Wells Board Faces Unclear Prospects -- WSJ
April 24 2017 - 3:02AM
Dow Jones News
By Emily Glazer, David Benoit and Joann S. Lublin
The battle over Wells Fargo & Co.'s board is going down to
the last possible moment, with uncertainty hanging over the
re-election prospects of several directors at Tuesday's annual
shareholder meeting, according to people familiar with the
matter.
Some large institutional shareholders have yet to weigh in and
are expected to place their votes Monday, just ahead of the
conclave. But as of Sunday, votes already placed had left several
directors at risk of losing re-election, the people familiar with
the matter said.
Nonexecutive Chairman Stephen Sanger isn't among those
directors, but Enrique Hernandez, head of the bank's board risk
committee, is vulnerable, one of the people said.
While it is unclear whether any directors will be voted out, the
bank needs decisive victories -- especially because directors are
running unopposed. If directors get less than 80% of the vote for
re-election, it would send a clear message to the San Francisco
bank that shareholders are seeking bigger changes after its
sales-practices scandal, said Charles Elson, director of the
University of Delaware's John L. Weinberg Center for Corporate
Governance.
And shareholders, in meetings with the bank in recent weeks,
already have been sending the message that more needs to be done to
address systemic problems at the bank, according to people familiar
with the meetings.
Employees over a five-year period opened as many as 2.1 million
accounts using fictitious or unauthorized customer information,
leading to a $185 million settlement with regulators last fall. A
$142 million settlement over customer class-action lawsuits is also
pending.
The bank has said it is cooperating with state and federal
investigations into the sales-practices scandal.
In an interview last Wednesday, Chief Executive Timothy Sloan
said he doesn't think the bank needs to make any changes to its
board risk committee, which comprises chairs from its other board
committees. He also said a recent report from the bank's board
about the scandal showed that Mr. Hernandez had raised questions
with management about aggressive sales tactics.
The independent board report largely placed blame on two
executives who are no longer with the bank. The bank named two new
directors to the board earlier this year, yet there have been no
other significant changes to the way it operates.
Some institutional investors briefed in recent days by Wells
Fargo executives and directors said the bank tried to reassure them
that the board's makeup will change in coming years because of
mandatory retirements. Some investors said they were told that six
members will hit the maximum age of 72 and will leave over the next
four years.
While bank officials also made no promises to rotate committee
memberships or chairmen, an official from an institutional
shareholder said "there needs to be a thoughtful but accelerated
response to constitute a new board."
Meanwhile, influential proxy-advisory firm Institutional
Shareholder Services Inc. has recommended that shareholders vote
against Mr. Sanger and 11 of his colleagues on Wells Fargo's
15-member board. It is unusual for the firm to recommend against so
many directors and the move drew the ire of Wells Fargo management,
including Mr. Sloan. The second-largest proxy-advisory firm, Glass
Lewis & Co., recommended investors vote for Mr. Sanger, but
against six directors.
The average support level for 4,934 S&P 500 director
elections in 2016 was 97.4%, with just two failing to get majority
support, according to ISS Analytics, the data arm of the
influential proxy adviser.
The bank already has at least 10% of the vote for director
re-election from top shareholder Berkshire Hathaway Inc., run by
Warren Buffett.
But just days ahead of what is shaping up to be a contentious
shareholder meeting, a number of public pension funds collectively
holding about 0.75% of the bank's shares outstanding came out
against the majority of directors on Wells Fargo's board. These
included the Office of the New York City Comptroller, California
State Teachers' Retirement System and the California Public
Employees' Retirement System.
Smaller shareholders want change, too. Jonas Kron, from
Boston-based Trillium Asset Management LLC, said his firm is voting
against re-electing 12 of Wells Fargo's 15 board directors. "In
order for the company to move forward, it's really going to take
more than just a change in CEO," said Mr. Kron, Trillium's director
of shareholder advocacy.
Trillium's clients hold about 14,000 shares, or nearly $750,000,
of Wells Fargo stock.
(END) Dow Jones Newswires
April 24, 2017 02:47 ET (06:47 GMT)
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