Wells Fargo isn’t out of the woods yet. Next Tuesday, its board will be subject to a potentially large protest vote that could trigger the ouster of up to 12 of its 15 directors—and test the extent to which slipshod corporate governance will be tolerated by America’s investment community.
CEO Tim Sloan isn’t among those targeted, though chairman Stephen Sanger is.
Lingering public anger against the bank was demonstrated yesterday by California state treasurer John Chiang in an open letter to its shareholders. It it, he called on them to dump seven board members, including Sanger, and the five who sat on its Corporate Responsibility Committee.
In large part, he wrote, “the wheels fell off the bank’s trademark stage coach” because the committee and Wells Fargo’s two longest-serving board members “failed time and again to deal effectively with the metastasis of the company’s internal culture of obduracy”.
Wells Fargo’s behavior was “morally repugnant”, he added, while the San Francisco-based company had “soiled its own nest by fleecing its home-state customers.”
Chiang has urged his fellow board members at the California Public Employees’ Retirement System and the California State Teachers Retirement System to demand the resignations with regard to their $2.3 billion-worth of Wells Fargo shares.
They could be joined by other investors after two of America’s biggest proxy advisory also called for heads to roll. “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 reputation,” Institutional Shareholder Service said earlier this month. It wants just three of the board’s 15 directors to stay.
“The long-standing sales practices and unchecked incentive program evidences a sustained breakdown of risk oversight on the part of the board,”ISS said.
Wells Fargo urged shareholders to disregard ISS’ “extreme and unprecedented” recommendation, claiming it failed to recognize “the active engagement of the board and the substantial actions it already has taken to strengthen oversight and increase accountability”.
Ousting such a large number of board members would be “crazy” and “absolutely irresponsible”, Sloan told Bloomberg in an interview on Wednesday. Sloan said none of the board members should go.
Another proxy advisor, Glass Lewis, has opposed the re-election of six Wells Fargo directors.