One Take on the Report of the Independent Directors of Wells Fargo: Vote the Bums Out

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Posted by Howell E. Jackson, Harvard Law School, on Saturday, April 22, 2017

Editor’s Note: Howell E. Jackson is James S. Reid, Jr., Professor of Law, Harvard Law School. Additional information on Professor Jackson’s outside interests and activities is available here. The views expressed in this blog posting are those of Professor Jackson and are not necessarily those of organizations, institutions or individuals with which he is associated.

Next Tuesday, the 25^th of April, the shareholders of Wells Fargo will meet for the first time since the news of the massive Wells Fargo mis-selling scandal broke last September when the firm was hit with penalties of $185 million for opening 1.5 million bank accounts and issuing 565,000 credit cards for customers without their consent. [1] In recent weeks, the two leading proxy advisory firms have recommended negative votes many of the directors serving on the Wells Fargo Board at the time the fines were announced, with Glass Lewis advocating negative votes on six of twelve continuing directors and ISS recommending the ouster of all twelve.

Just two weeks before the meeting date, the independent directors of Wells Fargo released a 110 page “Sales Practice Investigation Report,” prepared with the assistance of the law firm Shearman & Sterling under the direction of four independent trustees: Duke, Hernandez, James, and Sanger, all four of whom have received negative vote recommendations from ISS and one of whom (Hernandez) has received a negative recommendation from Glass Lewis. [2] The Shearman & Sterling Report—and I call it that because the document has all the hallmarks of a carefully and cautiously drafted legal document—is illustrative of an increasingly common practice in the aftermath of financial scandal: the preparation and distribution of a nominally “independent” but “in-house” analysis of corporate practices that have resulted in widespread violations of law.

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April 23, 2017 at 02:33AM

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