This article has been updated to reflect Wells Fargo's latest stock price.
To find out why President-elect Donald Trump's nominee for Transportation Secretary, Elaine Chao, was valuable as a board member to Wells Fargo (WFC - Get Report) , just take a look at the scandal-plagued lender's most-recent annual shareholder ballot. Listed first among her principal qualifications and experience is "governmental relations."
Chao was the first-ever Asian-American woman to serve in a presidential cabinet post, due to her tenure as Labor Secretary in the 2000s under former President George W. Bush. She's a fellow at the Washington-based think tank Hudson Institute. She's also married to Senate Majority Leader Mitch McConnell, a Kentucky Republican and one of the most powerful lawmakers in the U.S. Capitol.
It's not surprising that a big bank subjected to increasingly stiff regulations and federal laws -- and, more recently, embroiled in a scandal over the fabrication of 2 million unauthorized accounts -- would put a premium on Chao's government experience and connections; last year, San Francisco-based Wells Fargo paid her about $290,000; typically board members of corporations spend about five hours a week on the job.
More surprising, given all the Washington ties, is her nomination this week to become the next U.S. Transportation Secretary by President-elect Donald Trump, who as a candidate pledged to "drain the swamp" of career politicos and bureaucrats.
While Trump has named corporate executives and investors to run the Treasury and Commerce departments, Chao's nomination embodies the political revolving door that many of his voters despised the most: people who trade on their government connections to amass riches.
"You get to be a director if you are in the swamp," said Cornelius Hurley, director of the Boston University Center for Finance, Law and Policy. "It is all about being in the swamp."
Chao, 63, also serves on the boards of three other publicly-traded companies, according to TheStreet's BoardEx service: Ingersoll-Rand (IR - Get Report) , which in corporate documents cites her perspective on "international geopolitical dynamics;" Vulcan Materials Co. (VMC - Get Report) ("her government service"); and Rupert Murdoch's News Corp. (NWSA - Get Report) ("extensive knowledge of the U.S. government"). For those four board memberships, she got $1.1 million in compensation in 2015, for what works out to roughly half of a 40-hour work week based on a typical corporate director's workload.
While Wells Fargo says Chao would have to resign if she becomes Transportation Secretary, this year's scandal at the bank could lead to a harsh grilling early next year during the confirmation process before the Senate Commerce, Science and Transportation committee.
Chao declined to comment through a Wells Fargo spokesman.
Wells Fargo CEO John Stumpf resigned in October after the bank agreed to pay a $185 million penalty over regulatory allegations that employees ginned up bogus accounts to meet sales quotas imposed by senior management, in practices dating back to at least 2011. About 5,000 employees were dismissed, and the lender has faced a spate of investigations, additional regulatory scrutiny and the loss of some lucrative government deals.
The stock is flat this year, even as bank shares on average have surged 23%.
In hearings this year, lawmakers including Senator Elizabeth Warren, a Massachusetts Democrat, castigated Stumpf and the Wells Fargo board for being asleep at the switch as management failed to take more aggressive action to change its runaway sales practices. Chao, who joined the Wells Fargo board in 2011, was one of 15 directors at the company and served on the finance and credit committees -- raising the question of what exactly she was getting paid for aside from her government connections.
"Should she have known about the fake accounts? Ideally, yes. Did she? Probably not, especially given her many directorships," said Kurt Schulzke, associate professor in the Corporate Governance Center at Kennesaw State University. "It's a good question for the confirmation hearings."
The daughter of James S.C. Chao, a Chinese-born shipping magnate and founder of Foremost Group, Elaine Chao would have to sell any stock she owns or put assets into a blind trust, under conflict-of-interest rules that apply to government officials. According to board research firm Equilar, Chao had stakes worth $1.1 million in Wells Fargo at the end of 2015, $114,000 in Ingersoll-Rand and $163,000 in Vulcan.
When Trump announced her nomination in a statement on Dec. 1, he praised her "extensive record of strong leadership and her expertise." She immigrated to the United States as an 8-year-old speaking no English, became a citizen at age 19, got a master's degree in business from Harvard University and eventually served as director of the Peace Corps, chairman of the Federal Maritime Commission and deputy Transportation secretary, according to the statement. She also worked in the private sector at Bank of America and Citigroup, Trump noted.
"She has an amazing life story and has helped countless Americans in her public service career," Trump said.
As recently as August, the Huffington Post named McConnell and Chao as one of the top six most powerful couples in history and literature, alongside Julius Caesar and Cleopatra, Claire and Frank Underwood and New York Governor Andrew Cuomo and Food Network chef Sandra Lee.
Chao and McConnell have been considered a Washington power-couple because of their influence and connections.
Indeed, despite any lapses by Chao as a Wells Fargo board member, it's precisely the government experience and ties that could make Chao a successful Transportation secretary, Schulzke said.
"If you want to get things done in a Republican Congress, it's hard to challenge the choice," he said. "On the other hand, her Washington insider, ex-Bushy status does raise questions about Trump's commitment to drain the swamp."