Wells Fargo face irritated investors at annual meeting
Wells Fargo shareholders are getting their chance to give an earful to the bank’s top management and board of directors.
Wells Fargo (WFC) executives and its board will face irritated investors Tuesday for the first big shareholder meeting since the scandal over the bank’s sales practices led to an executive shake-up, fines and a dented reputation. Its board members, who are up for re-election, are facing calls for their ouster amid criticism they failed in their oversight. Several big investors such as the pension fund Calpers said they will vote against the board, according to The New York Times.
The bank has changed the way it pays branch employees, reclaimed promised compensation to several executives and apologized to customers after regulators imposed $185 million in fines last September. Authorities said Wells Fargo workers opened up to 2 million accounts without customer permission as employees tried to meet aggressive sales goals.
It’s likely that Wells Fargo’s top management will apologize to shareholders — a new, and arguably more patient, audience — following apologies already given to customers and employees. CEO Tim Sloan, who got that job in October, has repeatedly talked of making things right with customers. Whether the changes will be enough — Wells has seen a sharp decline in new customers and remains under investigation by various authorities — is a main issue to be decided Tuesday.
Wells Fargo’s executives are expected to face calls for their ouster. Shareholder proposals call for an overhaul of the bank’s corporate governance as well as more investigations into the pressure-filled corporate culture that some bank employees say pushed them to open the fake accounts.
The bank’s board has one high-profile supporter: Warren Buffett. His firm, Berkshire Hathaway (BRK.A), owns about 10 percent of Wells Fargo’s shares, and has said it will support the current board members, The Times noted.
An investigation by the bank’s own board of directors, released earlier this month, found that the problems at Wells Fargo and its overly aggressive sales culture date back at least 15 years, and that executives had little interest in dealing with the issue until it spiraled out of control. It also clawed back another $75 million in pay from former CEO John Stumpf and former community bank executive Carrie Tolstedt, saying both dragged their feet for years about the problems.
The big item to watch Tuesday will be whether Wells Fargo shareholders oust the board. Two major proxy advisory firms have advised shareholders to vote out at least some of the directors. One firm, Institutional Shareholder Services, is basically asking investors to clean house. Even two large California pension funds have come out against Wells Fargo’s board.
Another issue will be shareholder proposals. Wells’ board has advised shareholders to vote against at least two proposals that the proxy firms endorsed. One of them calls for yet another internal investigation into the bank’s sales practices.
The board will likely lean on its investigation, which said that both Stumpf and Tolstedt, when presented with the growing problems in the community banking division, were unwilling to hear criticism. It rescinded $47.3 million in stock options to Tolstedt, on top of $19 million the board had already clawed back. It took back $28 million more from Stumpf’s compensation, on top of $41 million already clawed back.
Along with the millions taken back from other executives earlier this year, the roughly $180 million in clawbacks are among the largest in U.S. corporate history. Wells Fargo has also said it will pay $142 million to customers for damages caused by any accounts opened without their permission, and expand its window for unauthorized accounts back to May 1, 2002.
The shareholder meeting, at a golf resort in Jacksonville, Florida, is being held about 2,800 miles from Wells Fargo’s headquarters in San Francisco. The company has not said why it chose that location.