Wells Fargo faces shareholders, protesters at annual meeting

PONTE VEDRA BEACH, Fla. – Wells Fargo’s top management and board of directors apologized to investors and faced a series of protesters Tuesday at the first big shareholder meeting since a scandal over sales practices led to an executive shake-up, fines and a dented reputation.

Chairman Stephen Sanger said, “We are deeply sorry,” as he addressed shareholders. And CEO Tim Sloan called it “unacceptable.” That follows apologies already given to customers and employees. Sloan, who got that job in October, has repeatedly talked of making things right with customers.

The bank has changed the way it pays branch employees, reclaimed promised compensation to several executives and apologized to customers after regulators imposed $185 million in fines last September. Authorities said Wells Fargo workers opened up to 2 million accounts without customer permission as employees tried to meet aggressive sales goals.

Whether the changes will be enough – Wells has seen a sharp decline in new customers and remains under investigation by various authorities – is a main issue shareholders are deciding.

A series of protesters interrupted the meeting, venting their anger at the bank’s executives and asking for the bank’s directors to directly address shareholders. A representative of a community activist group was removed by security after he was told he was out of order and kept going. Bruce Marks of NACA, the Neighborhood Assistance Corporation of America, said he wanted to hear from the directors whether they were “complicit and incompetent” in the scandal.

An investigation by the bank’s own board of directors, released earlier this month, found that the problems at Wells Fargo and its overly aggressive sales culture date back at least 15 years, and that executives had little interest in dealing with the issue until it spiraled out of control. It also clawed back another $75 million in pay from former CEO John Stumpf and former community bank executive Carrie Tolstedt, saying both dragged their feet for years about the problems.

The big item to watch Tuesday will be whether Wells Fargo shareholders oust the board. Two major proxy advisory firms have advised shareholders to vote out at least some of the directors. One firm, Institutional Shareholder Services, is basically asking investors to clean house. Even two large California pension funds have come out against Wells Fargo’s board.

Another issue will be the shareholder proposals. Wells’ board has advised shareholders to vote against at least two proposals that the proxy firms endorsed. One of them calls for yet another internal investigation into the bank’s sales practices.

The board will likely lean on its investigation, which said that both Stumpf and Tolstedt, when presented with the growing problems in the community banking division, were unwilling to hear criticism. It rescinded $47.3 million in stock options to Tolstedt, on top of $19 million the board had already clawed back. It took back $28 million more from Stumpf’s compensation, on top of $41 million already clawed back.

Along with the millions taken back from other executives earlier this year, the roughly $180 million in clawbacks are among the largest in U.S. corporate history. Wells Fargo has also said it will pay $142 million to customers for damages caused by any accounts opened without their permission, and expand its window for unauthorized accounts back to May 1, 2002.

The shareholder meeting, at a golf resort in Jacksonville, Florida, is being held about 2,800 miles from Wells Fargo’s headquarters in San Francisco. The company has not said why it chose that location.