Wells Fargo changes
board, names Duke chair in response to scandal
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[August 16, 2017]
By Dan Freed
(Reuters) - Wells Fargo & Co Vice Chair
Betsy Duke will replace retiring Chair Stephen Sanger next year, one of
several changes announced on Tuesday in a board overhaul following a
sales practices scandal.
Sanger will retire at year-end, earlier than his previous plans to
depart in April upon reaching a mandatory retirement age of 72.
The two longest-serving directors, Cynthia Milligan and Susan Swenson,
will retire at the same time. Juan Pujadas, a former
PricewaterhouseCoopers principal, will join as an independent director
on Sept. 1.
The board also detailed changes to four of its committees and said it
would make more changes over time, trying to balance competing needs for
directors with Wells Fargo experience and those with new perspectives on
Wells Fargo had long maintained a reputation as a well-run, highly
profitable institution that managed to sell more products to customers
than any of its big-bank rivals. That image was shattered nearly a year
ago when it revealed that thousands of its employees created as many as
2.1 million phony accounts in customers' names without their permission.
Since then, the bank has ousted executives, clawed back pay, changed
incentive structures for low-level employees and implemented a new
risk-management structure. Nonetheless, it still facing numerous
lawsuits and regulatory probes and in recent weeks detailed new problems
in its mortgage, auto loan and retail banking operations.
In a joint interview, Duke and Sanger said the board expedited changes
to its structure and composition after discussions with investors, who
offered most directors relatively little support in a vote earlier this
"This company is going to end up being a better bank than it would have
been without this incredible wakeup call," Duke said. "It had been so
successful for so long it was difficult to recognize the need for
Changes Wells Fargo has made "enable us to have our arms around sales
practices issues in a way that we obviously didn't before," Sanger said.
Issues found within business units are being elevated to the board and
regulators, and are then being addressed, much more quickly than before,
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A Wells Fargo bank sign is pictured in downtown Los Angeles,
California, U.S. August 10, 2017. REUTERS/Mike Blake
Sanger, who has been on Wells' board for 14 years, became chair in October after
then-Chair and Chief Executive Officer John Stumpf abruptly departed and the
board decided split the two roles.
Investors told directors they had not made changes to the board's structure and
composition quickly enough, prompting the hiring of Mary Jo White, former Chair
of the U.S. Securities and Exchange Commission, to conduct an internal review.
White, who now works at the law firm Debevoise & Plimpton, interviewed directors
about who the next chair should be and consulted with regulators before handing
down an assessment, Sanger said.
Duke said she saw herself as someone who can ensure Wells Fargo changes from a
sales-driven institution to one focused on service.
"I am a community banker to my very toes," she said, pointing to her experience
at small banks in Virginia and at the Federal Reserve.
The two Wells Fargo board members who received the lowest vote totals, Enrique
Hernandez and Federico Peña, will remain on the board, but director Karen Peetz
will replace Hernandez as chair of the risk committee.
Sanger said investors told him they did not have a particular problem with any
individual, but voted against directors who held leadership positions on the
board or its committees. He characterized Hernandez as one of the "very
strongest directors" whose departure would be bad for shareholders.
(Additional reporting by Arunima Banerjee in Bengaluru; Writing by Lauren Tara
LaCapra; Editing by David Gregorio and Andrew Hay)
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