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GOVERNANCE

All Wells Fargo directors re-elected despite strong pension fund opposition

Wells Fargo’s 15 board directors were narrowly re-elected at the bank’s annual meeting Tuesday, despite opposition from several large pension funds.

Investors granted directors support ranging from 53% to 99%, the company said. Independent Chairman Stephen W. Sanger received one of the lowest levels of support at 56% of votes cast. Last year, no board members drew less than 95% support.

Shareholder support was lowest for Mr. Sanger and some directors on two board committees: The risk panel, which is supposed to help ensure internal controls are effective, and the corporate responsibility panel, which guards the bank’s reputation.

Enrique Hernandez Jr., the chairman and CEO of Inter-Con Security Systems Inc., drew 53% backing. Federico Pena, who served as both U.S. energy secretary and transportation secretary during the Clinton administration, got 54%. Cynthia Milligan, former dean of the College of Business Administration at the University of Nebraska-Lincoln, got 57%.

Rhode Island Treasurer Seth Magaziner announced Monday he was voting against 12 of the board’s sitting independent directors in light of the “massive fraud perpetrated against (its) customers.” Mr. Magaziner oversees the Rhode Island State Investment Commission, Providence, which manages the assets of the $7.8 billion Rhode Island Employees' Retirement System. The office of New York City Comptroller Scott M. Stringer indicated last week that Mr. Stringer, the fiduciary for the five pension funds within the $170.6 billion New York City Retirement Systems, would be voting against the re-election of 10 directors, including Mr. Sanger.

“The extent of fraud at Wells Fargo was simply stunning,” Mr. Stringer said in a statement April 21. “When banks take shortcuts like this, everyone loses. Customers become victims. Public confidence dissipates. And long-term investors like the New York City pension funds are undercut. This scandal was the result of a serious oversight failure by Wells Fargo's board, and the directors responsible need to be held accountable. It's time for change at the top.”

The bank settled claims it set up two million deposit and credit card accounts for clients without their permission in a $185 million settlement package announced in September. According to their proxy-voting disclosures, the $316 billion California Public Employees' Retirement System, Sacramento; $202.1 billion California State Teachers' Retirement System, West Sacramento; and $133.2 billion Texas Teacher Retirement System, Austin, voted against the re-election of nine or more directors, including Mr. Sanger. The $186.2 billion Florida State Board of Administration, Tallahassee, voted against the re-election of six directors, excluding Mr. Sanger, according to its proxy-voting disclosure.

Proxy advisory firm Institutional Shareholder Services recommended in a report earlier this month that shareholders vote against 12 of Wells Fargo's directors, including Mr. Sanger.

Tuesday’s results came after tense exchanges, with security officers escorting one man out who shouted questions for several minutes, demanding to know what the board “knew and when you knew it.” Speakers chided the panel’s oversight after employees got caught opening legions of accounts without customer permission.

“Wells Fargo stockholders today, I think, have sent a clear message of dissatisfaction,” Mr. Sanger told the audience afterward. “The board has recognized that message.”

“It’s been a busy seven months, but we are focused on making things right, making real progress, and I’m fully confident we’re on the right path,” CEO Tim Sloan added.

Shares of the bank gained 2.3% to $54.86 at 2:35 p.m. EDT. The stock has climbed about 10% since regulators fined the company $185 million in September, setting off the scandal. That performance trails the 29% advance in the KBW Bank index of 24 major U.S. lenders.

Bloomberg contributed to this story.