After nearly two years of intensive engagement with Wells Fargo during the development of its Business Standards Report, published today, shareholders are commending management for what they view as an important first step to bring much-needed clarity around past lapses and how they will be prevented going forward. The shareholders also caution that, while the report is a good beginning, the company still has much work to do to redeem its credibility and restore customer trust.
The Business Standards Report responded to a 2017 shareholder proposal filed by the Sisters of St. Francis of Philadelphia along with fellow members of the Interfaith Center on Corporate Responsibility and other investors, requesting that the Board commission a comprehensive report available to shareholders on the root causes of the fraudulent activity and steps taken to improve risk management and control processes.
Investors say they believe the report is responsive to the resolution’s requests, and that Wells Fargo’s frequent consultation with investors and other stakeholders throughout its development and incorporation of investor’s feedback is commendable, particularly in light of the company’s admitted insularity in the past.
“This report has tremendous possibilities because it is a public acknowledgement by a major U.S. bank of its abuses of customers, team members and investors,” said Sr. Nora Nash who led the investor team helping to guide the development of the report. “As a sister of St. Francis of Philadelphia and a member of ICCR, I see the nearly 2-year engagement to produce this report as a much-needed period of reckoning and introspection in order for Wells Fargo to emerge from its crisis with some moral and ethical clarity. What is critical to move this document from aspiration to execution will be its implementation across the entire business, the retraining of WF team members, and accountability measures that are regularly tracking performance and are made public.”
The report invokes the company’s well-publicized scandals and billion dollar fines, including the opening of millions of fraudulent accounts as a result of an aggressive sales culture. The investors say they hope the deep dive into the root causes of these scandals will fundamentally change the way the company views its responsibility to all its stakeholders including its employees, customers and investors.
"Thousands of employees lost their jobs as a result of Wells Fargo’s improper sales practices,” said Brandon Rees of the AFL-CIO. “The business standards review shows Wells Fargo is willing to engage with stakeholders in dialogue toward positive change. We encourage the company to engage with its employees as stakeholders collectively and ensure that the company abides by its non-retaliation policies."
Investors stressed the importance of publicly disclosing the metrics Wells Fargo has developed to track progress in continuing to remediate harms beyond the publication of the report. One of the requests in the resolution was a report on assessment plans to evaluate the adequacy of changes instituted over time.The investors say these metrics will be important for stakeholders to monitor Wells Fargo’s performance and assess whether the changes the company is making are truly having an impact.
Another request in the resolution was evidence that incentive systems are aligned with customers’ best interests. To satisfy this request investors say they would like more information about how the bank intends to integrate employee conduct risk metrics into executive compensation and incentive plans.
"As an international investor, we value engagement collaboration with our U.S. colleagues to address environmental, social and governance risks within our holdings,” said Michelle de Cordova of NEI Investments. “The change we have seen thus far at Wells Fargo demonstrates the value of a shareholder proposal process supported by investors willing to commit to intensive dialogue. Now that the bank is moving into the next stage of the journey, we look forward to further disclosure tracking its progress in addressing the issues exposed by the review. Finding the right metrics is challenging, but important for rebuilding confidence.”
The investors noted that there is still a need for justice and truth with regard to the company’s handling of numerous homeowner loan modifications, inaccuracies in car insurance, and lines of credit to the gun industry. To align with the bank's stated goals of transparency and remediation, the investors also strongly recommended that Wells Fargo end its practice of forcing customers and employees into arbitration.
“Shareholders asked for a systemic review by a cross-functional team to assess the root causes and existing gaps that enabled concerning ethical lapses, and we recognize that Wells Fargo carried out a thorough process to develop the report,” said Mary Beth Gallagher of the Tri-State Coalition for Responsible Investment. “Investors have grounded our conversations in the company’s responsibility to respect human rights because we know people have been seriously harmed and are entitled to an effective remedy to make things right. It is now time for the company to undertake meaningful transformation of its culture, management systems, and governance to truly regain trust and fulfill its responsibilities to society. We believe this report is an important first step, and we will continue to encourage consultation with stakeholders and disclosure on the progress that is taking place.”
We encourage all stakeholders who may have been harmed by Wells Fargo's business practices or who wish to provide feedback on this report to reach out to and use the newly established Customer Remediation Center of Excellence, and for all employees to use the enhanced EthicsLine as necessary to seek remedy and help to make things right.
Wells Fargo’s announcement of the Business Standards Report can be found here.
Investor Participants in Wells Fargo Engagement on Business Standards Report:
- Barbara Aires, SC, Sisters of Charity of St. Elizabeth
- Michelle de Cordova, NEI Investments
- Seamus Finn, OMI, Missionary Oblates of Mary Immaculate
- Mary Beth Gallagher, American Baptist Home Mission Society and Tri-State Coalition for Responsible Investment
- Valerie Heinonen, OSU, Mercy Investment Services
- Susana McDermott, Interfaith Center on Corporate Responsibility
- Nora Nash, OSF, Sisters of St. Francis of Philadelphia
- Jeffery Perkins, Friends Fiduciary Corporation
- Hasina Razafimahefa, NEI Investments
- Brandon Rees, AFL-CIO
- Randy Rice, Office of Rhode Island General Treasurer Seth Magaziner
- Cathy Rowan, Maryknoll Sisters
- Natalie Wasek, Sisters of St. Francis of Philadelphia
- Amanda Werner, Consumers for Auto Reliability and Safety
- Pat Zerega, Mercy Investment Services
- Josh Zinner, Interfaith Center on Corporate Responsibility
About the Interfaith Center on Corporate Responsibility (ICCR)
Celebrating its 48th year, ICCR is the pioneer coalition of shareholder advocates who view the management of their investments as a catalyst for social change. Its 300 member organizations comprise faith communities, socially responsible asset managers, unions, pensions, NGOs and other socially responsible investors with combined assets of over $400 billion. ICCR members engage hundreds of corporations annually in an effort to foster greater corporate accountability. www.iccr.org