Paul Hodgson: Wells Fargo off the hook

Updates from the bank’s AGM this week

Wells Fargo announced at the end of its annual meeting on Tuesday that each of the bank’s 12 directors received ‘more than about 89%’ support from shareholders. And, despite earlier criticism, 92% supported its Say on Pay vote. California State Treasurer John Chiang (the bank’s headquarters is in San Francisco) was one of those who challenged CEO Tim Sloan’s pay, for example, but did not receive support from many other shareholders. Indeed, both ISS and Glass Lewis recommended a vote for the Say on Pay resolution. While ISS recommended – with provisos – a vote for all the directors, Glass Lewis did recommend votes against some, including John Baker, a director since 2009 and another object of Chiang’s criticism. I recommended voting against more than just him.
Outside the meeting, around 100 protesters gathered to object to a range of issues, from the bank’s predatory lending practices to its perceived support of the National Rifle Association (NRA) through a business relationship. Inside the meeting, a representative of the American Federation of Teachers said it had ended its relationship with the bank’s mortgage business because of continued ties with the NRA. Other banks, such as Bank of America, have said they are not going to lend to the NRA anymore, but Fargo refused to.
The Q&A session was dominated by the bank’s critics, but shareholder proposals – although some received higher than usual support – did not fare well enough to obtain majority support.A proposal from John Chevedden, seeking to reduce the proportion of shareholders required to call a special meeting, received 36.1% of the vote. Another, from the New York State Common Retirement Fund and Comptroller Thomas DiNapoli, asked the bank to issue a report on incentive compensation and how it contributed to the breakdown of ethics at the bank; that received around 22% of the vote. The third proposal was from Jing Zhao, calling for a link between executive pay and social responsibility, but that received only 6% of the vote. A fourth proposal had already been withdrawn by the Sisters of St. Francis of Philadelphia, on behalf of the Interfaith Center on Corporate Responsibility, because Fargo had agreed to publish a report describing the “root causes of systemic lapses in governance and risk management that have led to ongoing controversies, litigation and fines”.
According to a report in the Charlotte Observer, unusually, Glass Lewis had recommended that shareholders not ratify the bank’s auditor, KPMG. Due to “the severity of the fraudulent account activity and KPMG’s prior knowledge of the incident, we believe shareholders may question whether KPMG is adequately ensuring the integrity and transparency of financial information,” Glass Lewis said, according to the report. KPMG has been the bank’s auditor since 1931, and a fresh pair of eyes might have been a good idea, especially since the auditor is accused of knowing about the fraudulent accounts, but doing nothing. Shareholders apparently disagreed, though, with 91.1% of votes cast in favour.