Banks

Scandal-plagued Wells Fargo faces shareholders and protestors at meeting in Des Moines

Key Points
  • Last week the bank agreed to pay a $1 billion fine to the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.
  • The regulatory and legal issues have cleared out previous top management, and Wells has replaced six members of its board of directors, including three who were named to it in January.
  • Shareholders will vote on those board members at the meeting, as well as last year's $17.4 million pay package for CEO Tim Sloan.
People walk by a Wells Fargo bank branch on October 13, 2017 in New York City.
Spencer Platt | Getty Images

Wells Fargo executives and board members faced shareholders and protestors Tuesday at the company's annual meeting in Des Moines, Iowa.

It is the first time the San Francisco bank has held its meeting in the Midwestern city, where it is the largest employer. Last year's three-hour marathon meeting in Florida was interrupted by protestors more than once, but Tuesday's meeting went relatively smoothly.

Wells Fargo's independent board chair, Elizabeth Duke, told attendees at the start of the meeting in Iowa on Tuesday that shareholders had "sent the board a strong message of dissatisfaction" at last year's annual meeting. As a result, she said, the board began a "rigorous" self-examination.

Protestors with signs were said to have been asked to leave the hotel where the meeting is taking place, according to accounts on Twitter.

Tim Sloan, the bank's CEO, said rebuilding trust is their "top priority."

"Work is well underway to address the risk-management issues we have at our company."

Sister Nora Nash, representing faith-based groups in the Interfaith Center on Corporate Responsibility, and a well-known shareholder activist in the area of corporate governance, withdrew a proposal asking the bank to produce a report on risk management after management agreed to work with the group.

"This company has harmed and wounded millions of its customers," she said at the meeting. "Our company failed them." She added she appreciates the company's willingness to collaborate on a business standards review.

Nash also raised questions about Wells Fargo's position as the biggest lender to the gun industry. "Our company must not be financially associated" with makers of assault style weapons sold to civilians, she said.

Sloan also faced sharp questioning from another shareholder about the bank's relationship with the gun industry. The nation's second largest teacher's union, American Federation of Teachers, dropped a promotional program it had with Wells Fargo's mortgage business last week after failing to connect with Sloan on the issue.

"We have reached out to the AFT to set up a meeting and that's on-going," Sloan said in response to the questioner, while continuing to defend the bank's decision not to stop doing business with gun makers. "We think gun safety and gun violence are best addressed with legislation."

California's state treasurer, John Chiang, who is also running for governor there, traveled to the meeting to call for a shakeup in the executive ranks. "Integrity and trust matter," he said Tuesday. "Wells Fargo is a shadow of its former self." He said of Sloan, "It's time for him to go."

But Duke defended Sloan, saying, "He has worked every day to make changes within the company."

The setting is 1,800 miles from company headquarters, where top executives have been scrambling for nearly two years to contain the damage from a sales practices scandal that engulfed its retail bank and spread to auto lending, mortgages and even wealth management.

Just last week, Wells agreed to pay a $1 billion fine to the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency to settle accusations it charged thousands of auto loan customers for insurance they didn't need and improperly charged mortgage customers to lock in interest rates. Wells has to pay the customers back as part of the agreement.

And in March, Wells disclosed in a regulatory filing that it is responding to regulator questions about whether there have been inappropriate customer referrals or recommendations in its wealth management business.

The Federal Reserve told Wells earlier this year its growth would be limited until it can get its risk management, governance and board oversight in check.

The regulatory and legal issues have cleared out previous top management, and Wells has replaced six members of its board of directors, including three who were named to it in January.

Shareholders voted on those board members at the meeting, as well as last year's $17.4 million pay package for Sloan, who was named to that role when the sales practices scandal erupted in the fall of 2016.

"It's been a journey the last year an a half," Sloan acknowledged on Tuesday. "We're going in a new direction."