A proxy advisory firm is urging Wells Fargo shareholders to vote against the re-election of six directors as the bank faces a contentious annual shareholder meeting this month in the wake of a major sales scandal.
In a report this week, Glass Lewis said four of the directors should go because of their failure to uphold their duties amid the scandal, while the other two should not be elected because they sit on too many boards.
Glass Lewis is one of the major firms that advises institutional investors, such as pension funds, on how to vote their shares regarding directors and other investor proposals. The San Francisco-based bank holds its annual shareholder meeting April 25 in Florida.
In its report, Glass Lewis cites the “reputational damage inflicted on the company” from the scandal that erupted in September. Four of the directors that it opposes – John Baker, Lloyd Dean, Enrique Hernandez and Cynthia Milligan – sit on Wells’ corporate responsibility committee, which showed “failure to properly fulfill its stated duties,” the report says.
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The report also recommends shareholders vote against the re-election of directors John Chen and Susan Swenson. Glass Lewis says the two, who are CEOs of other companies, serve on too many other public company boards, raising concerns about their ability to fulfill their board duties. They each serve on three boards, including Wells Fargo’s.
Glass Lewis recommended that shareholders re-elect the other nine directors who serve on the bank’s board.
It’s the latest setback for Wells Fargo, whose reputation has been tattered by revelations employers opened fake accounts without customers’ knowledge as they sought to meet high-pressure sales goals.
Since the scandal, the bank has repeatedly pointed to steps it’s made to repair its image and practices. On Tuesday, Wells announced the publication of an open letter to customers from CEO Tim Sloan listing some actions the bank has taken, such as eliminating product sales goals for retail bankers.
In a statement Tuesday, Wells spokesman Mark Folk pointed out that Glass Lewis’ recommendations come before the release of findings from an independent investigation by the bank’s board into the scandal. Those findings are expected to be made public before the shareholders meeting.
“Our board and management are taking decisive actions to rebuild trust with customers, team members, community partners and shareholders,” Folk said. “We are committed to making things right, fixing the problems and building a better Wells Fargo.”
Four of the directors opposed by Glass Lewis have served on the corporate responsibility committee since at least 2011, the firm notes. That’s two years before a 2013 Los Angeles Times story first raised questions about sales practices at the bank.
It’s not unheard of for Glass Lewis, which advises large investors such as pension funds, 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.
Glass Lewis’ report says Wells Fargo has taken “robust actions” to fix its problems. But Glass Lewis also said the scandal serves as a “stark reminder” for banks that reputational risk “should be more than a tertiary consideration.”
The report says there was a “cultural failure” at Wells and that “the effects are likely to continue to the foreseeable future.”