Bank CEO roasted again

Despite a repetition of verbal scourging, the appearance of Wells Fargo CEO John Stumpf before the U.S. House Financial Services Committee was not a “deja-vu-all-over-again” affair. New information emerged that had not been explored at a Senate hearing the week before. Naturally, new questions arose. Before Thursday’s House hearing, the bank’s directors announced that Stumpf would forfeit $41 million in stock awards not yet paid and would serve without salary during the board’s own investigation of how and why about 1.8 million accounts had been opened for customers without their knowledge. (Stumpf earned $19.3 million last year, of which $2.8 million was salary and a large part of which was awards of stock.)

The former head of consumer banking, Carrie Tolstedt, who recently left Wells Fargo, will forfeit $19 million in stock awards.

The first notable piece of new information from the House committee room was Stumpf’s testimony that the board had been told of the unauthorized accounts in 2014. (The Los Angeles Times had written about them in December 2013.)

Sales goals, which if met produced bonuses, are being dropped immediately (new info) instead of next year. “We never directed nor wanted” employees to give customers products “they did not want or need,” Stumpf said. This is hard to believe.

It’s unclear why the accounts were being opened while the bank was firing 5,300 employees (over seven years) for “dishonesty.”

The new question is: Why did the directors appear to do nothing? (A new training regime was instituted; at whose behest is not known.) Stumpf has shown himself to be an unfit CEO; shouldn’t the directors pay some penalty for sitting on their hands? Penalties eventually imposed by regulatory agencies came to $185 million, which comes out of the pockets of shareholders.

Banks usually have provisions to retrieve pay, but $41 million is the largest “clawback” ever. It should encourage other bankers to pay attention to their duties.