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CtW Seeks Major US Banks' Reviews After Wells Fargo Scam


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In light of the sales scam surrounding Wells Fargo & Company (WFC - Analyst Report) , CtW Investment Group, the Union pension fund adviser, recently called on boards of JPMorgan Chase & Co. (JPM - Analyst Report) , Bank of America Corporation (BAC - Analyst Report) and Citigroup Inc. (C - Analyst Report) to review their employment practices. It said that it will not support the re-election of directors who failed to comply with the examination of incentive pay practices.

It sent letters to the lead directors of these banks and called them to review whether incentives paid to workers encouraged unethical behavior.

A renewed round of scrutiny on whether big lenders' sales practices have become too aggressive to meet goals has already been conducted.  Notably, on Oct 3, Morgan Stanley was charged by Massachusetts' top securities for "dishonest and unethical conduct" for having pushed its brokers to sell loans to clients.

Further, CtW which manages more than $250 billion funds for the union pension, mentioned in its letter that the Wells Fargo case "evinces the significant risks that inappropriate and poorly designed human capital management practices may pose to a bank's operations, reputation, and regulatory standing."

In the past, some of the actions taken by CtW have helped bring certain changes including the departure of directors from JPMorgan after the so-called "London Whale" trading debacle. Moreover, it has called on Wells Fargo to take some actions. This includes adding two new directors with human capital expertise.

Meanwhile, other activists have called on Wells Fargo and have filed shareholder resolutions to study a breakup and to differentiate between the roles of CEO and chairman.

However, spokespeople for JPMorgan, Bank of America and Citigroup each have not yet made any comments regarding the matter.

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