Wells Fargo Urged by Connecticut Treasurer to Keep CEO, Chairman Roles Split

Connecticut's pension plans joined the chorus of investor critics over governance at Wells Fargo (WFC) , saying the CEO and board chairman roles should remain split following this year's scandal over the creation of as many as 2 million unauthorized accounts.

Although Wells Fargo's board appointed lead director Stephen Sanger to become independent chairman last month when former Chairman and CEO John Stumpf resigned, Connecticut Treasurer Denise Nappier said today that the roles should remain split in perpetuity. Currently, the CEO is Tim Sloan, who had been second in command at the San Francisco-based lender before taking over Stumpf's duties.

"In our view shareholders are best served by an independent board chair who can provide a balance of power between the CEO and the board," Nappier said in a statement.

The split between CEO and chairman has been a flashpoint for investors and corporate-governance watchdogs since 2014, when Bank of America (BAC) combined the duties under Brian Moynihan, defying a 2009 shareholder vote that had stipulated the roles should remain separate. The backlash was so severe that the Charlotte, North Carolina-based lender had to agree to hold a separate referendum in 2015 to ratify the decision. That passed with 63% approval -- a thin margin of victory given that such matters typically garner at least 90% of votes.

Wells Fargo's Stumpf stepped down amid withering criticism from lawmakers, investors and consumer advocates, after the bank admitted that employees ginned up bogus accounts to meet sales quotas imposed by senior management. The lender agreed to pay a $185 million penalty and has faced a spate of investigations, additional regulatory scrutiny and the loss of some lucrative government deals.

The lender's shares are down 4.4% this year, even as the KBW Nasdaq Bank Index has climbed 17%. 

According to the Connecticut statement, Nappier has filed a shareholder proposal with Wells Fargo seeking to change the company's bylaws to make sure the chairman remains independent. The resolution was filed in conjunction with Illinois State Treasurer Michael Frerichs, Hermes EOS and the Needmor Fund, an Ohio-based family foundation.

Nappier, in her role as state treasurer, serves as principal fiduciary of the $30 billion Connecticut Retirement Plans and Trust Funds, according to the statement. 

Press officials with the bank didn't immediately respond to a request for comment.

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