The bank is actively meeting with shareholders since its scandal but also blocking some annual meeting resolutions
The Wall Street Journal
Emily Glazer And Joann S. Lublin
Jan. 29, 2017

In the wake of its sales-practices scandalWells Fargo & Co. shareholders are proposing resolutions for this spring’s annual meeting to demand more information about risk management, directors’ suitability for the board and employees’ bonus payments.

The bank is responding by having directors and executives meet with shareholders. But in some instances, it is pushing back.

Wells Fargo has submitted what is for it a record number of requests to the Securities and Exchange Commission to keep shareholder proposals off its proxy statement. The six so-called no-action request letters filed with the SEC are the most by the bank since the agency began posting such requests in 2007.

The bank drew investors’ ire when it emerged in September that Wells Fargo had opened as many as 2.1 million accounts using fictitious or unauthorized customer information. It paid a $185 million settlement and now faces a spate of other investigations.

Wells Fargo spokesman Ancel Martinez said the bank regularly engages with its investors to “understand and discuss points of view on governance and related matters.” He added that “like many other companies” Wells Fargo routinely files no-action letters, which vary each year based on the proposals it receives.

In December letters to the SEC, Wells Fargo attempted to exclude several proposals it says duplicate an accepted proposal submitted in October by the Sisters of St. Francis of Philadelphia and other co-filers including Walden Asset Management. That measure seeks information about “the root causes of the fraudulent activity and steps taken to improve risk management and control processes” and “evidence that incentive systems are aligned with customers’ best interests,” among other requests.

But other shareholders say that is a tactic by Wells Fargo to keep out proposals that dig deeper into the issues. A letter from the New York State Common Retirement Fund opposing one Wells Fargo request for a no-action letter said its proposal and the previously accepted one aren’t the same, according to a letter reviewed by The Wall Street Journal.

Though both proposals mention incentive compensation, the proposal from New York’s public retirement system wants Wells Fargo to identify employees whose incentive-based compensation may have exposed the bank to material financial loss, according to letters reviewed by The Journal. Another proposal by Harrington Investments asks for a report from the bank on its incentives or activities that posed greatest risk.

Wells Fargo also wrote to the SEC that one proposal asking about how ethics are factored into pay had already been implemented. The bank cited its 2016 proxy and compensation changes put in place in 2011, although those were both before the bank’s sales-tactics scandal exploded into public view in September 2016.

While Wells Fargo is fighting some proposals, it is trying to hear out investors. Chief Executive Timothy Sloan in mid-October said the investor relations team is “doubling down” with large investors to be “more proactive than we’d normally be” in the next few weeks and months, according to an internal call reviewed by The Journal.

Sister Nora Nash, who filed the proposal on behalf of the Sisters of St. Francis, said she and about 20 Wells Fargo investors are scheduled to meet Feb. 6 with Mr. Sloan and Vice Chairwoman Elizabeth Duke.

Many of those shareholders support the accepted Sisters of St. Francis resolution but also want a broad discussion of related issues, such as what board members knew and why they didn’t act sooner about the scandal, Timothy Smith, a Walden senior vice president, added.

Some investors also remain dissatisfied with Wells Fargo’s board because several members serve on many corporate boards. Among them is the California State Teachers’ Retirement System. It said it raised concerns about “overboarded” Wells Fargo directors during a Nov. 3 conference call with Stephen W. Sanger, the bank’s new chairman, and other institutional shareholders.

Mr. Sanger told the shareholders that a law firm retained by the board to investigate the sales scandal also would assess corporate-governance practices, according to Anne Sheehan, CalSTRS’s director of corporate governance.

Discussions between large shareholders and Mr. Sanger, who regularly meets with investors each fall, focused more this year on sales-practice issues, a board spokesman said. Mr. Sanger also offered to reconnect with shareholders before or during proxy season when he could share more information about actions the board has taken and possibly discuss at least preliminary findings from its investigation, the spokesman added.

Some concerns have been put to rest, though. In mid-September, just days after Wells Fargo announced the sales practices regulatory settlement, several investors asked the bank to split the roles of CEO and chairman starting with its next leader. Then-CEO John Stumpf soon resigned and Mr. Sanger, then lead independent board director, became chairman. Those shareholders withdrew their 2017 resolution.

While that is no longer an issue, Mr. Sanger has agreed to meet with Connecticut state officials, among the co-filers of the role-split proposal. They intend to ask him about the board’s efforts to recruit new members and attempts to claw back certain executives’ pay, said David Barrett, a spokesman for the Connecticut state treasurer.

Write to Emily Glazer at and Joann S. Lublin at