A group of nuns and religiously-affiliated investors said Wells Fargo & Co. has agreed to publish a review that shows the root causes of the systemic lapses in governance and risk management that have led to ongoing controversies, litigation and fines. As a result of the company's commitment, the Interfaith Center on Corporate Responsibility will withdraw a resolution filed for the 2018 proxy calling for the review.
Sister Nora Nash of the Sisters of St. Francis of Philadelphia led the engagement with Wells Fargo, along with 22 other co-filers who are members of the ICCR, a shareholder coalition that has been engaging the top seven U.S. banks on controversies around risk, ethics and culture for several decades. ICCR members were joined in the filing by the Offices of the Treasurer of the States of Rhode Island and Connecticut.
The group had sought to put its resolution to a vote at the lender's annual meeting in April.
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"ICCR first requested this review in 2014 when Wells Fargo came in last in a benchmarking survey on risk management, responsible lending and other metrics," Nash said in a statement. "With each new scandal and penalty as a result of aggressive cross-selling, car loan insurance issues, and mortgage fraud, we tried to impress upon management the need for a comprehensive review that will lead to systemic change. We are encouraged that they are finally agreeing to take this first step towards what we hope will be authentic reform."
San Francisco-based Wells Fargo (NYSE: WFC), Philadelphia's largest bank by deposits, said in a brief statement that it had agreed to publish the review and looks forward to working with the ICCR.
The ICCR said the company has agreed that its published review will include the following six elements:
- Analysis of the impacts on the bank, its reputation, customers, and investors of the continuing scandals;
- Identification of the systemic cultural and ethical root causes of recent scandals, including at the board level;
- A framework to address the issues and embed systems throughout the company, including changes already implemented, establishment of grievance mechanisms, and plans to strengthen corporate culture and instill a commitment to high ethical standards at all employee levels;
- Key performance indicators to evaluate the effectiveness of changes instituted over time;
- A commitment to ongoing and regular disclosure of progress;
- Description of how the identified issues will be factored into employee and executive incentive and compensation decisions.
The ICCR originally filed the shareholder resolution in October 2016, one month after Wells Fargo admitted that its employees opened as many as 3.5 million checking, savings and credit card accounts without customer authorization in order to meet sales goals. The scandal led to a $185 million settlement with regulators and the departure of CEO John Stumpf. It has also set in motion more regulatory settlements, replacing several members of the bank's board and states and municipalities severing or suspending business ties.
Locally, Philadelphia City Council voted unanimously last May to approve legislation to remove Wells Fargo as the bank handling the city's payroll account. Citizens Bank secured the winning bid to handle those services at the start of the city's fiscal year in July 2017.
The city also filed a lawsuit accusing the bank of engaging in discriminatory mortgage lending practices targeting minority borrowers. Wells Fargo's motion to dismiss was recently rejected by a federal judge, but the bank is vigorously disputing the claims in the suit.