Wells Fargo's Critics Unappeased as Four Directors to Leave
(Bloomberg) -- Four Wells Fargo & Co. board members, including its three longest-serving directors, plan to retire next month as pressure mounts for new oversight in the 18-month-old scandal.
Federico F. Pena, Lloyd H. Dean, Enrique Hernandez Jr. and John S. Chen will leave at the company’s annual shareholder meeting on April 24, the San Francisco-based lender said Thursday in a statement. The move wasn’t enough to appease some of the bank’s most prominent critics, who’ve demanded the board push out all members who were on the panel when employees created as many as 3.5 million fake accounts.
While Wells Fargo had already signaled plans to replace four directors in 2018, Thursday’s announcement came as its legal and regulatory struggles expanded to previously untarnished businesses, with the bank revealing new allegations of improper sales practices. Also, the Federal Reserve vowed to keep unprecedented sanctions in place for a “significant period.”
California State Treasurer John Chiang, who’s on the boards of the state’s biggest pension funds, promised last month “to raise holy hell” if four longtime Wells Fargo directors aren’t gone before the bank’s annual meeting. His list of targets included three in Thursday’s announcement -- Pena, Hernandez, and Dean.
Late Thursday, Chiang called for Chief Executive Officer Tim Sloan to step down, too.
“Tim Sloan has shown himself to be too much a champion of the old guard to truly be the change agent that Wells Fargo so desperately needs,” Chiang, a Democratic gubernatorial candidate, said in an emailed statement. “It’s time for him to go.”
Another prominent critic, U.S. Senator Elizabeth Warren, gave the bank measured credit for the board changes -- even if they didn’t go far enough.
“No director who served during the fake accounts scam should remain on the Wells Fargo board,” she said. “But this is a positive step toward holding senior officials accountable for the massive fraud that occurred on their watch,” the Massachusetts Democrat said in a statement.
Hernandez, Dean, and Chen have been directors for more than a decade, and Pena joined the board in 2011. They didn’t respond to messages seeking comment, some of which were left with representatives of companies where they work.
Wells Fargo has been remaking its board in the wake of a sales scandal that erupted in September 2016. Then-CEO John Stumpf left the firm in October of that year, passing his chairman title to Stephen Sanger. Betsy Duke was named vice chairman at the time and ultimately succeeded Sanger to run the board.
The bank said Thursday that the board will nominate the remaining 12 directors for shareholder approval at next month’s meeting. It’s unclear whether the board will shrink to that number or replace the four departing directors. Bank spokesman Ancel Martinez declined to comment.
Wells Fargo said earlier on Thursday that government agencies had inquired about improprieties in the wealth-management business related to 401(k) rollovers and other products. The lender is also responding to queries from government agencies into its foreign-exchange business. Last month, the Fed put in place sanctions preventing the bank from getting any bigger until it fixes its problems.
“We will not lightly lift” that restriction, Fed Chairman Jerome Powell told lawmakers at a Senate Banking Committee hearing Thursday. The firm will probably be subject to the sanctions for a “significant period,” he said.
“There’s never just one cockroach in the kitchen,” Warren Buffett, whose Berkshire Hathaway Inc. is Wells Fargo’s biggest shareholder, said about the possibility that Wells Fargo could uncover additional wrongdoing in an interview that aired Monday on CNBC.
The drip-drip of additional disclosures by the bank is “very frustrating,” said Tony Scherrer, director of research and co-portfolio manager at Smead Capital Management, which has about 1.4 million Wells Fargo shares.
“The cockroach theory is alive and well,” Scherrer said. On the bright side, he added, the recent stumbles could make the stock cheaper for investors looking to buy. The shares fell 0.8 percent to $56.86 at 7:38 a.m. in early New York trading, after dropping 1.9 percent on Thursday.
Even with the board revisions, five directors who were on the panel before the scandals erupted will remain: Duke, John Baker II, Donald James, James Quigley, and Suzanne Vautrinot.
As recently as mid-February, CEO Sloan defended the quality of the board.
“I think we’ve got a terrific board right now,” Sloan said in a Bloomberg interview.
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