Wells Fargo & Co. Chief Executive Officer Tim Sloan said last year that a wholesale makeover of his board would be “crazy.” Well, now it’s happening, whether he likes it or not.
The Federal Reserve last week barred the nation’s third-largest lender from getting bigger and said the bank will replace four unspecified directors by the end of 2018. They’re the latest aftershocks of a bogus-accounts scandal that continues to haunt the firm as new allegations of consumer harm emerge. Four directors have been added since September and, by year’s end, half of the 16-member board will have joined since Sloan said last April that an overhaul would be “absolutely irresponsible.”
The day of reckoning can’t come soon enough for some prominent detractors. Former Treasury Secretary Larry Summers this week questioned why the departing directors aren’t leaving immediately “with an element of humiliation.”
Arati Randolph, a spokeswoman for San Francisco-based Wells Fargo, declined to comment.
U.S. Senator Elizabeth Warren has demanded the ouster of board members who presided over the bank when employees created millions of fake accounts. The Massachusetts Democrat pressed former Fed Chair Janet Yellen and her successor, Jerome Powell, to hold the firm accountable during nine separate discussions over the past 18 months, according to a person with knowledge of the matter, who asked not to be identified because the meetings were private.
‘Holy Hell’
California State Treasurer John Chiang, who’s on the boards of the state’s biggest pension funds, promised this week “to raise holy hell” if four longtime Wells Fargo directors -- Federico F. Peña, John D. Baker II, Lloyd H. Dean, and Enrique Hernandez Jr. -- aren’t gone before the bank’s annual meeting, which is typically in April. The men didn’t return calls or declined to comment.
All four once served on the board’s risk committee. Only Hernandez is still on the panel, though he’s no longer committee chair. All are on Wells Fargo’s corporate responsibility committee, which is charged with monitoring the bank’s reputation.
Hernandez, the chairman and CEO of Inter-Con Security Systems Inc., is the longest-serving member, having joined the board in 2003. He’s also on the boards of McDonald’s Corp. and Chevron Corp. About 53 percent of the bank’s shareholders voted for him last year. That compares with at least 90 percent for most S&P 500 directors, according to Equilar Inc.
Peña, a former U.S. energy and transportation secretary who joined the board in 2011, got 54 percent support from shareholders last year. Dean, CEO of hospital operator Dignity Health, has been on Wells Fargo’s board since 2005. He’s also a director at McDonald’s. About 62 percent of votes were cast for him last year. Baker, CEO of FRP Holdings Inc. and a Wells Fargo board member since 2009, received almost 70 percent.
The New York State Common Retirement Fund, which owns 13.9 million Wells Fargo shares, will vote against all incumbents, said Matthew Sweeney, a spokesman for state Comptroller Thomas DiNapoli, the pension fund’s sole trustee.