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Wells Fargo claws back $75M in pay from two former execs
22 April 2017, 12:57 | Jan Cross
Wells Fargo Board Says Leaders Shrugged Off Scandal, Then Hid It
Former CEO John Stumpf, who left the bank in October, will pay an additional $28 million, while the former head of community banking, Carrie Tolstedt, will return $47 million in stock options on top of the $19 million she agreed to pay back after stepping down past year, according to a report by the Wells board of directors. The scandal prompted congressional hearings, steep fines, and an independent inquiry by Wells Fargo's board of directors into abuses at the company.
Despite the embarrassing revelations, Wells Fargo's longtime CEO John Stumpf was able to retire last fall with more than $83 million by exercising all of his vested stock options, which he had amassed over a 34-year career.
Many directors on the San Francisco bank's board now face their own scrutiny. Better Markets, a nonprofit that lobbies for stricter regulation of Wall Street, called the report a compendium of "too-little, too-late cosmetic actions" and urged shareholders to oust all of Wells Fargo's board members at the company's annual meeting this month. It has been under investigation by the Securities and Exchange Commission because of its practices. The board has since cut or clawed back more than $180 million in pay to senior leaders including Tolstedt and Stumpf.
The announcement came in a report released by the board that named Stumpf and Tolstedt as the two most prominent senior executives who have left the company due to their roles in the scandal.
Wells Fargo will claw back an additional $75 million from two former executives implicated in the bank's phony accounts scandal.
California and Arizona had a "considerably higher" number of such accounts per employee compared with other areas of the country where the bank operates, the report said.
But executives outside the community bank, including Chief Risk Officer Michael Loughlin, grew concerned after learning of the figure in April 2014 and summoned Tolstedt to a meeting that month.
Arizona was one of two "epicenters", along with the Los Angeles metro region, of Wells Fargo's unauthorized-accounts scandal, according to an internal study released Monday. After a Los Angeles Times story cast a spotlight on sales abuses in 2013, she pushed to address the problem and limit reputational damage, writing in an email that she hoped the story "doesn't become national".
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A total of US$185 million (AU$246 million) was paid in fines by the bank to federal and local authorities.
The company has also ditched high-pressure sales goals, rearranged executive titles and duties, terminated some executives, and centralized risk and human resource management systems. In 2016, the report suggests, Stumpf fought a board effort to cut her compensation-and won the battle. He hasn't had other pay clawed back, in part because he wasn't closely involved in overseeing the retail unit until recently.
The bank will also "require an applicant's documented consent" before their credit is pulled, according to a report issued Monday by independent members of the bank's board. McKinsey's performance was an outstanding demonstration of the worthlessness of management consultants: The firm produced a 402-page report that the Shearman investigators say "identified the need to "manage.the risks associated with sales, '" but "without further description of the actual problems".
"We will trust investors to make their own decisions about how they will vote". In response, some employees were fired and executives were forced to give back more than $90 million in compensation. In its report, the board found that Stumpf was also unwilling to change Wells' business model when problems arose.
For years, Wells Fargo has been known in banking circles as a having an extremely aggressive sales culture.
Activists begin an overnight encampment at a Wells Fargo bank in New York City. The investigators said Stumpf protected Tolstedt. The board "should have been more forceful in pushing Stumpf to change leadership", the committee concluded.
"The real questions right now are: Where was the board of directors, and where were the regulators?" She also ignored senior bank leaders' views about the consequences of unreasonable sales goals.
When she was forced to report the issues, such as at a January 2016 Board meeting to gauge the sales issues, she minimized the scale and nature of problems, the report states.
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