Wells Fargo restructures after accounting scandal
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 spiralled 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 under pressure from lawmakers. Tim Sloan was promoted that month to CEO, while Stephen Sanger became non-executive chairman.
“We believe 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.
Proxy advisers typically advocate for separating the two most powerful roles at a corporation. The issue resulted in a special vote last year at Bank of America after CEO Brian Moynihan was granted the chairman role without shareholder input. He ultimately prevailed in keeping both titles. At JPMorgan, similar proposals were defeated last year and in 2013. The idea was also put forth in 2014 and withdrawn before a vote.
Wells Fargo has faced a barrage of criticism and calls for closer scrutiny since agreeing in September to pay US$185 million over claims that employees may have opened more than two million unauthorized accounts for customers. Lawmakers including Democratic Senator Elizabeth Warren of Massachusetts had called on Stumpf to resign and have pushed federal authorities to open additional probes.
Under the bylaw change, the chairman and vice chairman of the board must be independent, the San Francisco-based company said Thursday. The changes are effective immediately.