Wells Fargo's Board of Directors Just Dodged a Bullet

It's safe to say that Wells Fargo's (WFC -0.26%) shareholder meeting this year was less cordial than those of previous years, with some of its largest investors, as well as shareholder advisory firms, urging investors in the bank to vote against the re-election of nearly its entire board of directors in the wake of the bank's fake-account scandal.

Fortunately for the bank's 15 directors, most of whom earn between $300,000 and $400,000 for the part-time gig, the majority of shareholders took Warren Buffett's advice and decided otherwise, re-electing the entire board.

Stephen Sanger, Chairman of Wells Fargo. Image source: Wells Fargo.

Outcome aside, shareholders' discontent was apparent. A handful of directors only barely cleared the 50% threshold, with others failing to garner a supermajority. Compare that to last year, when 95% or more of shares were voted in favor of re-electing the entire slate of directors.

Data source: Wells Fargo press release.

Wells Fargo's current chairman of the board, Stephen Sanger, took note, issuing a three-paragraph statement to accompany the results:

Wells Fargo stockholders today have sent the entire Board a clear message of dissatisfaction. Let me assure you that the Board has heard that message, and we recognize there is still a great deal of work to do to rebuild the trust of stockholders, customers, and employees.

In our conversations with stockholders, many have told us they support the substantial and wide-ranging actions taken by the Board and management over the last seven months to address the root causes of sales practice issues, enforce accountability, and ensure that such improper behavior is not repeated. Yet they also feel the understandable need to hold the entire Board accountable for not moving quickly enough before that to address these issues -- and that is the reason why all except our newest directors received support from 80 percent or less of shares voted today.

The Board is steadfast in our commitment to continue to strengthen oversight and accountability while working closely with management to keep improving Wells Fargo. We thank the stockholders who supported us, and we will continue our engagement with stockholders and other stakeholders in the months and years ahead.

No one yet knows how significantly Wells Fargo's tarnished reputation will impair its future growth, as the bank's missteps forced it to abandon its once highly profitable retail sales strategy, resulting in a substantial drop in new checking and credit card account openings. That said, long-term investors in the bank remain in good company, given that Wells Fargo's largest shareholder, Buffett's Berkshire Hathaway, has said it intends to stick around.