Warren Buffett is likely to back controversial recommendations made by Wells Fargo (WFC) executives at the company’s annual shareholder meeting next week, including plans to reinstate most of the scandal-ridden bank’s increasingly unpopular board of directors, according to Reuters.
Berkshire Hathaway’s (BRK/B) show of support comes after proxy advisors voiced their intention to use the occasion to overhaul Well Fargo’s board. As Buffett’s company Berkshire Hathaway is the largest shareholder, owning nearly a tenth of Wells Fargo stock, and is very influential in investment circles, its decision will likely play an important role in swinging the final vote. (See also: Berkshire Sells Wells Fargo Shares.)
Wells Fargo’s management team has faced criticism from some shareholders in recent months after it emerged that the nation’s fourth-largest bank created up to to 2 million fake accounts and other products in customer names without consulting them. The scandal led former CEO John Stumpf to resign in October, although several disgruntled shareholders believe that further managerial changes are still required to improve the bank’s reputation and ensure that similar mistakes don’t occur again in future. (See also: Four Wells Fargo Managers Fired.)
Proxy adviser Institutional Shareholder Services argued that the current board failed to provide “timely and sufficient risk oversight” to stop the fake accounts scandal. As a result, it has been campaigning with shareholders to vote for the reelection of just three of the bank’s 15 directors at the next meeting. One of the directors it plans to back is current CEO Tim Sloan, who recently bought $2 million worth of shares to boost investor confidence in the company. (See also: Wells Fargo CEO and Chairman Buy WFC Stock.)
According to recent reports, it is likely that Wells Fargo was made aware of the scandal years before it became public. The OCC, the nation’s big bank regulator, confirmed that it recognized unusual sale patterns at the bank as early as 2010, but failed to investigate further after meeting with the company’s executives.
"The OCC did not take timely and effective supervisory actions after the bank and the OCC identified significant issues with ... sales practices," the office's inspector general said in a report.