Where Was Wells Fargo's Board?

The scandal surrounding the opening of fake accounts at Wells Fargo illustrates a deeper dysfunction in the governance of U.S. companies: Corporate boards are failing at their job of overseeing management. If regulators can’t address the problem, shareholders can and should.

Despite years of evidence that a policy coming from the very top was driving illegal and abusive practices at Wells Fargo, the bank’s directors were notable mainly in their passivity. They did not act in 2013, when the Los Angeles Times reported that bank employees were opening phony accounts to meet unrealistic sales quotas. They did not act in September, when Wells Fargo agreed to pay a $187.5 million fine and admitted to creating more than 2 million fake accounts. Only after CEO John Stumpf was excoriated in congressional hearings did they decide to claw back some of his compensation. Still, they never fired him -- he resigned on his own.