Wells Fargo released the Board’s investigation of itself and in a surprise finding, it concludes it did just fine.

The four-member committee was made up of current board members, with three of the four having served since before 2009 when the bad conduct is alleged to have begun. A law firm did assist in the completion of the report. The firm, of course, was retained by the board.

To be fair, the report does highlight a few examples where the board could have executed its duties better. In another surprise finding, however, the report concludes that its oversight efforts were thwarted by management.

I’m surprised that the report didn’t conclude that the board was the victim of senior management. Those poor board members.

I have to question the integrity and conclusions of the report given the obvious conflict of interest. Bad behavior will continue where it is incentivized or not punished. If the report is allowed to stand, what incentive will other boards have to be tough on management?

The FT’s definition of “independent board” notes:

Often, directors approve managers’ initiatives too fast without careful investigation because some of them have personal ties with the firm managers or feel indebted to the CEO who hired them.  As such, in some firms, outside directors merely serve as window dressing and don’t have real power. Research has shown that independent directors also need incentives, either in a monetary form (stock ownership) or a non-monetary form (reputation, social status), to contribute their human capital (industry experience) and social capital (business or government connections) to the firm and perform their duty effectively.

None of the above issues were explored in the report. Would an independent investigation have done so? I would expect so.

Shareholders will have the opportunity to decide the issues of conflict and integrity at the annual meeting on April 25th, where the board members responsible for the investigation are up for re-election. The proxy advisory firm Institutional Shareholder Services recommends that shareholders vote against all four of them.