At Last, Wells Fargo Shareholders Are Happy With Scandal-Plagued Board
It took three years but the board of directors of Wells Fargo (WFC) has finally won the endorsement of an important constituency: the scandal-plagued U.S. bank’s own investors.
All 12 Wells Fargo directors won at least 95% of shareholder votes at the San Francisco-based bank’s annual meeting last week, an April 26 filing showed.
It’s the first time the Wells Fargo board has received such a resounding endorsement from shareholders since allegations surfaced in 2016 that the bank had systematically committed consumer abuses. Those included opening millions of unauthorized accounts in customers’ names and improperly charging some auto-loan borrowers for insurance they didn’t need.
And the new verdict comes just a month after Wells Fargo announced the departure of CEO Tim Sloan, who took over in 2016 when his predecessor, John Stumpf, stepped down. The board, led by former Federal Reserve Gov. Betsy Duke, is now conducting a search for a successor and has said it will look outside the ranks of top executives currently at the bank.
It’s also a positive sign for the board that shareholders are apparently more content following a year of underperformance in the bank’s stock price. Wells Fargo shares are down 6.9% over the past 12 months, while rival banks JPMorgan Chase (JPM) , Bank of America (BAC) and Citigroup (C) have each notched gains.
Directors run unopposed in Wells Fargo’s board elections, as they do at most U.S. corporations, and big institutional investors usually take the side of board and management in corporate-governance matters. So any approval ratings shy of 90% are often seen by corporate-governance advocates as tantamount to rejection.
At annual meetings in 2017 and 2018, several Wells Fargo directors got shareholder approvals of less than 90%, and in at least a few cases, barely half.
The scandals have cost Wells Fargo at least $4.5 billion in elevated legal expenses and foregone revenue, and the Federal Reserve last year imposed the draconian sanction of barring the bank from further asset growth until it can demonstrate significant improvement in risk-management and corporate oversight.
Earlier this year, executives announced that they expected to remain under the sanctions at least through the end of 2019, longer than previously expected.
Wells Fargo has overhauled its board, installing Duke as chair while announcing the departures of several directors who served blithely during the pre-2016 period when the abusive practices allegedly flourished.
Duke got just 75% of shareholder votes at the 2017 meeting, but she won 95% at last week’s meeting, according to the new filing.
Director John Baker II, a former trucking and construction-materials executive who joined the Wells Fargo board in 2009 and was one of the last remaining directors serving when the scandals erupted, got just 89.91% of shareholder votes at last year’s meeting. This year, he won 97%.