Hefty payoff to exit Wells
Despite fake accounts scandal, CEO John Stumpf could receive more than $100M if he leaves
If growing calls to push Wells Fargo’s top boss “out of the stagecoach” succeed in the wake of the fake accounts scandal, he’ll likely be in for a soft landing.
John Stumpf, the bank’s CEO and chairman, is in line for a hefty payday that could top well over $100 million if he resigns over revelations that bank employees opened millions of bogus accounts for unwitting customers.
Experts say the disclosure, which has caused Wells Fargo’s stock to decline nearly 10 percent, is one of the bank’s most difficult periods in years — and a big payout to Stumpf could make matters worse.
“Without a doubt, this is Wells Fargo’s biggest crisis since the Great Recession,” Ken Thomas, a banking analyst
and president of Miamibased Community Development Fund Advisors, said Monday. “Wells Fargo has always been a highly respected bank up to now.”
On Sept. 8, Wells Fargo was hit with $185 million in fines for what the federal Consumer Financial Protection Bureau described as a “widespread illegal practice.” Workers secretly opened more than 2 million unauthorized accounts — funding them with customers’ money, without their knowledge — to meet sales goals and earn bonuses, federal authorities said.
Stumpf, were he to step down or retire from Wells, would be in line for a package valued around $125 million, according to calculations provided to this newspaper by San Mateobased Equilar, which tracks executive compensation. The value of the compensation package would depend on the value of Wells Fargo’s stock at the time of his departure.
Regardless, a handsome pay package in light of the scandal could stir further outrage.
“Payments like this put companies in a bad light when there is controversy,” said Michelle Leder, an expert on company public filings who runs the online site Footnoted.
Carrie Tolstedt, who until July was the senior executive vice president in charge of community banking, stands to walk away with roughly $90 million, the Equilar assessment determined. The unauthorized account activity occurred in the unit Tolstedt oversaw. She had announced before news of the scandal broke that she would retire at the end of this year.
“Executive pay is really about the philosophy behind the compensation package and whether it was based on the company’s performance, and increasing the value of the company’s shares over time,” said Dan Marcec, a spokesman for Equilar. “In this case, there is the perception that there was wrongdoing by the bank.”
For Stumpf, the retirement package breaks down this way: stock valued at $74 million; unvested shares of stock eligible for retirement valued at $25.2 million; a pension worth nearly $20 million; and deferred compensation valued at $4.4 million, according to the Equilar estimates. Those figures are based on proxy statements from Wells Fargo, of which the most recently available was filed in March.
“The amounts could be higher,” Marcec said.
The exit package for Tolstedt breaks down to $38.2 million in stock; $11.5 million in unvested shares, a $1.2 million pension; and $1.8 million in deferred compensation.
It is possible that Wells Fargo’s board or compensation committee could decide to claw back, or cancel, some or all of the stock options or bonuses of top executives, including Stumpf and Tolstedt.
“If the company’s profits were achieved through nefarious means, or there is a belief it was nefarious, then it’s up to the board of directors to make a decision on that,” Marcec said.
Since the announcement of the scandal and the fines, the bank’s shares have tumbled 9.8 percent. That’s a loss of $24.7 billion in market value, according to statistics derived from the Bloomberg News database. San Francisco-based Wells Fargo fell 1.88 percent on Monday.
Shareholders have sued Wells Fargo, and the U.S. Department of Justice has issued subpoenas to the bank.
“The board of directors is asking itself what can it do to protect the brand of Wells Fargo, the stagecoach brand,” Thomas said. “If they have to push Stumpf out of the stagecoach, then that’s what they are going to do.”