Wells Fargo & Co. may soon face a rather rocky shake up in their corporate office, as shareholders vote to oust many of the bank’s directors amid continued backlash following the company’s sales scandal. As such, bank executives have been scrambling to meet with key investors prior to their annual shareholders meeting on April 25, in order to secure their seat by possibly appealing to disgruntled investors seeking a change.
An official representing a major shareholder in Wells Fargo stated that “A number of those directors will be vulnerable.” In spite of this vulnerability, it is quite rare for a shareholder to vote out a director. In the past five years, only nine directors have left the boards of companies listed in the S&P 500 after failing to amass majority support for their reelection. Chairman Stephen sanger, the current director of Wells Fargo who took over after John Stumpf resignation following a sales practice scandal is the top prospect at risk of receiving the boot from shareholders.
Though Mr. Sanger, the former chief of General Mills Inc., has handled the scandal by blaming the former CEO as orchestrating the entire fiasco, many shareholder have begun to question the overall effectiveness of the board’ role who want to know why the board did not act sooner to shake the improper employee practices despite concerns in 2014 and 2015. Earlier this month, ISS recommended that shareholders vote out Mr. Sanger and 11 other board members on Wells Fargo’s 15-member board. Glass Lewis & Co supported the actions of ISS, recommending investors vote for Mr. Sanger and 6 board members as opposed to 11.
Mr. Sloan, who was named CEO following Mr. Stumpf resignation, used to run the firm’s corporate and wholesale business. But has appeared to avoid much of the blame for the sales scandal, as retail consumer banking operating outside his jurisdiction. In an interview, Mr. Sloan commented on his meeting with Warren Buffett, Wells Fargo’s largest shareholder who offered his support for the board. In a statement, Mr. Sloan stated that “We value his input and engagement…at a very important time for the company.”
As it stands, management and board members currently plan to argue in favor of the board, noting that the firm did claw back $183 million in pay from current and former executives and overhauled four of its major committees — risk, audit, human resources, and corporate responsibility — in an effort to further strengthen the firm’s oversight. In response to mounting questions as to whether Mr. Sanger should resign, he responded by stating that “investigation showed the board took the appropriate actions with the information it had.” Though to many shareholders these “appropriate actions” may have come a bit too late.
There is hope for Wells Fargo’s board according to their corporate governance guidelines which are fairly similar to most large companies; as gives the board latitude over shareholder input. According to Wells Fargo’s policy, though directors require a majority of votes to retain their position they alone hold the discretion as to whether they will accept or reject offers to regions despite failing to secure a majority. However, if the bank were to go against shareholder sentiment they would risk a possible a hit to their stock price as frustrated investors sell shares in bulk in retaliation to perceived treachery.
So far, a number of large shareholders have not agreed on how they will plan on voting. If investor sentiment following the meeting starts indicating that shareholders are ready for a shake up, Wells Fargo might consider ushering early retirements fo4m its directors in an effort to preserve majorities and quell tensions amongst investors. Though the bank is no doubt in hot water following the reveal of their scandalous sales practice, and the swarm of fake accounts being opened, Well Fargo has quite the task in rebuilding their image and restoring their social prominence as one of America’s safest and most trustworthy banks.