Activist investors tell Wells Fargo to split roles of chairman and CEO
16 September 2016
Activist investors started filing shareholder resolutions with Wells Fargo yesterday calling on the bank to split the roles of chairman and CEO, both held by John Stumpf, in light of the recent fake accounts scandal.(See: Fargo fined $185 mn for opening millions of unauthorised accounts) Activist investor Bart Naylor, a financial policy analyst for consumer advocacy group Public Citizen, said in a shareholder resolution, he had called on the company to study breaking up its business in the wake of the scandal.
The fake account scandal that hit Wells Fargo had wiped $19 billion off its market value. After the scandal came to light last week, in which Wells Fargo employees created nearly 2 million accounts for customers without their knowledge in order to meet internal sales targets, the bank has let go of 5,300 employees.
In the aftermath of the scandal, the bank stock was down 7.5 per cent as against a 2.4 per cent decline for the Dow Jones US Banks Index.
Reuters reported citing investors, analysts and legal experts that, Wells Fargo's silence did not mean it had broken the law. However, there was broad agreement that the bank needed to be more forthcoming and explaining why this happened.
Meanwhile, pressure is mounting on chief executive John Stump, to explain this oversight.
A Congressional grilling of Stumpf has also started.
A group of Democratic US senators, under Elizabeth Warren, asked the chairman and chief executive officer in a letter dated 15 September to reveal whether the bank would hold top managers accountable following allegations that employees opened millions of accounts without customers' knowledge.
The lawmakers named Carrie Tolstedt, who led the unit where the alleged misconduct occurred, pointing out that there seemed to be ample justification for recouping at least some of her compensation.
''We write to ask whether the board of directors will invoke Wells Fargo's clawback authority to recover any of the compensation the company has provided to its senior executives, including Carrie Tolstedt," they wrote. ''There appear to be multiple grounds on which to trigger the clawback provisions to recoup some or all of Ms. Toldstedt's incentive rewards."