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Governance

Shareholders reject DiNapoli’s incentive pay practice proposal at Wells Fargo, re-elect all directors

A shareholder proposal calling for Wells Fargo & Co. to report on whether incentive pay practices have exposed the company to financial losses was defeated, despite support from a number of large pension funds.

The proposal, filed by Thomas P. DiNapoli, New York state comptroller and sole trustee of the $209.1 billion New York State Common Retirement Fund, Albany, was defeated at the bank's annual meeting Tuesday, Wells Fargo said in a news release. Matthew Sweeney, a spokesman for Mr. DiNapoli, said the proposal was supported by 21.7% of investors, according to preliminary voting results.

In an April 19 news release, Mr. DiNapoli argued that "incentive pay practices have been identified as contributing to the multiple crises at Wells Fargo."

The proposal was also supported by the $209.7 billion Florida State Board of Administration, Tallahassee, and $151 billion Texas Teacher Retirement System, Austin, according to their proxy-voting disclosures. The $222.5 billion California State Teachers' Retirement System, West Sacramento, voted against the proposal.

In a statement on Tuesday's voting results, Mr. DiNapoli said investors "need daylight on what Wells Fargo is doing to oversee risky incentive pay practices that have contributed to multiple scandals at the bank."

"Investors remain concerned about pay practices that can incentivize misconduct and outright fraud," he added. "As long-term investors, we'll be back next year and expect to gain even stronger support."

Mr. DiNapoli also voted against six of the bank's 12 directors — CEO Timothy Sloan, board Chairwoman Elizabeth Duke and board members John Baker II, Donald James, James Quigley and Suzanne Vautrinot — along with Wells Fargo's auditor, KPMG and the bank's proposed executive compensation plan.

"The board's apparent failure to demonstrate effective oversight of these risky practices demands an overhaul of its directors," Mr. DiNapoli said in the April 19 news release.

The Florida State Board of Administration also voted against the compensation package, the auditor and the re-election of Mr. Baker.

CalSTRS voted against the re-election of Messrs. Baker and James. Texas Teachers supported all of the directors.

Despite some pension fund opposition, all 12 directors were re-elected Tuesday with every candidate receiving at least 89.9% support, according to the preliminary voting results released at the meeting.

The executive compensation package was supported by 92.4% of shareholders, down from last year's support level of 96%.

Some critics of the bank expressed outrage last month, after the firm awarded Mr. Sloan a $17.4 million package for 2017, a 36% raise. Part of that reflected his first full year running the company after a promotion. Most of his package was restricted stock after he asked the board not to award him a bonus.

Bloomberg contributed to this story.