Exclusive: Four large Wells Fargo shareholders want more action from board

Tue Nov 15, 2016 12:23pm EST
 
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By Dan Freed

NEW YORK (Reuters) - Several large Wells Fargo & Co (WFC.N: Quote) investors say they are looking for changes on the board of directors in the wake of a sales scandal that has caused months of upheaval for the bank and cost its former chief executive his job.

Four shareholders who spoke to Reuters voiced concerns about the 15-member board's initial response to the crisis, its size, directors' responsibilities and their outside commitments. Another, Gamco CEO Mario Gabelli, would not discuss the board's performance. However, he said he would welcome Warren Buffett, whose company is Wells Fargo's top investor, becoming a director.

Reuters contacted more than two dozen of the top 100 Wells Fargo investors to determine whether the sales scandal affected their views on the stock. Five – the California State Teachers' Retirement System (CalSTRS), New York City Retirement Systems, union-affiliated CtW Investment Group and fund managers Gardner, Russo & Gardner and Gamco Investors Inc GBL.N – offered comments. Others declined to be interviewed or did not respond.

Investors who spoke to Reuters directly own or advise others who own about 71 million Wells Fargo shares, 1.4 percent of all outstanding stock, worth about $3.7 billion as of Friday's close.

One key criticism: the board was slow to tackle and disclose sales practices that led to the opening of as many as 2 million accounts without customers' permission.

Shareholders also said they had trouble understanding who was responsible for what on various board committees.

For instance, the finance committee oversees "financial risk" and "reputation risk," according to its charter. However, there is also a separate risk committee, and a corporate responsibility committee that "monitor(s) the company's reputation generally." Committee chairs are supposed to coordinate to avoid unnecessary duplication.

"Until we get a bit more of this information it's hard to know whether the board should change or who should be held accountable," Anne Sheehan, director of corporate governance at CalSTRS, told Reuters.   Continued...

 
The logo on a Wells Fargo bank building is seen in downtown San Diego, California March 18, 2014. REUTERS/Mike Blake