September 24th, 2009

Does Wells Fargo need more Board Changes?

Each week InvesGuard will be showcasing 2 researched companies and discussing their scorecards as well.


Considering the change in Chairman CEO positions, I thought we could start with Wells Fargo


Up until now, Wells had dual Chairman CEO positions. It is generally believed that separating these two positions has a positive effect on the general governance health of the company. Having one person hold the positions of both chairman and CEO may increase the possibility of concentration of power.


With this change, Wells Fargo joins the long list of financial industry companies where the CEO is also the chairman. Look at this partial list of companies where these 2 positions are held by the same person:


a. Goldman Sachs


b. Regions Financial Corp


c. J P Morgan Chase


d. US Bancorp


e. Bank of New York Mellon


As part of our research on Wells Fargo, we found certain deficiencies on their Board composition.


1.Wells Fargo Board of Directors’ Finance and Credit Committee charters require their members to provide oversight of various public and private equity investment portfolio strategies, derivative usage strategies, credit related aspects of Basel II. However, from the biographies that the company has provided on its directors, it appears that these committee members do not have relevant previous or current experience. Subscribers can access more details under Board Effectiveness and Risk Profile in the Board of Directors Tab for Wells Fargo .


2. Concerns exist about certain board interlocks on the Wells Fargo Board. The CEO of Vulcan Materials serves on the Wells Fargo board while another director from Wells is also on the board of Vulcan Materials.


3. 2 Board members at Wells Fargo have been associated with companies that have filed for relief under Chapter 11 in the U.S. Bankruptcy court. Out of these 2 directors, one serves on the Audit Committee of the Board.


If these little nuggets interest you and you want to know more, think about subscribing to InvesGuard. Besides getting unrestricted access, subscribing also gives you the opportunity to receive alerts about newly added companies.


Did you know you can browse the company scorecard pages even without a subscription? The scorecard tab along with the overview and factsheet tab are freely available. You can even compare companies in the ‘Compare Charts’ tab. You can also download the scorecard graph on your desktop. Simply click on ‘Grab and share’ on the bottom of the graph on the HOME PAGE.


Must reads for the week:


1. insightful look at weird accounting treatments of asset write downs in case of bank acquisitions.


2. Another article on accounting practices. This one foresees potential gains for tech industry


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