Last week, Friends Fiduciary joined a coalition of faith-based investors in expressing concern about Wells Fargo’s business practices. We asked for a full report on the root causes of the recent fraudulent account activities and the steps taken to improve risk management and control processes. As investors, we believe a full report is essential for stakeholders to make informed decisions.
Wells Fargo & Company has been fined $185 million for opening over two million fraudulent user accounts. The bank’s previously vaunted cross-selling strategy proved perilous, leading to high levels of manager pressure on employees to sell accounts that customers did not want or need, ultimately ending in fraud as employees tried to meet or exceed sales goals.
Friends Fiduciary, with The Interfaith Center on Corporate Responsibility (ICCR), has been in dialogue with Wells Fargo since 2011, engaging with the company on issues such as a predatory lending consumer product (which was eventually dropped) and their risk management practices. In the risk management discussions last year, Wells Fargo pointed to their Vision and Values statement as proof that they had a strong company culture and risk management system. As investors we did not feel this was sufficient, and recent revelations support that assessment.
The resolution Friends Fiduciary co-filed asks that the bank conduct an analysis of the scandal’s “impacts on the bank, its reputation, customers and investors,” and that the report detail steps taken to ensure \ “high ethical standards” become part of the company culture within all levels of the bank. The report should also include “evidence that incentive systems are aligned with customers’ best interests” and outline changes made to the Board’s process for evaluating risk.
Friends Fiduciary believes that this report is essential for the bank to restore its reputation after such an egregious breach of trust. Our resolution is one of many that are likely to be filed this proxy season, on such issues as executive pay, separation of Chair and CEO, a review of the bank’s size and manageability, and lobbying disclosure. Due to SEC regulations, Friends Fiduciary is limited to filing one resolution per company, but we will support other resolutions with our proxy vote.
Read the resolution here. For news coverage of the resolution, click here.