Wells Fargo makes sweeping changes to its board

(Courtesy of Jacksonville Business Journal)

The San Francisco-based bank said that board vice chairman Betsy Duke will succeed Stephen Sanger as independent chairman, effective Jan. 1, 2018. The board will see three long-time directors, including Sanger, exit at the end of this year. Also departing at year-end will be Cynthia Milligan, who joined in 1992, and Susan Swenson, who joined in 1998.

Wells, led by CEO Tim Sloan, also said it’s adding a new independent director to its board, former PricewaterhouseCoopers principal Juan Pujadas. The bank is also changing the composition of board committees, effective Sept. 1.

“The changes announced today reflect a thoughtful and deliberate process by the board that was informed by the company’s engagement with shareholders and other stakeholders, as well as the board’s annual self-evaluation that was conducted after the 2017 annual meeting and prior to its typical year-end timing,” Sanger said in a statement. The Wells Fargo board worked with former SEC Chairman Mary Jo White in making the self-evaluation.

Duke, a former member of the Federal Reserve’s Board of Governors, has been on the Wells Fargo (NYSE: WFC) board since January 2015 and has been vice chair of the bank’s board since October 2016.

“Betsy was the unanimous choice to lead the board as it continues its focus on strengthening oversight and rebuilding the trust of shareholders, customers, and other stakeholders,” Sanger said. “Her broad understanding of the financial system and markets combined with years of main street community banking experience make her the ideal chair to work with the rest of the board and Tim Sloan as Wells Fargo continues to move forward.”

Previously, Wells Fargo named two new independent directors, Karen Peetz and Ronald Sargent, to its board.

The bank is making several changes to its committees, seeking to enhance the board’s oversight of “conduct risk,” including sales practices risk, by expanding the risk committee’s responsibilities to include oversight of Wells Fargo’s new conduct management office, formerly called the office of ethics, oversight and integrity. The moves also include expanding the board’s human resources committee’s responsibilities to include oversight of human capital management, culture and the bank’s code of ethics and business conduct.

Wells previously announced that it will create a “stakeholder advisory council” to the board and company to get feedback from a diverse mix of stakeholders. Council meetings, led by Duke, will begin in the fourth quarter.

Wells Fargo is trying to recover from a fake accounts scandal in which up to 2 million credit and deposit accounts were opened without customers’ authorizations. Wells said this month that there may be a “significant increase” in the number of customers affected as it expanded the scope of its internal investigation.

Last month, the New York Times reported that the bank improperly placed insurance on auto loan borrowers, triggering repossessions and tarnishing credit records.

“We view the changes to the board as necessary to help the company move forward from its sales-practice issues,” Gerard Cassidy, a banking analyst with RBC Capital Markets, said in a note to clients.

But today’s changes may do little to quell calls for more changes in Wells Fargo’s boardroom, C-suite and corporate culture that allowed such misbehavior to persist for years.

Critics of Wells Fargo, including Sen. Elizabeth Warren, are calling for more than a “refreshment” of the bank’s board. Warren sent a letter to Federal Reserve Chairman Janet Yellen calling for the regulator to oust most of the bank’s board.

Wells Fargo is the third-largest bank in Central Florida, with $6.76 billion in local deposits.

 

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