Wells Fargo sep­a­rates chair­man, CEO roles

The Denver Post - - BUSINESS - By Kather­ine Chiglinsky

Wells Fargo & Co. changed its by­laws to re­quire a sep­a­rate chair­man and chief ex­ec­u­tive of­fi­cer, break­ing with most of its U.S. peers af­ter years of sales abuses in its branches spi­raled into a na­tional scan­dal.

That move is sig­nif­i­cant in an in­dus­try that has long fought off pres­sure from cor­po­rate gov­er­nance ac­tivists and share­hold­ers in­clud­ing pen­sion man­agers, but it won’t change Wells Fargo’s cur­rent lead­er­ship. John Stumpf had held both roles at Wells Fargo un­til he stepped down in Oc­to­ber. Tim Sloan was pro­moted that month to CEO, while Stephen Sanger be­came non-ex­ec­u­tive chair­man.

“For­mal­iz­ing this struc­ture is the right de­ci­sion at this time,” Sanger said in a state­ment. “Ef­forts to re­store the trust of our cus­tomers and team mem­bers are well un­der­way and will con­tinue un­til we have fully ad­dressed the is­sues sur­round­ing re­tail bank­ing sales prac­tices.”

The ap­proach dif­fers from al­most all of Wells Fargo’s big­gest com­peti­tors, in­clud­ing Bank of Amer­ica Corp. and JPMor­gan Chase & Co., which have per­suaded share­hold­ers not to di­vide the jobs in re­cent years. Cit­i­group Inc. is the only other bank among the na­tion’s top six that hasn’t granted both ti­tles to its cur­rent leader.

Split­ting the roles at Wells Fargo, the third-largest U.S. lender by as­sets, but­tresses the case that other banks should fol­low suit, ac­cord­ing to CtW In­vest­ment Group’s re­search direc­tor, Richard Clay­ton. “Share­hold­ers at all the banks are go­ing to press for changes.”

The bank has faced a bar­rage of crit­i­cism and calls for closer scru­tiny since agree­ing in Septem­ber to pay $185 mil­lion over claims that em­ploy­ees may have opened more than 2 mil­lion unau­tho­rized ac­counts for cus­tomers.

“Though from a busi­ness per­spec­tive it is de­bat­able whether sep­a­rat­ing the chair­man and CEO into two roles is ben­e­fi­cial, we view the sep­a­ra­tion in roles more fa­vor­ably from a po­lit­i­cal per­spec­tive,” RBC Cap­i­tal Mar­kets an­a­lyst Ger­ard Cas­sidy said in a note to in­vestors. “It should help re­lieve some of the po­lit­i­cal pres­sures the com­pany has felt.”

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