Wells Meeting Turns Into Screaming Match, Shareholder Kicked Out After “Physical Approach” Toward Board Member
What may be the most controversial annual shareholder meeting in Wells Fargo history, in which the board is seeking re-election after last year’s misselling scandal, devolved into a screaming match on Tuesday morning and was briefly halted following interruptions by angry shareholders as the bank’s chairman and chief executive tried to calm nerves ahead of a vote that could oust the majority of its board.
According to Reuters, at least one shareholder was ejected and the meeting went into recess after he made what Chairman Stephen Sanger called a “physical approach” toward a board member. Others were escorted out and the meeting was interrupted several times as investors demanded answers related to the bank having created as many as 2.1 million unauthorized accounts in customers’ names without their permission.
“You’re saying we’re out of order. Wells Fargo has been out of order for years!” the first angry shareholder said, before being ejected. Board Chairman Sanger and Chief Executive Tim Sloan repeatedly asked him to sit down because he was out of order, and then called a recess, only to have other shareholders stand and shout.
The meeting is unusual in that a dozen of Wells Fargo’s 15 directors on the ballot, who have come under fire after it was discovered that employees in its retail banking business had been creating accounts under customer’s names without their knowledge for years, face a rare negative recommendations from Institutional Shareholder Services (ISS). The influential proxy adviser argued that the group, including Chairman Stephen Sanger, failed in their oversight duties, although Wells Fargo’s top investor Berkshire Hathaway has already voted in favor of the bank’s board. According to the WSJ the board is expected to remain having clinched a majority of the votes.
Wells Fargo’s guidelines require that directors offer to resign if they fail to receive a majority of votes cast. But in practice, directors who win with less than 80 percent support should consider exiting the board, said Charles Elson, a University of Delaware expert on corporate governance, Reuters notes. “If they’re below 80 (percent) I’d say they have a lot of soul-searching to do,” he said.
The bank’s board and management have said steps taken to fix problems and punish employees responsible for abuses show there is now strong oversight, and that directors nominated deserve to be elected. But the public firestorm that hammered its shares and led to the resignation of then-Chairman and Chief Executive John Stumpf last year was not forgotten. They repeated those messages on Tuesday.
“It’s been a busy seven months but we are focused on making things right,” Sloan said.
At most S&P 500 companies, director support averages around 95 percent of votes cast, according to pay consulting firm Semler Brossy. Typically a recommendation from ISS that investors vote “against” a director will reduce the support they receive by an average of 17 to 18 percentage points.
Should Wells Fargo directors win narrow majorities – between 50 to 80 percent of votes cast – the board would have to decide whether to accept any individual director’s resignation. University of Pennsylvania law professor Jill Fisch said a likely outcome, in the event of a close vote, would be for the board to bring in fresh faces over a period of months or longer. “From a business perspective that may be the best response you could make,” she said. “You don’t want the whole leadership to be in flux.”