PONTE VEDRA BEACH, Fla. — An expected investor revolt at Wells Fargo’s annual meeting fell short of its goal Tuesday as shareholders voted to re-elect 12 board members and elect three more nominated by the company.

Still, several prominent members of the board, including Chairman Stephen Sanger, retained their seats by the narrowest of margins, leading to speculation that some directors may choose to voluntarily resign rather than face the continued wrath of investors still angered by a phony-accounts scandal that has severely damaged Wells Fargo’s reputation.

“Wells Fargo stockholders have sent the entire board a clear message of dissatisfaction,” Sanger said in announcing the preliminary results midday Tuesday.

Stephen Sanger, chairman of Wells Fargo.
“Wells Fargo stockholders have sent the entire board a clear message of dissatisfaction,” Wells Chairman Stephen Sanger said in announcing the preliminary results midday Tuesday. Bloomberg News

Those seen as most vulnerable were directors who held key oversight posts prior to the scandal’s emergence into public view in September 2016. Enrique Hernandez, who has served on the board since 2003 and chairs its risk committee, received only 53% of the vote and. Sanger, also a director since 2003 who was named chairman in October after CEO and Chairman John Stumpf resigned, received just 56%.

Cynthia Milligan, another member of the risk committee who has served on the board since 1992, received only 57%. Federico Pena, chairman of the corporate responsibility committee, received 54% of the vote.

During a briefing with reporters, Sanger emphasized that, while investors may be unhappy, they viewed significant change in the boardroom as being potentially too disruptive.

“I don’t view it as a sign that things are fine,” Sanger said. “This is not what I get from the discussions” with shareholders.

Sanger also said that the company is committed to continuing to refresh the board. In the next four years, six directors are expected to leave the board when they reach the mandatory retirement age, he said.

The board has a mandatory retirement age for directors of 72 years old. Sanger is 71.

The vote comes weeks after the proxy advisory firms Institutional Shareholder Services and Glass Lewis recommended that shareholders vote out at last half of the directors up for re-election; Wells has 15 directors overall.

The vote marks the latest turn in a scandal that has placed Wells in a fight to salvage its reputation.

In September the San Francisco company paid $190 million to settle charges that 5,300 branch employees created roughly 2 million fake accounts in an effort to collect bonus pay. Stumpf resigned in October following two contentious hearings on Capitol Hill, and Carrie Tolstedt, the former head of retail banking, was forced to resign. Together they have since been forced to relinquish more than $130 million in stock-related compensation.

A board report into the root causes of the scandal, released earlier this month, cast a significant amount of blame on Tolstedt, in particular, saying that she withheld from the board crucial information about sales-related terminations.

It remains to be seen whether board members who received slim majorities will face pressure to resign. Such narrow margins of victory are often viewed as “no” votes in the eyes of the market, according to industry experts.

The closest and most recent example of a similar shareholder revolt in banking was five years ago at JPMorgan Chase, when two members of the company’s risk committee stepped down after receiving lackluster support from investors following the so-called London Whale scandal.

Kristin Broughton

Kristin Broughton

Kristin Broughton is a reporter for American Banker, where she writes about the business of national and regional banking.