Wed Apr 29, 2009 6:44pm EDT

By Jonathan Stempel

CHARLOTTE, North Carolina (Reuters) – Bank of America Corp shareholders voted to oust Chief Executive Kenneth Lewis as chairman of the board on Wednesday after months of mounting criticism of his stewardship of the largest U.S. bank.

The bank’s board “unanimously” expressed support for Lewis to stay in the CEO post despite the fact that shareholders “narrowly” approved a proposal to require an independent chairman.

Lewis, who will remain chief executive, will be replaced in the chairman post by Walter Massey, a director of the bank’s board since 1998 and also a director of McDonald’s Corp.

“We knew that it was going to be close, but this is an unambiguous vote of no confidence,” said Campbell Harvey, professor of finance at Duke University.

“Whether he chooses to remain as CEO or not, the dominant influence that he had at Bank of America is now a thing of the past,” Harvey said.

The proposal to name an independent chairman was one of eight shareholder proposals that went to the vote at the four-hour annual meeting, held in uptown Charlotte.

A similar proposal won 36 percent support last year, the bank said.

Many corporate governance experts favor splitting the posts of chairman and CEO. Citigroup Inc and Wells Fargo & Co are among banks that have divided the roles.

Last year, however, such a split was a precursor to the ouster of the chief executives of two large banks — Ken Thompson at Wachovia Corp and Kerry Killinger at Washington Mutual Inc. Wachovia was later bought by Wells Fargo, while Washington Mutual failed.

“It’s kind of the first step toward the end for Lewis,” said Ralph Cole, portfolio manager, at Ferguson Wellman Capital Management in Portland, Oregon. “It shows there’s at least some constituency that’s not happy with his performance. I just don’t think he’s going to last,” Cole said.

SHAREHOLDER FRUSTRATION

All 18 directors were elected to the board by “comfortable margins,” the bank said in a statement, although several major shareholder groups had also opposed the re-election of lead director O. Temple Sloan to the board.

About 2,000 people attended the annual meeting, more than triple the year-earlier number, reflecting how the bank’s shareholders are torn over the man responsible for much of Bank of America’s growth, as well as its current troubles.

The 62-year-old Lewis listened to dozens of attacks from shareholders over his leadership, and in particular the bank’s controversial purchase of Merrill Lynch & Co, but also got substantial praise.

He fielded many complaints over the bank’s failure to quickly disclose huge losses that Merrill was amassing, as it was paying out billions of dollars of bonuses to employees. Bank of America’s shares have fallen by about three-fourths since the merger was announced in September.