Shake-up of the board would arrive as sales scandal continues to roil the large lender
By Emily Glazer
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 11, 2017).
The board of Wells Fargo & Co., grappling with fresh problems even as it tries to move past the bank's sales-practices scandal, is planning a shake-up that is likely to include Stephen Sanger stepping down as nonexecutive chairman, according to people familiar with the matter.
Directors are aiming to make final decisions on any changes by Labor Day, some of the people said. Mr. Sanger is expected to step down before the bank's shareholder meeting next spring, one of these people said. Vice Chair Elizabeth Duke, a former Federal Reserve governor, is then likely to take the top spot, some of these people said.
Discussions about board changes have been under way for a few months, spurred by dismal results at the bank's shareholder meeting. They also come against the backdrop of calls in Washington for even more dramatic action at the bank.
Neither Mr. Sanger or Ms. Duke responded to requests for comment.
Wells Fargo, the third-biggest U.S. bank by assets, has spent most of the past year trying to put last fall's sales-practices scandal behind it. The scandal showed employees had opened as many as 2.1 million accounts without customers' knowledge, sparking public and political outcries as well as numerous investigations.
More recently, the bank has said even more customer accounts may have been impacted. It also is facing a new scandal in its auto-lending unit over insurance policies involving many borrowers. The bank has said it would reimburse customers for around $80 million.
Mr. Sanger became nonexecutive chairman last October when then Chairman and Chief Executive John Stumpf abruptly retired in the face of the sales-practices scandal. Mr. Sanger was previously the lead director and had been on the board since 2003.
He previously had been CEO of packaged-food company General Mills Inc. until September 2007 and was its chairman until 2008. Mr. Sanger also is a director of Pfizer Inc.
Since his elevation, Mr. Sanger and other board members have contended with continued revelations about the depth of problems within Wells Fargo.
In addition, Sen. Elizabeth Warren (D, Mass.) in June mounted a public campaign to press the Federal Reserve to remove a dozen directors at the bank who served during the period when bad behavior occurred. That "revealed severe problems with the bank's risk management practices -- -- problems that justify the Federal Reserve's removal of all responsible board members," according to a letter that Sen. Warren sent to Fed Chairwoman Janet Yellen.
Even before that, shareholders at the bank's annual meeting in April had given only tepid support to the board. Nine directors, including Mr. Sanger, received less than 75% approval for their reelection.
Mr. Sanger garnered only 56% of the vote -- far below the 95% or more that most directors usually receive.
Shareholders expressed even greater displeasure with Enrique Hernandez, head of the bank's risk committee. He received just 53% of the vote. Mr. Hernandez's role as risk committee chairman also is being discussed, some of the people familiar with the discussions said.
Mr. Hernandez declined to comment.
As part of these talks, the board also is planning to bring on at least one new director, these people said. It isn't yet clear who that person may be. The board also is aiming to name up to three additional directors before the bank's annual meeting next spring, one of these people said.
Mr. Sanger, who spearheaded the board's response to last year's fake-account scandal, said during the bank's late-April annual meeting that shareholders "sent the entire board a clear message of dissatisfaction."
Even so, neither Wells Fargo or the board said at that time that there would be any immediate changes. Instead, Mr. Sanger reiterated what the bank has told some large shareholders privately: that six directors will step down from the board within the next four years when they hit the mandatory retirement age of 72 years old.
Mr. Sanger, who turned 71 in April, said that month that the board is "urgently looking" to add new talent beyond the two directors who joined in February when the board began its refreshment. Those two directors, along with Chief Executive Timothy Sloan, who joined the board last year, received 99% majorities from shareholders in April.
Wells Fargo hinted in a quarterly securities filing released last Friday that board changes may be coming more quickly than previously signaled. "The board recognizes that there is still work to be done....[and] is engaging in an ongoing comprehensive review of its structure, composition and practices," the filing said. The bank said the review is "expected to result in actions in third quarter 2017."
That disclosure was made alongside insurance issues the bank identified in the filing. These included issues with guaranteed asset protection products the bank sold through car dealerships. Those could result in refunds to customers in certain states and already have brought regulatory scrutiny.
The bank said in late July that it is refunding around $80 million to as many as 570,000 auto-loan customers over other insurance practices known as collateral protection insurance. Regulators also are probing that matter and the bank faces several class-action customer lawsuits related to this.
"No doubt, other work lies ahead," Mr. Sloan said in a release Friday that accompanied the securities filing.
Write to Emily Glazer at email@example.com
(END) Dow Jones Newswires
August 11, 2017 02:47 ET (06:47 GMT)
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