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Armstrong cites Wells' example to argue for independent chairs

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Armstrong cites Wells' example to argue for independent chairs

The following is a summary of recent activist investor news from the bank and thrift space. Each company "in play" is listed along with the activist group and that group's ownership stake in the company, where applicable.

San Francisco-based Wells Fargo & Co.

Investors: Sisters of St. Francis of Philadelphia, 14,832 shares; Gerald Armstrong, 23,934 shares; Bartlett Naylor, more than $2,000 worth of shares; Arjuna Capital LLC, on behalf of Julia Bamburg and Judith Bamburg, as trustees of the Harold B. Bamburg Revocable Trust, 700 shares; the Nathan Cummings Foundation, 8,799 shares; and Sum of Us, on behalf of Linda Ferich, Holly Kooistra, Philip Katz, Laura Rea and Stanley Tomkiel, more than $2,000 worth of shares each

March 15: Wells Fargo has braced itself for the backlash from its fake-accounts revelation, and the expected shareholder proposal came from the Sisters of St. Francis of Philadelphia. They called for the creation of a report on the root causes of the sales malpractice scandal, as well as the steps taken to improve risk management and control processes.

Other proposals included Arjuna Capital's request for a report on the company's policies and goals to reduce the gender pay gap. Meanwhile, the Nathan Cummings Foundation, citing reputational risk, is pushing for full disclosure of direct and indirect lobbying activities and expenditures. Sum of Us wants a global policy regarding the rights of indigenous peoples.

Bartlett Naylor, of Public Citizen, proposed "study sessions" to address whether the divestiture of all noncore banking business segments would enhance shareholder value — and asked that a public report on the findings be released. And Gerald Armstrong wants cumulative voting in director elections.

Wells' board has asked shareholders to vote against all of the above. Among its many rebuttals, the board pointed out that, since the acquisition of Wachovia in late 2008, they have "eliminated more than 1,200 redundant, dormant or inactive subsidiaries, and have taken, and continue to take, steps to streamline our operations." The board also discouraged the use of cumulative voting, which it said could result in the election of directors representing a small shareholder group's special interests.

Wells expects to release the findings of its investigation into the fake-accounts scandal before its annual shareholder meeting April 25.

***

Charlotte, N.C.-based Bank of America Corp.

Investors: Bartlett Naylor; Kenneth Steiner; John Chevedden; and James and Anne Blaine, c/o Baldwin Brothers Inc.

March 15: BofA's board urged shareholders to vote against Naylor's proposed divestiture "study sessions," Steiner's recommendation that the CEO and chairman roles be split, Chevedden's push to amend the company's clawback policy and the Blaines' request for a report on gender pay equity.

The board noted approximately 96% of shareholders had rejected a similar motion by Naylor in 2015 and about 63% of them that same year agreed to the consolidation of the two top roles. Furthermore, 93.5% of them had rejected Chevedden's proposal at the 2016 annual meeting.

The company, according to the proxy filing, is already "a leader in the financial services industry with regard to female representation."

The annual shareholder meeting is on April 26.

***

New York-based Citigroup Inc.

Investors: John Chevedden, Bartlett Naylor, Arjuna Capital c/o Adam D. Seitchik, CtW Investment Group and the AFL–CIO Reserve Fund

March 15: At Citi, Chevedden also called for the amendment of the company's clawback policy, and Naylor urged that it consider divesting itself of noncore business segments. Arjuna Capital asked for a report on reducing the gender pay gap.

CtW Investment Group proposed the full disclosure of Citi's direct and indirect lobbying activities and expenditures, and the AFL–CIO Reserve Fund called for the prohibition of the vesting of senior executives' equity-based awards if they voluntarily leave for government service.

Citi's board asked that all shareholder proposals be voted down. And, with regard to the forfeiture of certain awards, it noted that some forms of compensation are relinquished under certain circumstances — but that transitions to government service, charity work or teaching are exempted from that rule.

Citi's annual shareholders' meeting is on April 25.

***

New York-based Bank of New York Mellon Corp.

Investor: Daniel L. Altschuler 1986 Trust, 754 shares

March 10: BNY Mellon's board asked that shareholders vote against proposed reports on its investment subsidiaries' proxy voting regarding environmental and climate change governance reforms. It argued that the company's own stance on climate change was not related to its subsidiaries' proxy voting practices. BNY Mellon further pointed out that its environmental efforts have placed it on CDP's Climate A List, FTSE4Good Index and Dow Jones Sustainability World Index.

The shareholder meeting is on April 11.

***

Minneapolis-based U.S. Bancorp

Investor: Gerald Armstrong, 7,276 shares

March 7: Armstrong, noting the recent separation of the chairman and CEO roles at Wells Fargo, repeated his call for a similar split at U.S. Bancorp. The board urged shareholders to again vote the proposal down.

