John Stumpf, the chairman and chief Executive (CEO) of  troubled US bank Wells Fargo, has quit following admissions of fraudulent activities, including the opening of customer accounts without permission. Stumpf's replacement as CEO is Tim Sloan, the company’s president and chief operating officer. Stephen Sanger, formerly lead director, will now serve as non-executive chairman while independent director Elizabeth Duke becomes vice chair.

Commenting on Stumpf's departure, Sanger said, “John Stumpf has dedicated his professional life to banking, successfully leading Wells Fargo through the financial crisis and the largest merger in banking history, and helping to create one of the strongest and most well-known financial services companies in the world. However, he believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges and take the company forward. The board of directors has great confidence in Tim Sloan.  He is a proven leader who knows Wells Fargo’s operations deeply, holds the respect of its stakeholders, and is ready to lead the company into the future.”

Stumpf's departure follows Interfaith Center on Corporate Responsibility (ICCR)  filing of shareholder resolutions for Wells Fargo's 2017 annual general meeting in respect of fraudulent activities uncovered by the Consumer Financial Protection Bureau (CFPB) at the bank. The investors argued that costly settlements by the bank (see infographic, left), including the “discriminatory steering” of African American and Hispanic borrowers into high cost loans, are symptomatic of deep oversight and ethical failures. ICCR's resolutions call for the implementation of a series of governance and risk management processes to address the failings.

Sister Nora Nash of the Sisters of St. Francis of Philadelphia, said, “At our meeting with Wells representatives last December, we pressed for disclosure and we were denied the truth. Now we are confronted with painful accounts of fraud including some 80,000 customers in Pennsylvania alone. As shareholders and customers ourselves we feel betrayed and have no choice but to call for a full review of business standards through this resolution which we hope other shareholders will support.”

The ICCR said the 2017 shareholder resolutions were consistent with their four engagement themes in calling for:

• a review and report on business standards including an analysis of the impacts the current scandal will have on customers, operations, reputation and shareholder value;
• linking executive pay to ethical business conduct and sustainability such as setting new standards for compensation and bonuses that reinforce ethical behaviour and penalises irresponsible or illegal behaviour;
•  a separation of the chair and chief executive roles to provide stronger oversight mechanisms - which has now been done by the company in its appointments, and
• demanding greater disclosure on lobbying and political spending.

In 2013 ICCR benchmarked seven US banks for governance standards; Wells Fargo was ranked last with a particularly low score for responsible lending. As a result, ICCR members advocated for a business standards review in a floor proposal at the 2013 AGM but withdrew when the board agreed to conduct the review. However shareholders now say that a comprehensive review to address their concerns was never produced.

Tim Brennan, treasurer and chief financial officer of the Unitarian Universalist Association, said, “Wells Fargo has an admirable Code of Ethics and Business Conduct. The problem is you get the behaviour you reward, and the incentive systems at Wells Fargo led employees to take actions that made a mockery of the Code. Shareholders want top management’s compensation to be tied to their success in aligning employee behaviour with the company's code. That’s why we filed a resolution urging the company to link executive pay to sustainability metrics, which is good for the company, employees, and customers.”

If unchallenged by the company, the ICCR said its members' proposals will appear on the company ballot to be voted on by all shareholders at the annual meeting.