Now that the Wells Fargo board has finally done the right thing and ‘retired’ former CEO John Stumpf, it seems a little churlish to criticise it. But that is exactly what I am going to do.
First, because it took them so long to do the right thing and only – it would seem – after a barrage of criticism from congressional hearings, shareholders, stakeholders and the press. Had they acted sooner, we might have had more faith in their actions. But that’s not all.
At first glance, the board looks amazing. Ten of 15 directors are either women, Asian, African-American and/or Hispanic or a combination; six out of the 15 are women and there’s a very good mix of tenures, although only one director is aged less than 60.
There are academics, former government types, accountants, USAF veterans, and even a director at Calvert Funds (Cynthia Milligan). This has to be one of the most diverse boards in the S&P 500.
There’s a solid 38 pages of information about the board in the 2016 proxy statement, its structure, the directors, their pay (between $300k and $350k a year each), their experience and qualifications, and committee memberships and responsibilities.
But as you dig a little deeper, the board starts to look a bit too cosy.
For example, both Elaine Chao (the former Secretary of Labor) and Donald James were together on the board at Vulcan Materials (where James was CEO). Chao is also on News Corp’s board, a company where reputational damage is not unknown.
Director Elizabeth Duke, a former Federal Reserve board member, was an executive at Wachovia which was acquired by Wells Fargo. James was also a director of SouthTrust and Wachovia prior to their acquisition by Wells Fargo, so to claim that he has only been a director since 2009 is a little misleading.
Finally, director Enrique Hernandez served alongside Stumpf on the Chevron board, before the latter resigned this week.
Then not one, but two directors – Susan Engel and Susan Swenson – were senior executives at two companies which went bankrupt, Lenox Group and Amp’d Mobile, respectively.
So, the board isn’t as perfect as it first seems. Which only goes to show that what a board looks like and how it actually functions are two very different things.Granted, Stumpf has ‘retired’ not been fired. Granted, Stumpf allegedly had $41 million in stock awards ‘clawed back’ but the board did not take back money that Stumpf had actually been paid: it was all unvested stock awards that might have been worth $41 million or might have been worth $0, depending on performance.
And he is still leaving with around $24 million in retirement benefits and will receive around $200,000 a year in benefits as a consultant, including an office, personal assistant and driver.
The company has now appointed lead director Stephen Sanger, the former General Mills chair, as chairman and Duke vice chairman – even though both were on the board throughout this whole fiasco.
Tim Sloan, the new CEO, has been with the bank for 29 years and has been in senior executive positions for most of those, including COO in charge of, among other things, community banking where the mis-selling was going on.
Shareholders and stakeholders are not happy. Prior to the announcement of the so-called clawback, Americans for Financial Reform delivered a petition with more than 75,000 signatures calling on the bank to claw back the compensation of both Stumpf and the executives directly responsible.
Shortly after this, Bart Naylor, financial policy advocate for Public Citizen’s Congress Watch division, filed the first-ever shareholder resolution at Wells Fargo calling for a breakup study.
Naylor says that megabanks are still “too big to fail, too big to jail and too big to manage.” Although there are multiple investigations going on into the bank by the FBI, the Department of Justice and the Securities and Exchange Commission as well as suits in the Los Angeles federal and state courts, the general consensus is that no one will go to jail.
Members of the Interfaith Center on Corporate Responsibility (ICCR) have filed four resolutions at the bank – it looks like 2017 will be a bumper year for resolutions. The first calls for a review and report on business standards; the second calls for a link between executive pay and ethical business conduct and sustainability; the third calls for the separation of the chair and CEO roles and the last is a resolution requesting greater disclosure on lobbying and political spending.