Dive Brief:
- Wells Fargo and investors have agreed to settle a lawsuit brought against bank executives over their alleged role in “sham” diversity hiring practices.
- The parties reached a settlement in principle in the shareholder derivative lawsuit Friday “after extensive arms-length negotiations,” according to a Monday court filing in the U.S. District Court for the Northern District of California.
- The lawsuit, filed in 2022, charged bank executives, including CEO Charlie Scharf, with breaching their fiduciary duties by making false or misleading statements about the company’s diverse hiring practices, and failing to disclose that federal prosecutors were investigating the San Francisco-based bank’s hiring practices. Wells also faces a securities class-action lawsuit that claims the bank misled investors about diversity practices.
Dive Insight:
A spokesperson said the bank is “pleased to have reached a settlement in principle in this matter. We believe the claims were without merit.”
In 2020, Wells Fargo launched a “diverse slate” policy, requiring at least half of job candidates interviewed for open positions paying $100,000 or more per year be women, nonwhite or otherwise disadvantaged.
But the bank’s practices came under fire in 2022, after current and former employees told The New York Times that sham interviews were being conducted to meet diversity goals. The bank was interviewing nonwhite and female candidates for jobs that had already been filled, with no intention of hiring the interviewees, employees said.
After shelving the diverse slate policy in June 2022, the bank implemented a revised hiring policy, applying its diverse-candidate requirement to roles based on job level rather than compensation.
In 2022, prosecutors began investigating whether the bank violated federal laws with its hiring practices, and the Securities and Exchange Commission opened a probe into the bank’s diverse-hiring practices. The Justice Department and SEC closed their investigations without taking action, the company disclosed in 2023.
The parties are working through formal settlement documentation and expect to file a motion for preliminary approval of the settlement by Oct. 13, according to court documents. A hearing has been requested for mid-November.
