The mounting problems at Wells Fargo have already claimed its CEO and other executives. Now attention is starting to focus on its chairman.
The Wall Street Journal reported Thursday that Wells’ board is planning a shake-up that’s likely to result in its chairman, Stephen Sanger, stepping down. Vice Chair Elizabeth Duke is likely to replace Sanger, according to the Journal, citing people familiar with the matter.
Wells Fargo wasn’t talking Thursday. But this much is clear: Support for the board has been tepid amid growing problems at the San Francisco-based bank, which has its largest employment hub in Charlotte.
The board’s directors are seeking to make final determinations by Labor Day on any changes, and Sanger is expected to step down before Wells’ annual shareholder meeting next spring, according to the Journal.
Sanger, named to the San Francisco-based bank’s board in 2003, has served as chairman since former CEO and Chairman John Stumpf left the bank last October amid a major scandal over fake accounts. Sanger, a retired chairman and CEO of cereal maker General Mills, has held the most powerful seat on the board of a bank reeling from a growing raft of scandals.
One of those scandals involves revelations last September that Wells Fargo employees, rushing to meet aggressive sales goals, for years opened more than 2 million accounts that may not have been authorized by consumers.
Wells Fargo has pushed to repair its image after paying $185 million in fines, but new revelations have created challenges.
“It’s been very disappointing,” said Shannon Stemm, a bank analyst with Edward Jones. “Wells’ reputation has already been damaged. That happened last September. And now it’s sort of an, ‘OK, this company is not the pristine bank that we once viewed it as.’”
Just last week, the bank disclosed that an expanded review of its sales practices is expected to identify a “significant increase” in the number of potentially unauthorized accounts employees created over an eight-year period. In the same disclosure, Wells said it had identified “certain issues” involving a type of auto insurance, noting the finding could result in customer refunds.
Revelations of that insurance matter came only about a week after the bank admitted other problems over auto insurance. In that scandal, Wells said hundreds of thousands of customers may have been charged premiums for insurance they didn’t need, a practice that may have contributed to vehicle repossessions. The bank has since apologized to customers and said it will provide approximately $80 million in remediation.
Such findings have added to lawmakers’ frustrations with Wells Fargo.
Last week, some members of Congress, including Massachusetts Democratic Sen. Elizabeth Warren, urged new hearings into the bank’s practices. Those calls come less than a year after Stumpf was grilled by Warren and other lawmakers on Capitol Hill.
Amid its challenges, Wells Fargo’s stock has underperformed that of its peers, whose shares have soared on hopes for higher interest rates and lighter regulations under the Trump administration. Wells’ share price is down for the year, while those of its biggest rival banks are all up.
Wells Fargo shares closed down more than 1 percent Thursday to $51.95 on a day when major indexes also dropped.
Discussions about changes to Wells’ board have been ongoing for a few months, sparked by tepid support for directors at the bank’s shareholder’s meeting in April, according to The Wall Street Journal.
Sanger received only 56 percent of votes cast, among the lowest percentages at a contentious meeting that featured outbursts from some audience members later removed by security. All but three of the directors received less than 81 percent of the shares cast – lower than the high-90s corporate directors running unopposed typically receive.
No director has left the board since the vote, a fact that continues to frustrate some investors and elected officials. Following April’s vote, Sanger noted six board members will hit a mandatory retirement age of 72 within the next four years. Sanger turned 71 in April.
In a disclosure last week, Wells Fargo said that “in response to feedback” received at the April meeting, the board is “engaging in an ongoing comprehensive review of its structure, composition and practices.” The review is expected to result in “actions” in the third quarter of this year, the disclosure said without giving specifics.
“You really need a fresh group of people there who were not connected with the old regime,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “I was surprised after the vote in the spring there wasn’t an immediate departure of some people.”
“The wisdom and experience here did not lead to an optimal situation for the bank,” said Elson, who also owns Wells Fargo shares. “Given what happened and continues to happen, there’s obviously something culturally going on that needs to be fixed.”