Wells Fargo shareholders reject calls to oust Sloan and vote to support board at annual meeting
A year ago, Wells Fargo & Co. shareholders voted in droves against some of the bank’s longest-serving board members, a revolt sparked by the scandal over unauthorized bank accounts.
But 12 months later, even as outrage against the bank continues in the wake of new enforcement actions, shareholders stood with the company.
At Wells Fargo’s annual meeting Tuesday at a hotel in Des Moines, Iowa, investors overwhelmingly voted to elect the company’s slate of directors, signed off on the bank’s executive pay and rejected a proposal that would have required the bank to report on risks associated with its compensation practices.
All 12 directors — many of them recent additions to the board — who stood for election received nearly 90% of shareholders votes, according to preliminary results released at the close of the meeting. That’s a blow to bank critics, including protesters who marched outside the meeting, who had called for the ouster of more board members and Chief Executive Tim Sloan.
Sloan took the job after the accounts scandal broke in 2016 but is a longtime Wells Fargo executive and previously ran the commercial banking business.
Tuesday’s votes stood in stark contrast to last year’s meeting, at which no director received more than 80% support and four — including the bank’s then-chairman, Stephen Sanger — received less than 60% in what Sanger described as “a clear message of dissatisfaction.” Corporate directors are typically elected with near-unanimous support.
California Treasurer John Chiang, who’s running for governor, was at the meeting and told fellow shareholders they should withhold votes for John Baker, who has been a director since 2009, one of few holdovers from prior to the accounts scandal. He served on a board committee that reviewed customer complaints and, Chiang said, should have known about the unauthorized accounts problem long before it became public.
“I am here to deliver a message from the people of California: Integrity and trust matter,” he said, arguing Baker and several former directors “tuned their backs on this metastasizing greed.”
Chiang also asked shareholders to withhold support for the bank’s executive compensation packages, saying Sloan in particular does not deserve the $15 million in potential incentive compensation he was granted last year — calling him an insider and “champion of the old guard.”
“It is time for him to go,” Chiang said.
Board Chairwoman Betsy Duke defended Sloan, saying she believes he is “the right CEO for Wells Fargo.”
“He knows this company, he cares deeply about this company,” she said. “He has worked every day to make those changes within this company.”
Shareholders also did not approve a proposal asking the bank to report on risks associated with its incentive compensation system. Incentive pay tied to onerous sales goals was one of the factors that motivated Wells Fargo workers to open unauthorized accounts, and a former currency trader alleged in a recent lawsuit that similar incentives may have led to problems in the bank’s foreign-exchange business.
The proposal for a report on risks related to incentive pay was brought forward by New York state Comptroller Thomas DiNapoli and supported by the influential shareholder advisory firm Institutional Shareholder Services. It received the support of 21.7% of votes, according to the early tally.
In a statement, DiNapoli said he believes that level of support was a positive sign and plans to make the same proposal at next year’s shareholder meeting.
“We need daylight on what Wells Fargo is doing to oversee risky incentive pay practices that have contributed to multiple scandals at the bank,” he said. “As long-term investors, we’ll be back next year and expect to gain even stronger support.”
Bank analyst Bert Ely said he wasn’t surprised by the apparent shareholder support for Wells Fargo’s management and board, especially given all the changes of the past year and a half. Investors, he said, are eager to move on and to give the new regime room to fix and stabilize the bank.
“Investors want things to settle down, they want to see a company get this behind them and get the share price up,” he said, though he added that shareholders will be unforgiving if the bank’s situation does not improve.
“Where there will be investor unhappiness is if, over the next year, new problems surface that are indicative of management that hasn’t gotten the message,” he said.
Tuesday’s meeting was the second since the bank reached a $185-million settlement with regulators in September 2016 after admitting that its employees had created potentially millions of accounts for customers without their knowledge or consent.
And it comes less than a week after regulators fined the bank $1 billion over other problems uncovered in the scandal’s wake. The bank has also been ordered by the Federal Reserve to halt its loan growth until it can improve its risk management and governance practices.
Shareholders may have offered more support for the bank’s board in part because most directors are relatively recent additions. Of the 12 directors up for election Tuesday, just five have been with the bank since before the account scandal broke. Only three have been the the bank since 2013, the year The Times first reported the practice among employees of creating unauthorized accounts.
The bank has taken other actions, too, starting a wide-ranging review of practices that has led to leadership changes in several business units and the discovery of additional problems, including the fact that it forced hundreds of thousands of auto loan borrowers to pay for insurance policies they did not need. That’s one of the practices regulators cited when handing down last week’s fine.
“There’s no question that in this company’s 166-year history, we’ve made mistakes, and we’ve acknowledged mistakes,” Sloan said Tuesday. “I said it last year and it’s still true: Rebuilding trust is our top priority.”
As Sloan and the board received support from investors, they also got an earful from small shareholders and advocacy groups who criticized a wide range of the bank’s practices, from its financial relationships with oil and firearms companies to how it pays employees.
Protestors marched in downtown Des Moines before Tuesday’s meeting and briefly made their way into the Marriott lobby. Marchers carried signs calling for Sloan’s ouster and calling on the bank to cut ties to oil pipeline projects, particularly those that cross tribal lands. The bank was one of several financial institutions that provided financing for the Dakota Access Pipeline.
Sloan said the bank has a relationship with TransCanada, the company behind the Keystone XL pipeline, but isn’t involved in that project specifically. He defended the bank’s business of lending to oil companies and pipeline projects, saying they are important to the economy. In answering one question about divestment from oil companies, Sloan asked meeting attendees to raise their hands if they drove or flew to the shareholder meeting.
“We’re proud to provide credit to companies in the energy industry, both those that provide fossil fuels and those dedicated to environmental sustainability,” he said.
Sloan also faced questions over the bank’s financing of gun manufacturers, an issue that has gained traction in the weeks since Bloomberg reported that Wells Fargo is the National Rifle Assn.’s primary bank and does more business with gun makers than any other bank.
Sister Nora Nash, a Philadelphia nun and member of the Interfaith Center on Corporate Responsibility who last year was named to a Wells Fargo advisory committee, urged the bank to stop doing business with companies that make or sell assault weapons.
“Our company must not be financially associated with manufacturers of military weaspons, assault-style weapons, that are sold to the public,” she said.
After a contentious exchange with another meeting attendee who asked about the bank’s stance on gun control, Sloan said the bank is not taking a position and will leave the issue to lawmakers. Some of Wells Fargo’s competitors, notably Bank of America and Citigroup, have said they will curtail their dealings with companies that make or sell certain types of firearms.
“We think gun safety and gun violence are best addressed by legislation,” Sloan said. “We don’t think it’s a good idea to allow banks to decide what products and services Americans can buy.”
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UPDATES:
2:45 p.m.: This article was updated with details about protests and a question-and-answer session.
1 p.m.: This article was updated throughout with results of the meeting.
This article was originally published at 8:35 a.m.
