John G. Stumpf, chairman and CEO of Wells Fargo & Co., had some surprising, hidden and unwitting enablers in the fake accounts scandal — participants in defined contribution plans.
How? Every year for more than a decade, large institutional investors have voted at the Wells Fargo annual meeting on a critical issue: whether to install an independent chair rather than allow the CEO to keep that job himself, effectively serving as his own boss.
The right chair could have added muscle to board oversight. A separate chair is an approach used by 46.5% of 256 medium to large U.S. banks, according to MSCI Inc. The structure provides an extra measure of assurance against the risk of misfires by a chief executive.
Every year, a majority of Wells Fargo's largest institutional investors has voted to keep both jobs in the hands of a single individual.
The current two largest institutional investors after Berkshire Hathaway Inc., the largest holder with 9.9% of the stock, are BlackRock Inc., with 5.6% of shares and Vanguard, 5.4%. BlackRock and Vanguard voted at Wells Fargo annual meeting in April against splitting the top two jobs, according to mutual fund proxy-voting records. Mr. Stumpf won re-election to the board by a 94.9% vote in favor.
BlackRock, Vanguard and other managers invest more than $3 trillion on behalf of defined contribution participants, according Pensions & Investments' report on the 1,000 largest retirement funds. Plan participants, in turn, rely on the funds to invest, engage and vote on their behalf to add value and protect against loss.