Wells Fargo claws back mil­lions of dol­lars in ex­ec­u­tives’ pay

China Daily (USA) - - Q&A WITH CEO - By AS­SO­CI­ATED PRESS in­Wash­ing­ton

Wells Fargo says CEO John Stumpf and the ex­ec­u­tive who ran the bank’s re­tail bank­ing divi­sion will for­feit tens of mil­lions of dol­lars in pay as the bank tries to stem a scan­dal over its sales prac­tices.

The in­de­pen­dent di­rec­tors at the na­tion’s sec­ond-largest bank said Tues­day that Stumpf will for­feit $41 mil­lion in stock awards, while for­mer re­tail bank­ing ex­ec­u­tive Car­rieTol­st­edt will for­feit $19 mil­lion of her stock awards, ef­fec­tive im­me­di­ately. Both are also giv­ing up any bonuses for 2016, and Tol­st­edt will not re­ceive any sev­er­ance or any other com­pen­sa­tion in con­nec­tion with her re­tire­ment, the bank’s di­rec­tors said.

The an­nounce­ment comes ahead of Stump’s planned ap­pear­ance be­fore the House Fi­nan­cial Ser­vices Com­mit­tee on Thurs­day, where he is ex­pected to face a bi­par­ti­san grilling sim­i­lar to what he ex­pe­ri­enced last week from the Se­nate Bank­ing Com­mit­tee.

The San Fran­cisco-based bank’s in­de­pen­dent di­rec­tors are also launch­ing their own in­ves­ti­ga­tion, hir­ing the law firm Shear­man & Ster­ling to as­sist them.

In their an­nounce­ment, the in­de­pen­dent di­rec­tors said the­moves­did not pre­clude the board from pur­su­ing more salary claw­backs from Stumpf or Tol­st­edt, de­pend­ing on the re­sults of the in­ves­ti­ga­tion. Stumpf, as a mem­ber of Wells Fargo’s board of di­rec­tors and chair­man of the board, has re­cused him­self from any de­ci­sions that may come from that in­ves­ti­ga­tion, the board said.

“We will pro­ceed with a sense of ur­gency but will take the time we need to con­duct a thor­ough in­ves­ti­ga­tion,’’ Stephen Sanger, Wells Fargo’s lead in­de­pen­dent di­rec­tor, said in a state­ment.

Wells Fargo had been un­der pres­sure from law­mak­ers and oth­ers to im­ple­ment its ex­ec­u­tive com­pen­sa­tion claw­back pro­vi­sions af­ter the bank agreed to pay $185 mil­lion to set­tle al­le­ga­tions its em­ploy­ees opened mil­lions of ac­counts with­out cus­tomers’ per­mis­sion to reach ag­gres­sive sales tar­gets.

Stumpf has faced bi­par­ti­san out­rage for his han­dling of the scan­dal. Repub­li­can Sen. Bob Corker of Ten­nessee said at a Bank­ing Com­mit­tee hear­ing, where Stumpf tes­ti­fied last week, that it would be “mal­prac­tice” if Wells Fargo didn’t in­sti­tute any com­pen­sa­tion claw­backs. Demo­cratic Sen. El­iz­a­beth War­ren of Mas­sachusetts told Stumpf he should re­sign and “give back the money you took while the scam was go­ing on.’’

Stumpf, a 34-year vet­eran of Wells Fargo and CEO since 2007, earned $19.3 mil­lion last year. Tol­st­edt an­nounced her re­tire­ment in July and had been ex­pected to leave with as much as $125 mil­lion in salary, stock op­tions and other com­pen­sa­tion be­fore the board’s an­nounce­ment.

The con­sumer bank­ing gi­ant, which is also the na­tion’s big­gest mort­gage lender, has fired about 5,300 em­ploy­ees over the sales prac­tices. Law­mak­ers told Stumpf at the hear­ing those dis­missals didn’t go enough up the chain.

Stumpf was long ad­mired for keep­ing Wells — un­til re­cently— free of scan­dal. The bank did not in­vest in as many toxic mort­gages in the 2000s as its coun­ter­parts, and Stumpf ini­tially de­clined to take bailout money from Wash­ing­ton be­fore ac­cept­ing it in a sign of sol­i­dar­ity.

He also was able to ex­pand Wells sig­nif­i­cantly as a re­sult of the cri­sis, buy­ing up­Wa­chovia. That gave the bank known for its stage­coach logo, which was pri­mar­ily a West Coast and South­ern bank, ac­cess to the lu­cra­tive East Coast and NewYork bank­ing mar­kets.

Stumpfwasalso well-known in the bank­ing in­dus­try for his com­pany’s abil­ity to sell prod­ucts to cus­tomers. While quo­tas var­ied by branch size and high other fac­tors, a typ­i­cal em­ploy­ee­hadto sell be­tween13and15 bank­ing prod­ucts a day — a new ac­count, a mort­gage, a re­tire­ment ac­count, or even on­line bank­ing. The tar­gets were high even in small towns.

Fed­eral and lo­cal author­i­ties said Wells Fargo & Co. em­ploy­ees try­ing to meet those tar­gets opened bank and credit card ac­counts, moved money be­tween those ac­counts and even cre­ated fake email ad­dresses to sign cus­tomers up for on­line bank­ing — all with­out cus­tomer au­tho­riza­tion. Debit cards were is­sued and ac­ti­vated, as well as PINs cre­ated, with­out cus­tomers’ knowl­edge.

The La­bor Depart­ment is in­ves­ti­gat­ing whether Wells Fargo abused its em­ploy­ees while driv­ingth­em­tomeet the lofty sales tar­gets.

value of the stock awards for­feit that Wells Fargo CEO John Stumpf will face money that John Stumpf earned last year

John Stumpf, chief ex­ec­u­tive of­fi­cer of Wells Fargo & Co

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