Religious investors lose faith in Wells Fargo after scandal

EghtesadOnline: A group of nuns and other religiously-affiliated investors have lost faith in embattled Wells Fargo & Co and filed a shareholder resolution calling on the bank to report on the root causes of a fake accounts scandal that led to a $190 million settlement struck with regulators last month.

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10 October 2016

The faith-based investors say they also want the report to cover improved controls after revelations bank employees opened as many as 2 million checking, savings and credit card accounts without the customers' permission in order to meet sales quotas.

According to Reuters, the resolution resembles one the Sisters of St Francis of Philadelphia and others filed for the bank's 2014 annual meeting and then withdrew, on the understanding the San Francisco-based bank would provide more specifics on areas like its risk controls.

But that did not happen, said Sister Nora Nash, a nun who is director of corporate social responsibility for the Catholic religious order, despite a series of meetings held in person and by phone with bank leaders including Wells Fargo lead independent director Stephen Sanger and a top ethics officer, Christine Meuers.

"They haven't done what we would have," said Nash in a telephone interview. "Now it is biting them in the face."

Wells Fargo spokesman Oscar Suris declined to comment.

The resolution is one among a series filed recently at Wells Fargo, including several from other investor groups affiliated with the Interfaith Center on Corporate Responsibility in New York. Other resolutions call on Wells Fargo to study a breakup and to split the roles of chairman and chief executive officer.

All cite the Sept. 8 settlement Wells Fargo struck with bank regulators over the accusations. Other authorities have since begun probes, while CEO John Stumpf faces political pressure and calls to resign.

The shareholder resolutions, proposed for the bank's annual meeting to be held next spring, show how the tables have turned for Wells Fargo.

Coming out of the financial crisis, it initially appeared to take less criticism than other large lenders including JPMorgan Chase & Co and Bank of America.

Both agreed under pressure from religious investors to provide reviews of their business practices in reports that amounted to mea culpas.

"In some cases, our controls fell short, and in others, we simply weren't meeting the standards we had set for ourselves," JPMorgan said in a 2014 report.

Wells Fargo's board has taken some steps since the settlement to address concerns, such as starting their own investigation and having Stumpf forfeit $41 million worth of unvested stock awards and his 2016 bonus.

But the religious shareholders now say they need more changes. For instance another resolution filed by the Unitarian Universalist Association calls on Wells Fargo's board to study how to connect executive pay with ethical conduct.

Tim Brennan, the association's treasurer, said that while Wells Fargo already has a code of conduct, the scandal shows the code "had nothing to do with the way the business was conducted."