WELLS FARGO BOARD FORCES CHAIRMAN/CEO STUMPF to forfeit $41M in stock awards over 2M phantom customer accounts scandal
Wells Fargo WFC -2.07% CEO John Stumpf may not lose his job over the phony account scandal that has cost his bank its reputation(and $185 million in fines), but he will lose his bonus — and then some. After weeks of public outcry and prodding from some Wall Street analysts, the Wells Fargo board announced late Tuesday that it is forcing both Stumpf and former community banking head Carrie Tolstedt to forfeit more than $60 million in bonuses and unvested stock awards.
The Wells Fargo board of independent directors announced late Tuesday that, in the wake of the news that the bank created more than two million accounts without its customer consent, it is launching an independent investigation and forcing Stumpf and Tolstedt to forego millions in stock awards.
According to a statement from the board, Stumpf will forfeit all of his outstanding unvested equity awards, which are valued at approximately $41 million based on Tuesday’s closing of $45.09 per share; he will forgo his salary during the investigation; and he will not receive a bonus for 2016. Carrie Tolstedt, the woman who used to be in charge of the unit that was responsible for creating the unauthorized accounts (she retired this summer), will also see clawbacks in her compensation: the board said that Tolstedt will forfeit all of her outstanding unvested equity awards, which are valued at $19 million based on Tuesday’s closing price; nor will she receive a bonus for 2016, be paid any severance or receive any “retirement enhancements in connection with her separation from the company.” The board also said that Tolstedt has agreed to not exercise her outstanding options during its investigation.
Stumpf, who is also the chairman of the board, has recused himself from the board’s investigation and compensation deliberations.
We will conduct this investigation with the diligence it deserves — and will follow the facts wherever they lead,” lead independent director Stephen Sanger said in a statement Tuesday evening. “Based on the results of the investigation, the independent members of the board will take such other actions as they collectively deem appropriate, which may include further compensation actions before any additional equity awards vest or bonus decisions are made early next year, clawbacks of compensation already paid out, and other employment-related actions.”
The clawbacks come just two days before Stumpf is to testify in front of the House Financial Services Committee, and is clearly an effort by a bank to avoid a repeat of what Stumpf heard during last week’s Senate banking committee hearing.
“You haven’t resigned, you haven’t returned a single nickel of personal earnings, haven’t fired a single senior executive… it’s gutless leadership,” Senator Elizabeth Warren (D-MA) said to Stumpf during the hearing. ”To not invoke some degree of clawback for yourself and others involved would be committing malpractice from the perspective of public relations. At a minimum that should take place,” Senator Bob Corker (R-TN) said to Stumpf.
The clawbacks announced Tuesday evening are just the latest in a series of damage control attempts by the bank: when news of the phony accounts first broke, Wells tried to emphasize that it has fired 5,300 employees over the course of five years. (Employees are saying that the bank is unfairly blaming them, and that unrealistic sales quotas are what led to the fraud in the first place. Just last week, two such ex-employees filed a class action suit seeking $2.6 billion in damages.) Then, a few days later, it announced that it was getting rid of product sales goals starting on January 1, 2017.
Tuesday night, it hastened the timeline for the abolition of sales targets; according to a copy of Stumpf’s prepared remarks for Thursday’s House hearing (which were obtained by the Wall Street Journal), the bank will end sales goals for retail banking employees by October of this year.
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