In a break from standard industry practice, Wells Fargo said Wednesday that it will no longer require arbitration for employees making claims tied to sexual harassment, earning it praise from at least one vocal advocate for women and other underrepresented groups.
“Changing the toxic culture of financial services requires systems level change, and ending forced arbitration is at the top of my list of crucial actions companies must take,” said Sonya Dreizler, founder of Solutions With Sonya and a consultant on sustainable and impact investing. “I’m glad to see Wells Fargo show leadership in this area, and I hope this change is accompanied by internal procedures to help all employees feel safe and welcome at work.”
Wells Fargo’s stance appears to be in sync with how the industry views the matter. In ThinkAdvisor’s survey that followed investment advisor Ken Fisher’s crude remarks at an event in October, 71% of both men and women polled said the industry should end mandatory arbitration in cases of sexual harassment, thus giving employees the right to sue employers.
Most men, 67%, agreed that it should end, while 82% of women said it should. (The poll was completed by about 1,350 financial professionals in late 2019.)
“Wells Fargo has zero tolerance for sexual harassment,” David Galloreese, head of human resources at Wells Fargo, wrote in a post on the company’s internal and external websites. “We believe that this is the appropriate change to make at this time for our employees.”
The bank says it made the decision after “internal dialogue and feedback from various stakeholders.” Last last year, Clean Yield Asset Management submitted a shareholder proposal focused on mandatory arbitration of workplace sexual harassment claims (which it has since withdrawn).
“It’s important to note that this tremendously positive change came about because of shareholder engagement efforts by Clean Yield Asset Management and others,” Dreizler explained. “Shareholder engagement, which is currently under threat at the SEC, is an important tool that can be leveraged to bring positive change to a company and its employees.”
The Securities and Exchange Commission has proposed changes to proxy voting rules that would make it harder for shareholders to challenge corporate management.
Wells Fargo’s arbitration policy generally has applied to employees hired since Dec. 11, 2015. Overall, it employs more than 250,000 individuals.
The use of forced arbitration more than doubled from the early 2000s through 2018, with over 60 million Americans bound by it, according to a report by the Economic Policy Institute; about 65% of firms with 1,000 or more workers use it.
Financial advisor Rachel Robasciotti, CEO of Robasciotti & Philipson and a co-founder of the impact investing platform RISE (Return on Investment & Social Equity), along with the Grab Your Wallet Alliance and LedBetter Gender Equality Index, formed the Force the Issue project in September 2019 to focus on ending arbitration. (Robasciotti, Dreizler and advisor Alex Chalekian were present when Fisher made his lewd comments in October and later spoke out about them.)
The Force the Issue effort has since earned the support of investor groups like the AFL-CIO, Trillium Asset Management, Los Angeles City Employee Retirement System, Walden Asset Management, Natural Investments,and Nia Impact Capital, which work with about $54 billion of assets. It also maintains a database of companies’ policies toward mandatory arbitration.
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