Wells Fargo said Tuesday its chairman will step down, the latest change at the top of the bank as it reels from a major sales scandal.
The San Francisco-based bank announced that board member Elizabeth Duke, 65, will succeed Chairman Stephen Sanger effective Jan. 1, in addition to other changes being made to the board. The move puts Duke, a former Federal Reserve governor and Wachovia executive, in the most powerful board seat at a bank dealing with a growing raft of scandals. It also makes her the only woman chair among the largest U.S. banks.
Wells had been expected to shake up its board, with Duke, who had been vice chair, likely replacing Sanger. The departing chairman’s tenure stretched to 2003 – a period that included the years in which Wells employees were accused of creating fake accounts to meet aggressive sales goals.
Sanger, who will retire completely from the board, had received a low 56 percent of votes cast by investors when he was re-elected at the bank’s annual shareholders meeting in April. Some other board members also received tepid support, in a sign of dissatisfaction following the fake-accounts scandal.
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In an interview with the Observer Tuesday, Duke said she had not envisioned herself taking on the chairmanship, but she pointed to her time at the Fed during the financial crisis, as well as her community banking experience, as being good assets for her new post.
“I’m looking forward to the role,” Duke said. “We’ve been through a lot in the last year, and, working with Steve, the amount of work that’s been done by this board has brought us to a point that I’m particularly comfortable with.”
For Wells Fargo, it’s another major change in leadership. In the wake of the scandal, Tim Sloan replaced John Stumpf as CEO in October, and a number of other top executives have also departed.
But some said Tuesday the board revamp alone would not fully restore Wells Fargo’s image, which has taken fresh hits in recent weeks from a new scandal over auto insurance.
“The board changes are not enough to keep current management out of the spotlight,” KBW analyst Brian Kleinhanzl said in a report. “In the end, there still will be pressure to see greater management changes if more wrongdoing is found.”
In other changes announced Tuesday, Wells said board members Cynthia Milligan and Susan Swenson will retire at the end of this year. Both have served since the 1990s.
The board also said it has elected Juan Pujadas, a retired principal of PricewaterhouseCoopers, as a new director. Pujadas will assume the role Sept. 1. He does not work for Wells Fargo, making him one of the bank’s independent directors.
The latest changes will give the board 13 members, of which 12 will be independent. The board also plans to name three more independent directors before the spring 2018 annual shareholder meeting.
Wells Fargo chairman and CEO John Stumpf testified Tuesday in front of the Senate Banking Committee about the bank's allegedly illegal sales practices.
Wells has pushed to repair its reputation, but it’s still wrestling with an array of problems.
Earlier this month, the bank disclosed that an expanded review of its sales practices was expected to identify a “significant increase” in the number of potentially unauthorized accounts employees created over an eight-year period.
That came soon after the bank faced a new scandal involving auto insurance. Wells has 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.
Sanger, who hits the board’s mandatory retirement age of 72 next April, told the Observer that the new scandals “were most definitely not a factor” in Tuesday’s board changes. Instead, he said the board has continued to respond since the annual meeting to the message shareholders sent directors through their votes by making changes to the board.
Tuesday’s board action came after it hired Mary Jo White, former head of the Securities and Exchange Commission, to assist the board in its 2017 annual review. Sanger said Tuesday that review was moved up to this summer from its normal timing at the end of the year.
The latest actions also come as some members of Congress, including Sen. Elizabeth Warren, D-Mass., have urged new hearings into the bank’s practices.
Sen. Elizabeth Warren called on Wells Fargo CEO John Stumpf to step down during a Sept. 20 Senate Banking Committee hearing for his role in the bank's unauthorized accounts scandal.
Fresh revelations of problems at the bank have come after the board in April released results of its own investigation into the fake accounts.
Asked Tuesday why the auto insurance issues weren’t disclosed by the board in April, Sanger said the insurance matter “is a very different issue” than the fake-account problems, blaming the auto insurance issues on improper oversight of a third-party vendor.
In addition Tuesday, Wells said it’s remaking its board committees. Karen Peetz, a former Bank of New York Mellon president who joined the board in February, will become chairman of the risk committee, replacing Enrique Hernandez Jr. At the shareholder meeting, Hernandez, who remains on the board, received 53 percent of shares cast, the lowest tally of all board members.
Among other changes, Donald James will succeed Sanger as chair of the governance and nominating committee. James is a longtime board member who became a Wells director through its 2008 acquisition of Charlotte-based Wachovia.