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Connecticut treasurer calls on Wells Fargo to ensure independent board chair

Connecticut Treasurer Denise L. Nappier, principal fiduciary of the $30 billion Connecticut Retirement Plans & Trust Funds, announced on Tuesday a shareholder resolution, in partnership with three institutional investors, at Wells Fargo calling for a change in the company’s corporate bylaws to ensure an independent non-executive board chair.

Ms. Nappier co-filed the resolution with the Needmor Fund, Illinois Treasurer Michael W. Frerichs and Hermes EOS.

“Shareholders rely on a board of directors to properly oversee management, and rightly expect the board to preserve and grow the value of the company in which they invest,” said Ms. Nappier in a statement. “Unfortunately, that did not happen with Wells Fargo, as evidenced by … loss in value for investors, including the Connecticut Retirement Plans and Trust Funds.”

The resolution’s supporting statement said: “Shareholders are best served by an independent board chair who can provide a balance of power between the CEO and the board. We believe a combined CEO/chair creates a potential conflict of interest.”

As of Nov. 25, the pension fund held $125.1 million in Wells Fargo stock and bonds.

In September, the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the city and county of Los Angeles announced that Well Fargo would pay a penalty of $185 million plus $5 million in restitution to customers for opening as many as two million unauthorized deposit and credit card accounts.

Stephen Sanger was named chairman in October, replacing former CEO John Stumpf. Mr. Sanger was previously lead director of the board.

Besides filing the shareholder resolution, Ms. Nappier has written to Mr. Sanger seeking a meeting to discuss additional steps the board will take to more effectively oversee risk management and otherwise strengthen shareholder accountability.

Connecticut’s relationship with Wells Fargo includes investments, bond underwriting, brokerage and cash management services. On Sept. 23, Ms. Nappier modified the assignment of lead banker for a sale of general obligation bonds by adding Morgan Stanley (MS) as co-bookrunner alongside Wells Fargo. In addition, the treasury’s short-term investment fund suspended purchasing securities through Wells Fargo’s brokerage subsidiary, through which it purchased $4.5 billion of securities in fiscal year 2016.