Wells Fargo & Co. will separate the chairman and CEO roles, a move adopted after the Connecticut Retirement Plans & Trust Funds and four other institutional investors jointly filed a shareholder proposal calling for the company to adopt such a board leadership structure.
Denise L. Nappier, Connecticut state treasurer, filed the proposal Oct. 26 on behalf of the $30 billion Hartford-based funds, for which she is sole trustee. Joining the filing were the $60 billion UAW Retiree Medical Benefits Trust, Detroit; Illinois Treasurer Michael Frerichs, a trustee of the $15.9 billion Illinois State Board of Investment, Chicago; the $27.1 million Needmor Fund, a Perrysburg, Ohio-based family foundation; and Hermes Investment Management EOS, which assists asset owners in corporate governance engagement and proxy voting.
“It is encouraging to learn that Wells Fargo’s board of directors acted swiftly on this important governance issue,” Ms. Nappier said in a statement. “The concerns about the company’s board leadership structure are not new. It is their interest in addressing them that marks a new day.”
The Wells Fargo board, whose decision the company announced Thursday, revised the bylaws Tuesday. The bylaw revision now requires the chairman and vice chairman of the board to be independent directors, Wells Fargo announced in a news release.
Following settlements in September totaling $190 million over allegations of retail banking sales practices abuses, John G. Stumpf stepped down in October as chairman and CEO, prompting the board to name Stephen W. Sanger chairman and Timothy J. Sloan CEO. Mr. Sloan, who had been president and chief operating officer, was immediately appointed as a director on the board upon becoming CEO. Mr. Sanger had been lead director and independent member of the board.
“We believe formalizing this structure is the right decision at this time for the company and its investors, customers and team members,” Mr. Sanger said about the change in bylaws.
At Wells Fargo’s annual meeting on April 26, shareholders defeated by an 82.8% vote a shareholder proposal calling for an independent chair, according to a Wells Fargo 8-K filing on April 29.
BlackRock and Vanguard Group — which respectively owned 5.6% and 5.4% of Wells Fargo shares and were the company’s biggest shareholders after the 9.9% owned by Berkshire Hathaway, both voted against the proposal at the April meeting, according to the investment managers’ proxy-voting disclosures.
The $128.2 billion Texas Teacher Retirement System, Austin, also voted against the proposal, according to its proxy-voting disclosures.
Voting in favor of the proposal were the $299.9 billion California Public Employees’ Retirement System, Sacramento; C$300.5 billion ($222.1 billion) Canada Pension Plan Investment Board, Toronto; $192.2 billion California State Teachers’ Retirement System, West Sacramento; $179.1 billion Florida State Board of Administration, Tallahassee; C$154.4 billion Ontario Teachers’ Pension Plan, Toronto; C$121.9 billion British Columbia Investment Management Corp., Victoria; $102 billion State of Wisconsin Investment Board, Madison; $44 billion Colorado Public Employees Retirement Association, Denver; and the Illinois State Board of Investment, according to their proxy-voting disclosures.
In all, 135, or 27.1%, of the companies in the Standard & Poor’s 500 index have independent chairs, according to ISS Analytics, the data and analytics arm of Institutional Shareholder Services.
In 2016, through Dec. 2, 47 independent chair proposals appeared on proxy-voting ballots, garnering an average 29.17% of votes cast in support, according to ISS Analytics. No proposal won a majority vote in favor.
In contrast, in all of 2015, the 62 independent chair proposals that were voted received a 28.7% average support, although two drew majority support, at Omnicom Group and Vornado Realty Trust.