Search this website. You can use fund codes to locate specific funds

Wells Fargo & Company is one of the world’s systemically important financial institutions.

Engagement objectives and issues:
Environmental: Climate change financing
Social: Conduct risk, corporate culture
Governance: Ensure appropriate leadership structure, responsible lending practices, requisitioning special meetings



Wells Fargo & Company announced regulatory and legal settlements in 2016 relating to its retail banking sales practices, which harmed customers. Misaligned incentives, insufficient oversight and a lack of attention to behaviour led to unethical activities, particularly in some parts of the company. As a result, the company suffered significant damage to its reputation among stakeholders, incurred significant fines and penalties and has had to pay compensation to those affected.

The company’s board launched an independent investigation into the company’s retail banking sales practices and related matters, and the board’s report found that the root causes of its issues included performance management and incentive programs and a high-pressure sales culture in its community bank, which drove inappropriate behaviours. To address the root causes, radical change at the company was therefore needed.

The crisis also meant that the company risked falling behind other emerging best practice within the industry, in particular on the increased financing of the transition to a low-carbon economy undertaken by its peers. We were of the firm view that catching up would help its rehabilitation.

Our engagement

Alongside the pension funds of the States of Connecticut and Illinois and the Needmor Fund, we began our engagement by filing a shareholder proposal in 2016 calling for an independent chair at the company. The arrangement, we believed, would provide the basis for proper oversight by the board over the company’s management.

Our dialogue continued into 2017, when we met with the company’s corporate secretary and chief administrative officer to discuss the progress it was making on governance and compliance and to ensure that change was underway. We also co-signed a letter, alongside 100 institutional investors with $2 trillion of assets under management, to 62 of the world’s largest banks requesting that they implement the recommendations of the Task Force on Climate-related Financial Disclosures. 

In the first half of 2018, our engagement led to a positive meeting with Wells Fargo’s independent chair. She outlined the board’s approach to the difficult issues it had to address, and we offered our support. Subsequently, we continued to exchange views with the company. We reiterated the importance of delivering a market-leading climate change strategy to restore trust among its stakeholders and to take advantage of the business opportunity that climate change presents. We also made further suggestions on the company’s pay, culture and internal controls.

Changes at the company

Encouragingly, in November 2016, the board amended the company’s by-laws to mandate an independent chair, allowing us to complete our objective within weeks of starting our engagement on the issue.

In late 2017 following our meeting on governance and compliance, the company provided us with details of its fundamental change programme, which exceeded the regulatory requirements. We also welcomed the retirement of many of the longer-standing directors, who have been replaced by good quality ones with a wealth of relevant experience.

In early 2018, our engagement allowed us to obtain further substantial information from the chair and the corporate secretary about the continuing efforts to re-establish cultural norms across the entire organisation and to re-build trust with its customers. We expect to complete our objectives on this and on conduct risk, as further evidence of progress emerges.

We were equally delighted that the company announced an ambitious clean energy goal in the second quarter of 2018 and hope for an early achievement of this. We also look forward to the company’s reporting against the recommendations of the Task Force on Climate-related Financial Disclosures. 

In early 2019 the company published its long awaited Business Standards Report which has added further confirmation that it has improved its practices significantly.

Case studies are shown to demonstrate engagement, EOS does not make any investment recommendations and the information is not an offer to buy or sell securities.

Related Articles

Public declaration of voting recommendations 2022
EOS Stewardship Report 2021
LyondellBasell case study

EOS Client Service and Business Development

Amy D’Eugenio,
Head of Client Service and Business Development, EOS