Wells Fargo & Co. said it will no longer require arbitration when an employee files a sexual harassment complaint, making it the first of the largest U.S. banks to announce an end to the practice.
The change, which applies to future harassment claims, is being made following discussions with stakeholders including Clean Yield Asset Management, which submitted a shareholder proposal late last year that focused on the practice, Wells Fargo said in a statement Wednesday. Clean Yield, which focuses on investments that reflect clients’ values, has since withdrawn the proposal.
“Wells Fargo has zero tolerance for sexual harassment,” David Galloreese, head of human resources, wrote in an article for the company’s internal and external websites. “We believe that this is the appropriate change to make at this time for our employees. The treatment of sexual harassment claims has become an increasingly prominent issue across industries.”
A global reckoning about sexual harassment has been unleashed in the #MeToo era, with forced arbitration coming under scrutiny for being one of many tools companies use to keep complaints from coming to light. While firms claim the process saves money, a 2015 study found employees prevail only about a third as often in mandatory arbitration as in federal courts, and get less money in damages. The system can also cover up misconduct from repeat offenders.
Although several tech giants, including Microsoft Corp., Alphabet Inc.’s Google and Facebook Inc., have done away with the clause in the last few years, the process remains widespread on Wall Street, which pioneered it decades ago. One woman at Cantor Fitzgerald has been engaged in a years-long battle with the brokerage firm to get her claims heard in open court.
“Wells Fargo’s decision is yet another step in ending the secrecy and silence that survivors of sexual harassment and assault have been forced to endure,” advocacy group Lift Our Voices said in a statement. “One major bank can inspire others in the financial sector to do the right thing.”
At Wells Fargo, the mandatory-arbitration policy applied to employees hired since late 2015, according to the statement.
“Wells Fargo has raised the bar for financial institutions aiming to root out sexual harassment in the workplace,” Molly Betournay, Clean Yield’s director of shareholder advocacy, said in a statement. Wells Fargo is believed to be the first big bank to end forced arbitration for such claims, Clean Yield said.
Wells Fargo, which is trying to regain customer trust and mend ties with regulators and elected officials following years of scandals, is instituting a series of reforms under new Chief Executive Officer Charlie Scharf. On Tuesday, he announced an overhaul that includes breaking the firm’s main businesses into smaller fiefdoms and bringing in Mike Weinbach, a former JPMorgan Chase & Co. executive, to run a new consumer-lending division.