An influential proxy advisory firm in a report Friday urged shareholders to vote against 12 of Wells Fargo’s 15 directors over the bank’s sales scandal, the latest blow to the bank’s effort to move past the controversy.
In the report, Institutional Shareholder Services said the 12 members of the board’s audit, risk and human resources committees “failed over a number of years to provide a timely and sufficient risk oversight process that should have mitigated the harmful impact of the unsound retail banking sales practices that occurred from 2011-2016.”
ISS recommended yes votes for the three other board members – new CEO Tim Sloan and newcomers Karen Peetz and Ronald Sargent – at the bank’s annual shareholder meeting April 25 in Florida. Proxy advisory firms such as ISS play an important role in shaping the voting of big institutional investors such as pension funds.
In September, regulators fined San Francisco-based Wells Fargo $185 million to settle allegations that its employees opened as many as 2 million fake accounts in order to meet high-pressure sales goals. The scandal has tarnished the bank’s reputation, cost former CEO John Stumpf his job and spurred congressional hearings and new investigations.
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In a statement, the Wells Fargo board responded sharply to ISS’ report, highlighting its efforts to reform the bank.
“The extreme and unprecedented ISS voting recommendation on directors 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 statement said.
“The Board and management are working tirelessly to rebuild the trust of customers, employees and investors, and are making substantial progress in strengthening Wells Fargo.”
Directors have previously launched their own investigation and taken a number of other actions, including firing four executives executives and eliminating bonuses for eight senior leaders. The directors have also taken back millions of dollars in stock awards from Stumpf and former community banking head Carrie Tolstedt.
Another proxy advisory firm, Glass Lewis, on Tuesday recommended Wells Fargo shareholders vote against the re-election of four directors who sit on the corporate responsibility committee – John Baker, Lloyd Dean, Enrique Hernandez and Cynthia Milligan – because of what it said was their failure to uphold their duties amid the scandal. It also urged no votes against John Chen and Susan Swenson because it contended they sit on too many boards.
It’s not unheard of for advisory firms to recommend “no” votes for directors whose companies run into trouble.
In 2015, for example, the firm recommended Bank of America shareholders vote against re-electing corporate governance committee chairman Thomas May. The recommendation came after the Charlotte bank rolled back a bylaw change approved by shareholders in 2009 that required an independent chairman and handed the title to CEO Brian Moynihan. May returned to the board but with just 66 percent of shareholder votes cast.
Wells Fargo has its biggest employment hub in Charlotte and its community bank is now run by Charlotte-based executive Mary Mack.