Wells Fargo investors urged to drop most board members

Wells Fargo and Co. shareholders should vote to remove most of the bank's board members after they failed to provide 'timely and sufficient risk oversight” to head off a scandal involving the creation of fake customer accounts, according to proxy adviser Institutional Shareholder Services Inc.

Wells Fargo's owners should vote for only three of the bank's 15 directors - Karen Peetz, Ronald Sargent and CEO Tim Sloan - at the lender's annual meeting later this month, ISS said in a report Friday. Glass Lewis and Co., another proxy adviser, recommended earlier this week that shareholders oppose the re-election of six directors, including members of the board's corporate responsibility committee.

'The board failed to implement an effective risk-management oversight process in a timely way and that could have mitigated the harm to its customers, its employees and the bank's brand and reputation,” ISS wrote. 'The long-standing sales practices and unchecked incentive program evidences a sustained breakdown of risk oversight on the part of the board.”

Wells Fargo's board called the ISS report 'extreme and unprecedented” and said the directors and company managers are working to restore the trust of customers, employees and investors, according to a statement.

The proxy adviser 'fails to recognize the active engagement of the board and the substantial actions it has already taken to strengthen oversight and increase accountability at all levels of Wells Fargo, including important improvements to corporate governance,” the board said in the statement.

Regulators announced in September that Wells Fargo employees sought for years to meet aggressive sales targets by opening as many as 2 million unauthorized customer accounts. The scandal triggered lawsuits, investigations and congressional hearings, prompting the lender to shake up leadership, deny bonuses to executives and fire some senior managers in the consumer business.

It also forced the resignation of CEO and Chairman John Stumpf, resulting in Sloan's promotion from chief operating officer.

ISS recommended voting against 12 directors - including newly named Chairman Stephen Sanger - because they served on the risk, human resources and audit committees. Peetz, a former president of Bank of New York Mellon Corp., and former Staples Inc. CEO Sargent joined the board in February and are its newest directors.