Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

In the wake of its retail-banking scandal, does Wells Fargo & Co. need a stagecoach filled with new directors? 

That's the view of some investors who believe the bank's board may require an overhaul because it was slow to tackle and disclose the practices that led to more than 2 million accounts being opened without customer consent, according to a Reuters report on Tuesday. They're irked by the board's size, directors' outside commitments and fuzziness around their exact responsibilities, as well as the initial response to the situation, which led to a $185 million fine. Perhaps they view a shakeup as a way to protect against future crises and reputational damage, considering how badly brand sentiment has plummeted.

In the Doghouse
Shareholders are right to be concerned about Wells Fargo & Co., which has slipped in the eyes of everyday American consumers
Source: YouGov BrandIndex
Methodology: "Buzz" is also the net sentiment generated across all media (advertising, news, word of mouth). Data is from 4,500 adults surveyed each weekday from a representative US population sample.

Or maybe it's that a revitalized board could help Wells Fargo return to favor across Wall Street: the bank's shares have recently lagged behind rivals, in part due to expectations that higher compliance and legal costs could dent future earnings. But not all investor grievances are equal.  

For instance, concerns about the size of Wells Fargo's board may be overblown. Although its 15-member composition is above the S&P 500 Index's average of 11, it isn't wildly different to its biggest rivals, all of which trail the likes of CME Group Inc. and Stifel Financial Corp. with their 23 and 21 directors, respectively. 

Numbers Game
Shareholders critical of the size of Wells Fargo's board of directors should be aware that it's not, especially outsized compared to other large U.S. banks
Source: Bloomberg

Even if 15 remains Wells Fargo's lucky number, new faces may well emerge in the boardroom after next year's annual meeting rolls around -- and that wouldn't be a bad thing. The California State Teachers' Retirement System (Calstrs) has previously (and unsuccessfully) voted against Wells Fargo's directors who are CEOs of other companies and serve on two or more outside boards.  The pension fund outlines its position as such:

It is Calstrs’ view that a director’s responsibilities and duties are increasingly complex, demanding and time-consuming. Calstrs believes that directors must be able to devote the time and energy necessary to responsibly fulfill their commitment to the company and effectively represent shareholders’ interests. Generally, Calstrs believes that CEOs should not serve on more than one other public board and directors should not serve on more than four public boards.

Other investors could soon subscribe to that same school of thought. Adviser Institutional Shareholder Services Inc. is set to urge shareholders ahead of the 2017 proxy season to withhold or vote against the re-election of directors who are CEOs of public companies that are on the boards of more than two public companies besides their own, or sit on more than five public company boards.  Sure, its stance isn't as tough as Calstrs, so none of Wells Fargo's directors currently meet its criteria, but at least there's more attention being drawn to the issue of "overboarding." 

More than half the directors on boards of S&P 500 companies have at least one other directorship. Overboarders, defined by ISS as those with more than five public company board roles*, are a minority.
Source: ISS Analytics, the data and analytics arm of Institutional Shareholder Services
*As of February 2017

Wells Fargo hasn't left its board completely unchanged since the debacle. Just last month, it split the chairman and CEO role previously held by John Stumpf between Tim Sloan (CEO) and Stephen Sanger (non-executive chairman).  ISS and another proxy adviser, Glass Lewis & Co., both generally recommend that shareholders vote in favor if an independent chair is proposed, especially in the event that there are concerns about a company's governance structure, so that's a positive. 

But as my colleague Michael Regan has written, the board's work is far from done. Its independent members are still investigating the scandal even as Wells Fargo's new CEO Sloan says the bank now understands that any issues must be escalated and dealt with quickly. The bank has also taken steps to remedy the situation including reviewing sales practices across the entire company, eliminating sales targets that promoted the unethical practices, creating procedures for automated confirmation emails and instituting a "mystery-shopper" program involving up to 20,000 annual branch visits.

Replacing a handful of directors won't guarantee Wells Fargo will recover from its malfeasance any quicker. But surely at this point, it can't hurt.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. These included former Wells Fargo Chairman and CEO John Stumpf, BlackBerry Ltd. CEO John Chen and Inseego Corp. CEO Susan Swenson.

  2. Another proxy adviser, Glass Lewis & Co., has said that beginning in 2017, it will generally recommend voting against a director who serves as an executive officer of any public company while serving on a total of more than two public company boards and any other director who serves on a total of more than five public company boards.

  3. The role is still combined at Bank of America Corp., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley. There is a view that Sloan should have been named interim CEO while the bank sought out an external candidate, but his appointment was affirmed by Warren Buffett -- the billionaire investor and head of Wells Fargo's largest shareholder, Berkshire Hathaway Inc. -- so that should count for something.

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Gillian Tan in New York at

To contact the editor responsible for this story:
Beth Williams at