and has been persuasive of his grand plan. But to anybody who’s been listening, that has to sound increasingly hollow over the past three years.”