Wells Fargo is a global company that is highly diversified and offers community-based financial services with approximately $ 1.7 trillion in assets (Jacobsen, Chan & Barbee, 2010). The corporation was established in the year 1852 with its headquarters in San Francisco. Wells Fargo offers many services to its customers comprising “banking, insurance, investments, mortgage, and consumer and commercial finance” (Wells Fargo, 2017). They run their operations in 36 states globally with about 266, 000 active employees. In the year 2015, they were ranked at position 29 in the Fortune Largest corporations in the US.
Wells Fargo board of directors comprises of many top officials and executives who oversee the daily operation of the company. According to Wells Fargo (2017), t he following are the principal members of the board, “John D. Baker II, John S. Chen, Lloyd H. Dean, Elizabeth A. Duke, Susan E. Engel, Enrique Hernandez, Jr., Donald M. James, Cynthia H. Milligan, Karen B. Peetz, Federico F. Pea, James H. Quigley, Stephen W. Sanger, Ronald L. Sargent, Timothy J. Sloan, Susan G. Swenson and Suzanne M. Vautrinot”.
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The Board members direct the business of Wells Fargo. They are responsible for delegating business related duties to the management, the workforce and the executive officers in addition to the CEO. The Board also selects and evaluates overall performance in addition to reimbursement of the firm’s CEO (Jacobsen, Chan & Barbee, 2010). They are further in charge of the oversight duties including planning for the succession of the CEO together with other senior most members of the management, review and monitor and approve the business strategic plan and goals. Additionally, the board is in charge of the company’s framework and management of risks, enhance the company’s integrity, implement and neighbor the organizational culture, and lastly, they ensure there is maximum compliance level.
The Wells Fargo’s executive committee comprises of the following; John R. Shrewsberry, Senior EVP, Chief Financial Officer and Timothy J. Sloan, CEO and President. They are in charge of every operation of the company, therefore; they manage, review, monitor and even suggest certain improvements of the strategic plans and objectives as members of the board of directors ( Wells Fargo, 2017 ). They also have a role in risk management and enhance the company’s integrity and culture of ethics. They qualified for these executive positions because they have highest character and integrity, demonstrated the breadth of leadership experience particularly in a senior leadership role in a recognized firm. Further, they are highly competent in financial concepts, and lastly, they all have a demonstrated capability to think and act independently and able to work constructively within a collegial environment.
After an extended period of corporate scandal facing the majority of the huge public corporations around the years 2000 and 2002, the Sarbanes-Oxley Act was created. It was aimed to restore the level confidence of investors in market and at the same time close any loopholes available that might have been adopted by companies to commit fraud among their investors (Jacobsen, Chan & Barbee, 2010). This Act evidently had a huge impact on Wells Fargo financial reporting. The Act required that Wells Fargo as a public firm strengthen their audit committees, undertake an internal control test, enhance their discloser and at the same establish a personal liability of the director for the accurate financial statement. The Sarbanes-Oxley Act further created a severe illegal penalty for security deception and changed how Wells Fargo as a public accounting firm operates their businesses. One of the primary effects of the Sarbanes-Oxley Act on corporate governance at Wells Fargo was the strengthening of audit committees ( Wells Fargo, 2017 ). The audit committee obtains great leverage in supervising the accounting choices made by the firm’s top management.
The members of the audit committee have to be autonomous against the senior management and assume new duties such as authorizing the audit and non-audit services of the company, choosing and supervising external auditors, and dealing with grievances concerning the accounting practices of the firm’s management. According to Jacobsen, Chan & Barbee, (2010), the firm was further required to undertake a costly extensive internal control test. The compliance cost has been shown to be highly burdensome for businesses that greatly depend on manual controls. The Sarbanes-Oxley Act helped Wells Fargo by ensuring that their financial reporting was more effective, integrated and automated. The Sarbanes-Oxley Act strengthened the disclosure requirement of the firm and imposed harsher punishments for any form of any act aimed at hindering “justice and securities fraud, mail fraud and wire fraud” (Jacobsen, Chan & Barbee, 2010).
Wells Fargo has an asset liability committee that coordinates the management of assets and liabilities to enable the firm to earn enough returns. Asset/liability management entails the process to manage the utilization of the assets and cash flow to meet Wells Fargo obligation that consequently reduces the possible risk of loss that might emerge due to failure to pay liability on time. The asset liability ensures that all the assets and liabilities are adequately handled hence resulting in increased revenues. When it comes to the management of significant risks facing Wells Fargo including credit risk, the market risk and even asset/liability interest rate risks, the Board of Director together with the senior management are in charge of risk management (Jacobsen, Chan & Barbee, 2010). These are further supported by the Board’s Credit committee who are in charge of managing the firm’s annual credit quality plan, the lending policy, credit trends, and elevated portfolio risks. Additionally, the Finance Committee oversees primary financial risks including the price and interest rate risks with the help of Corporate Asset/Liability Management Committee. Credit Officers certify risk ratings quarterly and are accountable for their accuracy. The corporate credit group and line of business credit functions recurrently appraise and adjust credit policy, including risk scores, to deal with extreme risk level once they have been recognized.
References
Jacobsen, B., Chan, C., & Barbee, O. (2010). Balancing longevity risk and market risk in target date funds. Rotman International Journal of Pension Management, 3 (2): 56-78.
Wells Fargo (2017). Leadership and Governance.
Retrieved from https://www.wellsfargo.com/about/corporate/governance/
