Wells Fargo & Co. shareholders should vote to remove most of the bank’s board members after they failed to provide “timely and sufficient risk oversight” to head off a scandal involving the creation of fake customer accounts, according to proxy adviser Institutional Shareholder Services Inc.
Wells Fargo’s owners should vote for only three of the bank’s 15 directors — Karen Peetz, Ronald Sargent and Chief Executive Officer Tim Sloan — at the lender’s annual meeting later this month, ISS said in a report Friday. Glass Lewis & Co., another proxy adviser, recommended earlier this week that shareholders oppose the re-election of six directors, including members of the board’s corporate responsibility committee.
“The board failed to implement an effective risk-management oversight process in a timely way and that could have mitigated the harm to its customers, its employees and the bank’s brand and reputation,” ISS wrote. “The long-standing sales practices and unchecked incentive program evidences a sustained breakdown of risk oversight on the part of the board.”
Wells Fargo’s board called the ISS report “extreme and unprecedented” and said the directors and company managers are working to restore the trust of customers, employees and investors, according to a statement.
The proxy adviser “fails to recognize the active engagement of the board and the substantial actions it has already taken to strengthen oversight and increase accountability at all levels of Wells Fargo, including important improvements to corporate governance,” the board said in the statement. The board plans to release the findings of an internal investigation into the scandal on Monday, according to a person briefed on the matter, who asked not to be identified because the timing isn’t public.
The Office of the Comptroller of the Currency, one of the regulators that fined the bank over the bogus accounts, stripped its most senior Wells Fargo examiner of his supervisory powers within the past two weeks, Reuters reported on Friday, citing people familiar with the matter.
Bogus Accounts
The OCC and Consumer Financial Protection Bureau announced in September that Wells Fargo employees sought for years to meet aggressive sales targets by opening as many as 2 million unauthorized accounts. The scandal triggered lawsuits, probes and congressional hearings, prompting the lender to shake up leadership, deny bonuses to executives and fire some senior managers in the consumer business. It also forced the resignation of Chairman and CEO John Stumpf, resulting in Sloan’s promotion from chief operating officer.
ISS recommended voting against 12 directors — including newly named Chairman Stephen Sanger — because they served on the risk, human resources and audit committees. Peetz, a former president of Bank of New York Mellon Corp., and former Staples Inc. CEO Sargent, both joined the board in February and are its newest directors.
ISS also recommended investors support a resolution at the April 25 meeting in Florida requiring the bank to adopt policies to help protect indigenous groups after protesters targeted its role in financing the Dakota Access pipeline.
Wells Fargo shares fell 0.9 percent to $54.86 at 4 p.m. in New York. The stock is little changed this year.