Responsible investors file resolution seeking governance changes at embattled Wells Fargo

The Needmor Fund, the US family foundation, is filing a resolution at embattled US banking giant Wells Fargo seeking governance changes in the wake of the fraudulent accounts scandal that has engulfed the company and seen more than 5,000 staff fired.

The fund, which is a client of socially responsible investment firm Walden Asset Management, says it is “imperative” for the board to have oversight over management and is calling for an independent chair at the firm “when the next CEO is chosen”.

“One of the major reasons stimulating this proposal is the scandal that was publicized this past week and the $185 million settlement with the CFPB [Consumer Financial Protection Bureau],” Needmor’s Executive Director Frank Sanchez says in a letter to Wells Fargo’s Corporate Secretary Anthony Augliera.

“Reports indicated that Wells Fargo employees opened 2 million customer accounts without consent and that this fraud had taken place since 2011 with 5,300 employees having been dismissed as a result.” The resolution is being filed for inclusion in Wells Fargo’s 2017 proxy statement.

The letter goes on to state that while the San Francisco-based bank has taken steps to set up new checks and balances, it was still unclear how the bank’s clawback policy would be implemented and “how far up the ladder of leadership” knowledge of the frauds existed.

Chairman and CEO John Stumpf, who has faced calls to resign, said on CNBC on September 13: “We are sorry. We deeply regret any situation where a customer got a product they did not request.”He went on to say that there was “nothing in our culture, nothing in our vision and values” that would support that. He told CNBC he would not resign.

“Integrity is not a commodity,” Stumpf says on the bank’s home page. “It’s the most rare and precious of personal attributes. It is the core of a person’s — and a company’s — reputation.”

The investors say a combined chair/CEO “weakens a corporation’s governance structure, which can harm shareholder value.”

It’s not the first time investors have had tangled with Wells Fargo. The Needmor Fund itself and other investors engaged with it back in 2014 on the bank’s business standards. A planned seven-point shareholder resolution on the issue was withdrawn. “We support your strong ethical standards and code of conduct,” the investors said at the time.

Christian Brothers Investment Services, at around the same time, also withdrew a resolution on predatory lending following an announcement by the bank that it would discontinue its ‘Direct Deposit Advance’ service. But a proposed resolution from the New York State Common Retirement Fund calling for a report on incentive-based compensation and the risks of material losses was opposed by the company, whose stance was supported by the SEC.

Ohio-based Needmor is the foundation of the Stranahan family of Champion spark plug fame.