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Investing.com -- Wells Fargo & Company (NYSE:WFC) is coming under fire from shareholder activists after announcing plans to make CEO Charlie Scharf both Chairman and Chief Executive, a move that reverses one of the key governance reforms it adopted in the wake of its 2016 fake accounts scandal.
The Accountability Board (TAB), a governance-focused shareholder group, submitted a proposal to the bank’s Corporate Secretary on Monday calling for the reinstatement of Wells Fargo’s independent Chair requirement. The activist group described the decision to recombine the roles as “short-sighted, to say the least.”
“Wells Fargo touted that over the last several years, it had executed ‘a multifaceted transformation under extremely difficult circumstances,’” the group’s filing states. “But those difficult circumstances arose from problems that occurred under a combined CEO/Chair, while the transformation was achieved under an independent Chair.”
In late July, Wells Fargo announced that Scharf would assume the Chairman role and that the Board would appoint a Lead Independent Director “to maintain independent oversight.” The company also awarded Scharf a one-time special equity grant worth roughly $30 million in restricted share rights and 1.05 million stock options, vesting between four and six years.
The bank’s Board said the decision reflects its “desire to retain Mr. Scharf” and “recognize his leadership in transforming Wells Fargo,” citing improvements to risk controls, regulatory compliance, and financial performance since his 2019 appointment.
TAB President Matthew Prescott, however, compared the independent Chair role to a “seatbelt” that the company shouldn’t remove just because it’s no longer in crisis.
“It’s easy to think you might not need one, but you’re sure glad it’s there when the storm comes rolling in,” Prescott said. “Wells Fargo was right to adopt an independent Chair policy after its fake accounts scandal and shouldn’t now reverse it just because that particular storm has passed.”
Wells Fargo’s independent Chair policy was introduced in 2017 as part of a broader rehabilitation plan designed to restore investor and public trust. For several years, the bank emphasized the reform as a cornerstone of its governance overhaul, with proxy statements through 2022 stating that separating the roles “enhances the Board’s risk oversight.”
TAB argues that the policy “should be restored” and notes that “shareholders certainly have cause to celebrate [the] recovery,” but that removing the very guardrail that guided it there risks backsliding into old governance patterns.
"Wells Fargo repeatedly assured shareholders that its independent Board Chair policy was a critical part of its plan to recover from its fake accounts scandal, and it shouldn’t be so quick to take down that important guardrail. The company’s problems began under a combined CEO/Chair and our sense is that shareholders aren’t keen on returning to that structure," TAB said in a statement to Investing.com.
The group, which holds stakes in more than 200 public companies, has owned at least $25,000 worth of Wells Fargo stock for more than a year, satisfying SEC eligibility rules for shareholder proposals. The group declined to disclose its total holdings to Investing.com but said it does not plan to nominate any directors and will instead focus on restoring the independent Chair requirement through shareholder support.
TAB additionally told Investing.com it has not been in contact with Wells Fargo management since filing the proposal on Monday morning, though it was in touch with other shareholders prior to submission, and that “others we spoke to have been receptive to the idea of keeping the Board Chair and CEO roles separate.”
Wells Fargo declined Investing.com’s request to comment on the proposal, which is expected to appear in the company’s proxy for its next annual shareholder meeting. Shares of the company were up 0.3% Tuesday as of 1:10 p.m. ET.