The annual shareholder meeting will be held April 18.

***

San Rafael, Calif.-based Westamerica Bancorp.

Investor: Gerald Armstrong, 3,594 shares

March 15: At Westamerica, Armstrong also pushed for an independent chairman. The board argued the investor should not compare Westamerica with Wells Fargo and that it should retain the flexibility to determine the best leadership structure for the company.

The annual meeting is on April 27.

***

Cleveland-based KeyCorp

Investor: Gerald Armstrong, 20,080 shares

March 29: KeyCorp's board argued that Armstrong's proposal for the separation of chairman and CEO roles is unnecessary. Fifteen of the board's 17 members are independent. In addition, it believes that a large company subject to significant regulation needs swift and consistent communication — which is helped by the chairman and CEO speaking as a single voice on behalf of board and management.

The vote will be held May 18.

***

Denver-based CoBiz Financial Inc.

Investor: Gerald Armstrong, 3,937 shares

March 10: CoBiz's board noted this is Armstrong's sixth consecutive year of pushing for an independent chairman — and that 84% of shareholders had voted against it in 2016.

The meeting is on April 27.

***

Kansas City, Mo.-based UMB Financial Corp.

Investor: unidentified shareholder, 92 shares

March 13: The proposal, citing changes in Wells Fargo's management and the "excessive turnover" in UMB's management, calls for an independent chairman. The board asked shareholders to again vote down the proposal.

The vote will be held April 25.

***

San Francisco-based First Republic Bank

Investor: Inge Thorn Engler Revocable Trust, 250 shares

March 27: First Republic's board asked shareholders to vote against a proposed report regarding employee diversity. The board said females represent 35% of the company's executive or senior-level official and manager roles and 49% of the overall workforce. In addition, 46% of First Republic's total workforce comes from minority groups.

The meeting is scheduled for May 9.

***

Pittsburgh-based PNC Financial Services Group Inc.

Investor: Trillium Asset Management LLC, on behalf of Portfolio 21 Global Equity Fund

March 15: The board recommended a vote against Trillium's proposal for more diversity-related disclosures.

The meeting is on April 25.

***

Winston-Salem, N.C.-based BB&T Corp.

Investor: Kenneth Steiner, at least 500 shares

March 15: Steiner has called for the elimination of supermajority voting provisions in the company's articles and bylaws, to be replaced with a "simple majority" vote. BB&T's board argues the current voting policy is designed to protect important bylaw provisions from "arbitrary amendment."

The annual shareholder meeting is scheduled for April 25.

***

Portland, Ore.-based Umpqua Holdings Corp.

Investor: Sheet Metal Workers' National Pension Fund, approximately 4,455 shares

March 3: Umpqua's board called on stockholders to vote against the majority vote standard being proposed for director elections, arguing that current rules already require directors who do not receive a majority of votes in their favor to tender their resignation.

The vote will be held April 19.

***

Birmingham, Ala.-based ServisFirst Bancshares Inc.

Investor: California State Teachers' Retirement System

March 29: CalSTRS called for a majority voting standard in uncontested director elections. ServisFirst's board urged shareholders to vote against the proposal, pointing out that incumbent director nominees who get more "withheld" votes than votes "for" their election in an uncontested election must offer to resign.

The meeting will be held May 18.

***

Irvine, Calif.-based Banc of California Inc.

Investor: Legion Partners Asset Management LLC, 6.6%

March 14: Having already appointed PL Capital Group's Richard Lashley and Patriot Financial Partners GP LP's Kirk Wycoff, Banc of California will now add two seats under an agreement with Legion Partners. When the vacancies are filled, the board will have a total of nine members, all independent.

***

Wooster, Ohio-based Wayne Savings Bancshares Inc.

Investor: Stilwell Group, 9.7% as of Oct. 31, 2016

March 21: Joseph Stilwell's investor group solicited votes for its director nominee, Stephen Burchett. It criticized Wayne Savings for being so "arrogant – or foolish" as to hire a law firm to fight the proxy contest, with a reported "half a million dollars" earmarked for keeping Burchett out of the boardroom.

Feb. 13: Wayne Savings' own letter to shareholders said Stilwell's group had a conflict of interest in its nomination of a new director, claiming the investor activist had reached a compensation agreement with Burchett involving options that will only be exercisable if the company is sold or if it undergoes a similar management change.

The shareholder meeting is on May 25.

***

Clarksville, Tenn.-based First Advantage Bancorp

Investor: Stilwell Group, 5.2%

March 20: The group disclosed it owns 182,700 First Advantage shares and will assert shareholder rights in order to profit from stock price appreciation.