Tiny panel has big say over bankers’ bonuses
Just 5 people at Wells Fargo have the power to take back millions
Ten of millions of dollars of executive pay at Wells Fargo are in the hands of five people.
The five- member human resources committee of Wells Fargo’s board of directors, which includes John Chen, the CEO of mobile phone maker BlackBerry, has the power to determine if the bank will claw back — take back — top executives’ pay.
The board is considering this week if some portion of the pay of CEO John Stumpf and former community banking unit head Carrie Tolstedt will be taken back, according to The Wall Street Journal, citing “a person familiar with the matter.” A decision is expected before Thursday, when Stumpf is expected to testify before the House Financial Services Committee, the Journal says.
Both Stumpf and Tolstedt were responsible at a time when allegedly hundreds of thousands of accounts were secretly opened for customers.
Meanwhile, the Department of Labor plans to investigate the bank’s workplace practices, Labor Secretary Tom Perez said in a letter Monday to Sen. Elizabeth Warren, D- Mass. Wells Fargo had no comment.
So far, only lower- level employees have been punished for the alleged fraud. Thousands of employees were fired for creating accounts unbeknownst to customers so they could meet sales targets set by upper management.
Wells Fargo has a clawback provision in place that triggers three levels of recoupment. Misconduct that leads to financial restatements can trigger a clawback of bonuses. Incentive pay can be clawed back if financial information was inaccurate, even if the executives were not responsible. Lastly, shares issued for performance can be clawed back for a number of reasons, including if executives’ conduct caused “reputational” harm, “material error” or “improper or grossly negligent failure, including in a supervisory capacity,” according to the proxy statement.