Wells Fargo & Co. (WFC) , the U.S. bank struggling to mend its reputation after scandals involving fake accounts and unneeded car insurance, is replacing the board chairman lambasted by investors and lawmakers with a former Federal Reserve governor.
Elizabeth "Betsy" Duke, 65, will succeed Stephen Sanger in the role on Jan. 1, the San Francisco-based lender said Tuesday, Aug. 15. Sanger and two other long-term directors, Susan Swenson and Cynthia Milligan, will retire at the end of this year.
Shareholders of Wells Fargo rebuked the board sharply at the company's annual meeting in April, where Sanger garnered a reelection tally of just 56%. In the months since, Sen. Elizabeth Warren, a Massachusetts Democrat and advocate for tighter bank regulation, has urged the Federal Reserve to remove directors who failed to prevent problems that hurt consumers and tarnished the bank's reputation.
The bank is "reacting to the investor expectations that things have to improve," Hank Boerner, chairman of Governance & Accountability Institute Inc., a New York-based consultancy, said in a telephone interview. "Bringing in new independent directors, moving tenured directors out and bringing in fresh blood, those are moves in the right direction."
In September, the lender agreed to a $185 million settlement with federal and local regulators over the creation of more than 2 million unauthorized customer accounts by workers trying to meet ambitious sales targets.
The fallout led to contentious Congressional hearings as well as the abrupt retirement of former Chairman and CEO John Stumpf and cost Wells Fargo a number of lucrative government bond deals.
Then, last month, as Stumpf's successor, Tim Sloan, was making progress in restoring the bank's reputation, Wells disclosed that some 490,000 car-loan customers were erroneously charged for insurance they didn't need. An additional 60,000 in states with specific disclosure requirements may not have been told about the insurance by the third-party vendor that issued it, Wells said.
While the bank has promised to correct the problems and refund money to affected customers, the revelation has already prompted two federal lawsuits that are seeking class-action status.