VEA Vice Chair Nell Minow moderated a panel discussion at Harvard Law School about What They Do With Your Money.
VEA’s Annalisa Barrett is is quoted in Gretchen Morgenson’s article about Wells Fargo. Morgenson suggests that appointing an insider to the CEO job may not send the right message of change.
Annalisa Barrett, a clinical professor of finance at the University of San Diego school of business, thinks the bank may be making the best of a bad situation. She argued that the investor reaction could have been worse had the board announced it was looking for an outsider to replace Mr. Stumpf.“They likely would have named an interim C.E.O. while they conducted their search,” she said. “In my opinion, that would have been very disruptive and led to more uncertainty in the market and concern among employees and customers.”
VEA Vice-Chair Nell Minow is quoted in the LA Times story about the new CEO at Wells Fargo:
Nell Minow, vice chair of ValueEdge Advisors, which promotes strong corporate governance, said the question of whether Sloan came from inside or outside Wells Fargo’s ranks is less important than his need to move fast to restore the bank’s trust with customers, investors and employees.“We’re going to know very quickly whether he’s the right choice or not. He has a one-week window,” she said.Among other things, Sloan must personally visit Wells Fargo’s largest institutional shareholders and its largest banking centers to listen to the concerns of investors, employees and customers and then respond to them, Minow said.
Sloan also should say Wells Fargo will “add new people to our board and ask investors to suggest candidates,” review the performance of other top Wells Fargo executives “to determine whether they can continue to work there” and even be the face on Wells Fargo’s television commercials, Minow said.
Sloan also must vow to conduct “a very rigorous examination of its system and make the results of that public,” Minow said. “If he doesn’t do all of those things, he was the wrong choice.”
According to a new survey of 884 directors of public companies, 10 percent of current board members think the ideal number of women on a corporate board is somewhere between 20 percent of the board and zero. Zero! One in 10 directors mulled over the prospect of sharing a conference table with women and thought, “I could tolerate zero women, or maybe a very tiny proportion of women, but that is absolutely it.”
The head of PwC’s Governance Insights Center, which conducted the survey, told Fortune that the not-unpopular desire for a board with as few women as possible is largely attributable to the old-school men who populate most corporate boards and, thus, the survey base. The average age of a board member of a major U.S. company is 63 and rising, and 83 percent of PwC’s survey participants are men.
Just as disconcerting as the 10 percent in the “few to no women, please” club is the 43 percent of participants who said the “optimal” share of women on a corporate board is 21 to 40 percent. (Women currently occupy 20 percent of S&P 500 companies’ board seats.) This means that more than half of all board members think women deserve significantly fewer than half the seats on corporate boards. Since women make up more than half of the world’s population, this suggests that more than half of current board members think women are inherently less capable of serving in corporate leadership positions. Another 43 percent said women should occupy 41 to 50 percent of board seats; only 5 percent thought the “optimal” proportion of women was greater than 50 percent.
VEA Vice Chair Nell Minow is quoted in a Forbes story about a lawsuit against Theranos.
“I’d have to read the complaint to be certain, but most likely the plaintiff will have to prove that company managers did not disclose risks they knew or should have known. They will ask for company records to show that the managers were communicating about problems with the company’s testing product but not alerting investors to the product’s poor results in a timely manner,” she said in an October 11 interview.“At the same time, there is or will probably be an SEC investigation and the outcome there will help — or hurt — this case. My guess is that the SEC will do the usual — [require Theranos to] pay a fine but not admit wrongdoing settlement, which will help the case a little, not a lot,” she said.Minow also suggests a factor that might help Theranos avoid returning capital to shareholders — Director & Officer (D&O) liability insurance. As she explained, “Such suits are almost always settled. The D&O liability insurer takes charge and while in some cases (not this one) management would prefer to argue the correctness of their conduct to the very end, insurers run the numbers and stay out of court.
Jon Lukomnik has some good advice for Wells Fargo.
Wells Fargo has been knocked off its pedestal, but it is imperative that the company move forward and put this episode behind it.
His recommendations include replacing the CEO and CFO (we would add the head of HR who designed or approved the compensation that incentivized the creation of the fraudulent accounts) and installing a board-level independent monitor.
[T]he most important consequence of Wells Fargo’s over-reliance on arbitration is that it brings home the drawbacks of allowing big businesses to saddle their customers with clauses the latter probably don’t read and certainly don’t fully understand. If Congress wishes to extract a silver lining from the Wells Fargo scandal, it could do worse than outlawing binding arbitration that keeps aggrieved consumers out of court, entirely.
VEA Vice-Chair Nell Minow is quoted in the video portion of this story.
A spate of lawsuits challenging director compensation over the last few years has prompted many companies to make serious moves to set new limits on annual compensation, equity awards and cash payments for board members.
Wells Fargo didn’t disclose anything publicly about its “cross-selling” abuses or looming settlement with regulators before the pact was announced Sept. 8—including in its second-quarter Securities and Exchange Commission filing weeks earlier, on Aug. 3. Three Democratic senators who grilled the bank’s chief executive last week now have asked the SEC to investigate whether Wells Fargo misled investors by failing to disclose the issue sooner.
While the bank’s management had known since 2013 that some employees had created deposit and credit-card accounts for customers without their knowledge, the accounts were a tiny portion of Wells Fargo’s business. The settlement, which included a $185 million fine, was less than 1% of last year’s earnings. The matter was “not a material event,” Chief Executive John Stumpf told a Senate panel last week.
That is true in terms of the bank’s income statement. Not so its reputation or share price. The bank and Mr. Stumpf have faced a political and public furor and the stock has lost nearly 10% since the settlement, or about $23 billion.
Citing Wells Fargo’s “venal abuse of its customers,” the California treasurer took the unusual step on Wednesday of suspending many of its ties with the San Francisco bank as it continues to reel from the scandal over the creation of as many as two million unauthorized bank and credit card accounts.The state treasurer, John Chiang, said he was suspending Wells Fargo’s “most highly profitable business relationships” with the state for at least a year, including the lucrative business of underwriting certain California municipal bonds.
On Tuesday alone, he said, he had pulled Wells Fargo off two large municipal bond deals.
“How can I continue to entrust the public’s money to an organization which has shown such little regard for the legions of Californians who placed their financial well-being in its care?” Mr. Chiang wrote in a letter on Wednesday to the bank’s chairman and chief executive, John G. Stumpf, and the bank’s board members.