Normally an American company annual meeting would be ignored in Australia. Compared to ours, they are creatures of the company, quite often tightly controlled with dissent kept to a minimum and over in minutes – just look at the shortness of AGMs held by the Murdoch family’s 21st Century Fox and News Corp in recent years.
But every now and then one pops up with a big issue, big names and hints of fireworks – or at worst, some rare dissent from big shareholders large and small.
And so it will be early Wednesday with Wells Fargo holding its AGM in Florida, a long way from its main shareholder bases in California and in the Carolinas.
Regardless of that the meeting of shareholders in one of the biggest banks in the US will see shareholder unrest about the fake accounts scandal that has already seen the CEO fired and lose millions in benefits, as well as other senior executives and a $US185 million fine imposed by Federal regulators, with possibly more to come from several additional probes.
It also pits Warren Buffett against a major corporate governance group and at least two major shareholders in the bank who want directors voted out at the meeting, Buffett will support the board and resolutions to remove some of the longer serving directors will fail.
Late last week, two large California public retirement systems/fund managers, CalPERS (the biggest in the US) and CalSTRS, the state’s retirement fund for teachers, revealed they plan to will vote against nine of 15 Wells Fargo & Co directors up for election at the bank’s annual meeting overnight Tuesday, Sydney time, citing the bank’s fake-account scandal.
CalPERS is the 52nd largest shareholder of Wells Fargo with 13.9 million, and and CalSTRS is the 62nd largest with 11.6 million, according to Thomson Reuters.
While they are not big holders of Wells shares (Warren Buffett’s Wells Fargo is the largest with 10% and that has been voted in favour of the board), comments from the two funds, especially CalPERS often influences the debate and voting stances by other funds.
CalPERS said in a statement that its voting hit list will include Wells Fargo’s its chairman, Stephen Sanger.
“We believe these directors failed in their oversight responsibilities during the retail banking controversy at the company," CalPERS said in a statement posted on its website.
As well CalPERS says some directors have been there too long – some have tenures of 12 years or more, “which we believe could compromise director independence.”
In a separate statement, the California State Teachers’ Retirement System, or CalSTRS, said it had already voted its 11.6 million Wells Fargo shares against the same group of nine directors. According to the statement, “These board members bear responsibility for the failure of oversight of sales practices at Wells Fargo.”
Wells Fargo is based in California and these votes against directors represents a rebuff to the country’s third biggest bank which has been trying to claim that it has put the fake accounts scam behind it with three new board members, a new CEO and new blood in senior management ranks.
But while the board has support from its largest investor, Warren Buffett’s Berkshire Hathaway, it also faces a recommendation to vote against 12 directors by leading proxy adviser Institutional Shareholder Services (ISS). That has triggered an intense debate about these proxy advisers and ISS has been unrepentant in supporting its recommendation.
Besides the board, CalPERS said it is voting “against” the ratification of bank auditor KPMG. Calpers said it has “concerns over a potential lapse of internal controls during the extended period of abusive sales tactics at the company.”
Berkshire Hathaway owns nearly 10% of Wells Fargo and Buffett personally owns 2 million shares as well. Berkshire’s investments are followed by many small investors because of his decades-long track record of profitable investments.
Reuters says Buffett’s assistant, Debbie Bosanek, told it last week that Buffett supports Wells’ management and board, and that he has likely voted shares held by him and Berkshire to reflect that view.
But while Berkshire supports Wells Fargo it has decided to sell more than 9 million shares to avoid breaching the 10% threshold that would require approval from the US Federal Reserve.
Buffett has decided that lifting his stake in Wells Fargo is not worth the extra regulation, and the public odium from expanding its relationship with the embattled bank in future years.
What that means is that Berkshire will never buy another Wells share (the bank’s stake is valued at around $US26 billion for Berkshire). And there is now a greater possibility that Wells shares could be sold if a big investment deal comes along for Buffett to consider.
