Wells Fargo Holders Expected to Re-Elect Board, Send Message -- 3rd Update
Wells Fargo & Co.'s shareholders voted to re-elect all of the bank's directors, in some cases by slim majorities that reflected persistent unease about the lender's sales-practices scandal last fall.
After a contentious three-hour shareholder meeting, the bank said that all 15 directors were re-elected, but longer-serving directors who were around before the problems erupted received approvals as low as 53% of shares voted.
Chairman Stephen Sanger, who received only 56% approval according to a press release, said that long-serving directors received less than 81% and that shareholders "sent the entire board a clear message of dissatisfaction." The head of the bank's risk committee, Enrique Hernandez, received the lowest majority, 53%.
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 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, one bank 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." There were two other shareholder outbursts during the nearly three-hour meeting.
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 is a relief for the bank, the fact that at least one director received just 53% of votes cast is concerning. Directors, who usually run unopposed, typically receive more than 95% or more of the votes cast.
The board's two newest directors, appointed in February, received more than 90% of the vote, Mr. Sanger 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 13:43 ET (17:43 GMT)