Wells Fargo & Co directors could have avoided a shareholder backlash over a sales practices scandal if they had paid more attention to scores of whistleblowers who complained, in vain, for years.
A slow response to warnings is not unique to Wells Fargo, but it is an immediate concern at the third-largest U.S. bank, whose board is facing a no-confidence vote at its annual shareholder meeting on Tuesday.
Wells Fargo has been engulfed in scandal since September, when it reached a $190 million settlement with regulators over complaints that its retail banking staff had opened as many as 2.1 million unauthorized client accounts. The bank fired 5,300 employees for improper sales tactics over five years, but did not make more substantive changes to policies and procedures or hold managers accountable until there was a public outcry.
An third-party investigation commissioned by the board found such practices were not flagged as "a noteworthy risk" until 2014, even thought lawsuits and complaints suggested the problem existed at least as far back as 2010.
George Sard, a spokesman for Wells Fargo's board, declined to comment. The bank's spokeswoman Richele Messick said Wells Fargo takes the issue "very seriously" and detailed multiple steps the bank has taken to improve procedures since the scandal erupted, including reviews of its ethics hotline and new standards and training for employees.
"It's critical that all team members feel safe escalating concerns, and have confidence those concerns will be addressed," Messick said.
Influential proxy advisor Institutional Shareholder Services recommended shareholders vote against 12 of its 15 directors, including Chairman Stephen Sanger, arguing directors failed in their oversight duties for years leading up to the settlement.
The Wall Street Journal reported on Sunday that several directors were at risk of losing re-election based on a tally of those who have already cast ballots.
Sanger, who led the internal investigation after being installed as independent chairman in October, had faced controversy involving whistleblowers before.
In 2004, an employee sued General Mills Inc, the company Sanger ran from 1995 to 2007, for allegedly retaliating against him after he raised concerns that the company was shipping more products to retailers than they wanted to artificially boost sales figures.