Following the revelation that Wells Fargo employees created more than two million unauthorized accounts in customers’ names to meet the bank’s high-pressure sales goals, the bank’s board has decided to claw back $41 million from CEO John Stumpf’s compensation package, and $19 million from Carrie Tolstedt, the former head of retail banking who failed to stop the chicanery.
Wells Fargo announced the initial steps — which also include an investigation into the bank’s retail banking sales practices — to hold the executives accountable for the growing scandal that began when the Consumer Financial Protection Bureau, along with the Office of the Comptroller of the Currency and the Los Angeles city attorney, ordered the company to pay $185 million in refunds and penalties.
“We are deeply concerned by these matters, and we are committed to ensuring that all aspects of the company’s business are conducted with integrity, transparency, and oversight,” Stephen Sanger, lead independent director for the board, said in a statement. “We will conduct this investigation with the diligence it deserves — and will follow the facts wherever they lead.”
The board could take additional action against Stumpf, Tolstedt, and other executives pending the outcome of the investigation.
“We will proceed with a sense of urgency but will take the time we need to conduct a thorough investigation,” Sanger said. “We will then take all appropriate actions to reinforce the right culture and ensure that lessons are learned, misconduct is addressed, and systems and processes are improved so there can be no repetition of similar conduct.”
The clawbacks for Stumpf and Tolstedt will be acquired through unvested equity awards and neither executive will receive bonuses for 2016. The board also said that Stumpf will forgo salary during the independent investigation and recuse himself from all matters related to boards’ deliberations related to the investigation.
Tolstedt, former head of Wells Fargo’s retail banking division, has come under a lot of scrutiny in the last week after it was reported that she had earned $124 million in stock and options when she recently left the bank.
Last week, during a Senate Banking Committee hearing, Stumpf all but acknowledged that Tolstedt was nudged out the door for her failure to fix issues like the glut of unauthorized accounts, but he defended her as a hard worker and maintained that Tolstedt chose to retire after the bank decided to “go in a different direction.”
Stump said at the time that Wells’ board had the tools to hold all executives, including himself and Tolstedt, accountable.
Still, lawmakers had no patience for Stumpf or Tolstedt, arguing that in the almost month since the fraudulent behavior came to light no one, besides 5,300 employee who were fired, have been held responsible for the issues.
“You haven’t resigned, you haven’t returned a single nickel of personal earnings, you haven’t fired a single senior executive,” Massachusetts Senator Elizabeth Warren said during the hearing. “Your definition of accountable is to push the blame to your low level employees… it’s gutless leadership.”
Some lawmakers welcomed Tuesday evening’s announcement by the Wells Fargo board.
“Tonight’s announcement is a step in the right direction but there are still dozens of unanswered questions,” Ohio Sen. Sherrod Brown told the Wall Street Journal.
The steps will likely be addressed during a hearing Thursday with the House Financial Services Committee.
In a prepared statement for the hearing, Stumpf did not mention the board’s decision, the WSJ reports, but did note that Wells Fargo will end sales goals for retail-banking employees next months, instead of the previously announced January 2017 deadline.
by Ashlee Kieler via Consumerist