Wells Fargo exec loses pay of $45 million
Wells Fargo & Co. Chief Executive John Shumpf will be forced to forfeit compensation worth $45 million in the wake of the bank’s fake account scandal.
Wells Fargo & Co. CEO John Stumpf will forfeit compensation worth about $45 million, part of the company’s response to the still-unfolding scandal over millions of fake accounts created by bank employees.
Stumpf will give up about 910,000 shares in unvested stock awards and will not get a bonus this year, according to a statement released late Tuesday by members of Wells Fargo’s board of directors.
Also, Carrie Tolstedt, the executive in charge of the division at the heart of the scandal, will give up $19 million worth of stock.
The board’s decision comes two days before Stumpf is expected to appear before the House Financial Services Committee.
Stumpf came under heavy bipartisan criticism last week when he was grilled by the Senate Banking Committee. The San Francisco banking giant has acknowledged that thousands of bank workers opened as many as 2 million accounts for customers without their knowledge.
The bank has agreed to pay $185 million to federal
regulators and the Los Angeles City Attorney’s Office over the fake accounts, a practice regulators say was encouraged by an aggressive and poorly supervised sales culture.
Federal prosecutors are investigating the bank to see whether criminal charges should be filed, and the Labor Department said Tuesday that it is investigating possible labor law violations.
Meanwhile, the company is facing a mounting number of lawsuits from customers, employees and shareholders.
At last week’s hearings, Sen. Elizabeth Warren, D-Mass., called on Stumpf to step down.
“You should resign,” Warren said. “You should give back the money you took while this scam was going on, and you should be criminally investigated by the Department of Justice and the Securities and Exchange Commission.”
Warren and other senators pushed Stumpf to commit to giving back some of his pay and to take back pay from Tolstedt. He said at the time that any decisions about compensation would be left to a committee within the company’s board.
Late Tuesday, the independent members of Wells Fargo’s board — that is, members other than Stumpf — announced they have hired a law firm to investigate the bank’s sales practices. Stumpf, the chairman of the board, will recuse himself from matters related to the investigation, according to a news release.
According to that release, Stumpf and the board reached a deal that calls for him to give up all of his unvested stock awards, which the company values at about $41 million, based on the closing price of Wells Fargo shares Tuesday.
Based on a review of the bank’s regulatory filings, the Los Angeles Times has estimated Stumpf’s unvested shares could ultimately have been worth as much as $52 million, though that figure includes the maximum potential value of some awards that are based on the bank’s performance.
Along with giving up his unvested stock, the board will not pay Stumpf a bonus for 2016. His annual bonus for the last several years has been $4 million.
Stumpf will also give up his salary during the investigation. With an annual salary of $2.8 million, Stumpf would lose about $54,000 per week.
Also, Tolstedt, who announced her retirement this summer and was expected to stay with the bank through the end of the year, has left the company.
The board noted in its statement Tuesday that the clawback actions against Tolstedt and Stumpf “will not preclude additional steps being taken” against them “or other executives as a consequence of the information developed in the investigation.”
Still, Stumpf and Tolstedt will not walk away empty-handed. The two executives are only giving up unvested stock awards — ones they didn’t own yet. They each own millions of dollars worth of Wells Fargo stock outright, and Tuesday’s agreement does not call for the executives to lose any of those.
Tolstedt’s holdings, including stock and vested stock options, amount to about $77 million. Stumpf ’s holdings add up to $109 million in stock, plus more than $24 million in accumulated pension and 401(k) benefits.
The consumer banking giant, which is the biggest U.S. mortgage lender, has fired about 5,300 employees over the disputed sales practices.
Stumpf was long admired for keeping Wells Fargo — 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 Fargo significantly as a result of the crisis, buying up the Wachovia banking company. 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 New York banking markets.