Wells Fargo & Co.'s shareholders are expected to re-elect all of the bank's directors -- but at uncomfortably low vote totals -- in a pitched contest over the board that resulted from last fall's sales-practices scandal, according to people familiar with the matter.
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Shareholders' limited support for the board suggested shareholders seek further changes and explanations following the scandal. Tensions were high at the bank's shareholder meeting Tuesday in Florida as shareholders voiced their complaints, prompting Wells Fargo Chairman Stephen Sanger to halt the meeting for several minutes.
The bank is scheduled to release the results of the shareholder vote on directors at the meeting. The bank and its 15 board directors were on edge through the night and early morning as key institutional shareholders placed their votes, people familiar with the process said.
Some votes were still coming in Tuesday, meaning vote tallies could still shift or shareholders could still change their votes, the people familiar with the matter said. The technical deadline for casting votes is when the meeting ends.
At the meeting, a bank's shareholder refused to stop asking individual directors to explain what they knew about the sales practices scandal. Mr. Sanger and Chief Executive Timothy Sloan repeatedly asked the shareholder to sit down and wait until the question-and-answer period began. The shareholder said the bank and board's response was "not good enough," and he wanted more details from each director.
When the meeting restarted a few minutes later, Mr. Sanger said the shareholder made a "physical approach to our board members and ultimately we removed him from the meeting."
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Much of the discontent among shareholders is rooted in the bank's sales-practices scandal that led to a $185 million settlement with regulators last September and a more recent, pending $142 million settlement with customers. Its reputation has been hit hard with two congressional grillings and a spate of state and federal investigations. The bank has said it is cooperating with those.
In an unusual move, Institutional Shareholder Services Inc., one of the largest and most influential proxy advisory services, had recommended earlier this month that shareholders vote against re-electing 12 long-serving directors.
While the re-election of directors, if confirmed, will be a relief for the bank, the likelihood that at least a few board members will receive below 60% of votes cast is concerning. Directors, who usually run unopposed, typically receive more than 95% or more of the votes cast.
Other long-serving directors are expected to receive less than 80% of the vote, which is also worrisome, one of the people familiar with the matter said. The board's two newest directors, appointed in February, are expected to receive more than 90% of the vote, this person said.
The collective low votes for long-serving directors sends a clear message to the bank of "dissatisfaction," one of the people familiar with the matter said.
The bank has told large shareholders that six directors will hit retirement age in the next four years and will step away from the board with "significant turnover," emphasizing that point in recent days, people familiar with the conversations said.
Many large shareholders thought the board was slow to react to the sales-practices problem but in the last six months has taken appropriate action, some of these people said.
While no specific deals were struck with shareholders on changing directors, there were some backdoor negotiations, some of these people said. It is possible that committee chairs could change but not as a result of an explicit agreement, one of these people said.
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(END) Dow Jones Newswires
April 25, 2017 11:54 ET (15:54 GMT)