Activist shareholders and Democratic lawmakers on Capitol Hill are pressing forward with their campaigns to shake up Wells Fargo's (WFC) board and push for other changes even after the megabank announced Wednesday that its embattled CEO, John Stumpf, was resigning from the company.
Specifically, Stumpf's resignation comes in the wake of revelations a little more than a month ago that about 2 million customer accounts had been set up by the bank's employees without clients' knowledge or approval.
In early September, the bank disclosed a $185 million settlement with federal and local regulators over the accounts, which led to the dismissal of 5,000 employees over a five-year period and set off a firestorm of criticism. Chief Operating Officer Tim Sloan will succeed Stumpf as CEO, and lead independent director Stephen Sanger will become chairman of the board.
However, a top official at CtW Investment Fund, an organization that advises pensions for unions belonging to the Change to Win labor group, said it was pressing forward anyways with a campaign the fund had launched last month urging the embattled bank to add two directors to its board who understand human capital management. The fund advises funds representing roughly 12 million Wells Fargo shares.
"A new CEO alone does not fix the multileveled failures at Wells Fargo," said CtW executive director Dieter Waizenegger. "We are encouraged that the bank is finally enacting reforms, but it must look beyond the C-suite and make sure that strengthening board oversight is part of its succession plan."
Waizenegger added that the board needs to review its approach to human capital management and make major changes to employment practices that determine pay, promotion and retention for customer service workers. The fund is urging Wells Fargo to seek out director candidates by reviewing a pool of executives who have worked at corporations that receive a high level of positive comments from employees, such as Trader Joe's, Costco (COST) or Southwest Airlines (LUV) .
The CtW campaign continues as Wells Fargo's board continues an independent probe itself of the bogus accounts.
In addition, Stumpf's resignation doesn't mean that pressure on the ex-CEO will let up on other fronts. For example, investors said they are continuing a campaign they launched last month to have Stumpf removed from the board of Target (TGT) in the wake of the barrage of criticism.
According to BoardEx, a relationship mapping service of The Deal, Stumpf sits on the boards of Chevron (CVX) and Target and is an adviser to the Federal Reserve Bank of San Francisco. According to Target, Stumpf is on both risk and compliance and governance board subcommittees.
Investor, gadfly John Chevedden, who frequently submits shareholder proposals, sent a letter to Target last month urging it to "re-evaluate" Stumpf's qualifications. After the announcement of Stumpf's resignation, Chevedden said that he is continuing his effort. "Stumpf's resignation is a potent validation of the charges against him -- makes him more disqualified to serve on the boards of Target and Chevron," Chevedden said.
In addition, another small investor took out an advertisement in the Minneapolis Star Tribune arguing that the retailer's legacy is "endangered" by the presence of Stumpf on its board.
Lawmakers on Capitol Hill berated Stumpf in two separate Congressional hearings in recent weeks for failing to take action sooner. On Wednesday, some Democratic lawmakers said they were not appeased by Stumpf's resignation.
Sen. Sherrod Brown, D-Ohio, the top Democrat on the Senate Banking Committee, said in a statement that Stumpf's retirement doesn't answer many questions that remain. "We are still waiting for answers as to how Wells Fargo plans to right its wrongs against customers and the low-paid employees who weren't given the benefit of a retirement package when they were fired for refusing to cheat," Brown said. "There must be accountability to fix the culture within Wells Fargo that encouraged cheating and left senior executives either unwilling or unable to stop it for far too long."