Wells Fargo has changed its boardroom rules to require the roles of chief executive and chairman be kept separate, adding to pressure on other US banks to end the contentious practice of combining the top jobs.
The bank, which has been in the spotlight for months over sales malpractice in its branches, had prised apart the two positions when John Stumpf quit suddenly in October. He was replaced by Tim Sloan as chief executive and Stephen Sanger as chairman.
On Thursday, however, Wells went further — saying it had with immediate effect amended the company’s bylaws to mandate the split. The move comes after pressure from shareholders, including state treasurers in Illinois and Connecticut.
Wells’ decision is noteworthy in a sector that has largely resisted such demands — and some corporate governance experts said it should encourage other banks to do the same.
“This change to ensure accountability and stronger oversight will benefit everyone with an interest in the company,” said Michael Frerichs, Illinois’ state treasurer. “While an important step forward, we need to continue to encourage companies to do the right thing for the right reasons.”
Other critics of the practice also include Norway’s sovereign wealth fund, which ranks among the US bank’s 15 largest shareholders. Yngve Slyngstad, head of the $860bn fund, said this year it was “untenable” for companies not to separate the roles.
Brian Moynihan, who holds both positions at Bank of America, survived a corporate governance battle with some shareholders last year over whether he should be stripped of the chairmanship.
JPMorgan Chase has also faced calls to split the jobs, which are held by Jamie Dimon. About a third of shareholders in JPMorgan voted at its last two annual meetings that it should do so.
Hopefully this will be long-lasting at Wells. It’s a natural, and a wise, decision. There will be some calls on other banks to do the same thing
Among the other large banks, only Citigroup has separated the roles — although unlike Wells, the bank has no mandate to require it.
The amendment at Wells does not necessarily make the separation permanent. The board could in future reverse the decision, as Bank of America did. Any U-turn would likely draw scorn from shareholders, however, and people familiar with the bank maintained that in practice it would be unlikely.
“Hopefully this will be long-lasting at Wells,” said Charles Elson, a professor of finance at the University of Delaware and corporate governance expert. “It’s a natural, and a wise, decision. There will be some calls on other banks to do the same thing.”
In a statement, Mr Sanger said: “We believe this action will enhance the board’s independence and its oversight of the company’s management, and we appreciate the feedback that we received from our investors on this matter.”
Wells is trying to draw a line under the faked account debacle. Thousands of its employees set up fee-generating bank accounts and credit cards for customers without their knowledge or consent.
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