Former Fed governor will be first woman to hold top board role at a large U.S. bank
By Emily Glazer
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 16, 2017).
Wells Fargo & Co. said Elizabeth Duke would replace its chairman, Stephen Sanger, on Jan. 1, making the former Federal Reserve governor the first woman to hold a top board role at one of the nation's largest banks.
The San Francisco lender, which has battled a sales-practices scandal and other problems in recent months, announced the promotion of Ms. Duke, the board's vice chairman, Tuesday along with other changes.
The moves represent the bank's strongest response yet to the high percentage of shareholders who voted against directors at its annual meeting in April, a clear sign of discontent after years of Wells Fargo being an investor favorite.
Mr. Sanger, 71, will leave after a tumultuous period presiding over the board's response to the fake-account scandal that last year led to the departure of former Wells Fargo Chairman and CEO John Stumpf.
Mr. Sanger, a former General Mills Inc. CEO, is one of three directors who will retire at the end of 2017, the company said.
The other two are Cynthia Milligan and Susan Swenson, both of whom joined the board in the 1990s.
Mr. Sanger would have hit the board's mandatory retirement age next year and is stepping down about four months early.
The bank also named its newest director, Juan Pujadas, who will start Sept. 1. Mr. Pujadas recently retired from PricewaterhouseCoopers LLP, the accounting giant where he had been a principal and held numerous senior roles. Some of the coming changes were outlined in a Wall Street Journal article last week.
Wells Fargo, the third-biggest U.S. bank by assets, has spent most of the past year trying to put last fall's sales-practices scandal behind it. Employees of the bank opened as many as 2.1 million accounts without customers' knowledge, sparking public and political outcries as well as numerous investigations.
More recently, the bank has said even more customer accounts may have been impacted. It also is facing new problems in its auto-lending unit over insurance policies potentially involving thousands of borrowers. The bank has said it would reimburse customers for around $80 million.
Ms. Duke said in a Tuesday interview that it is "time to change into another gear."
She added that she can bring her understanding of the financial system, importance of safety and soundness, and risk management to the role. That is alongside her "appreciation" for fair and responsible consumer financial services as Wells Fargo "is shifting from a sales culture to a service culture."
Ms. Duke became vice chair last October, when Mr. Stumpf abruptly retired in the face of the sales-practices scandal. Ms. Duke has served on the Wells Fargo board since January 2015.
She was a governor of the Federal Reserve from 2008 to 2013, the seventh woman to be appointed to the board and joining in the thick of the financial crisis.
"She developed a reputation for being extremely careful," and being "skeptical of some of the extreme moves the Fed took" around the financial crisis, said Peter Conti-Brown, a Fed historian and assistant professor at The Wharton School of the University of Pennsylvania.
Before her work at the Federal Reserve, Ms. Duke had served as an executive or CEO at a number of community banks in Virginia, where she will remain. Timothy Sloan, Wells Fargo's CEO, added in the statement that her "regulatory expertise has been invaluable."
Mr. Sanger said in an interview that the board reconnected with shareholders after its April annual meeting and accelerated its annual self-evaluation to July from December.
In July Mr. Sanger asked another former regulator, former Securities and Exchange Commission chairman Mary Jo White to facilitate the board's self-evaluation, which resulted in the reshuffling. Ms. White, who is now a senior partner at law firm Debevoise & Plimpton LLP, said in an interview she spoke with all board directors and about half a dozen top executives to hear their assessment of the board's workings and how the relationship with management is going.
Wells Fargo also announced changes to key spots on board committees. As of Sept, 1, the board's risk committee will be led by former Bank of New York Mellon President Karen B. Peetz, who joined the board in February. She will succeed Enrique Hernandez Jr., who received a 53% shareholder approval rate at the bank's annual meeting. Nine directors in total received less than 75% approval from shareholders for re-election, with Mr. Hernandez having the lowest percentage. He remains on the board.
The bank is also changing the chairs of its governance and nominating committee and adding board members to committees overseeing corporate responsibility and audit.
Mr. Sanger said he and Ms. Duke will reconnect with shareholders during the typical fall outreach but the transition is earlier than expected because "it is symbolic and appropriate; we're not just doing business as usual."
Ms. Duke will take the lead on the proxy, annual report and chairman's letter where preparation in earnest begins early next year.
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