Wells Fargo revokes 2016 bonuses for top execs; warns there could be more fake accounts
Discloses warning that more customers could be victims
Wells Fargo announced Wednesday that it plans to claw back the cash bonuses for eight of its top senior executives, including the bank’s new CEO, Tim Sloan, as the fallout from the bank’s fake account scandal continues.
But as it turns out, Wells Fargo may be facing more fake account fallout, as the bank also warned investors Wednesday that there could be more victims of fake accounts than previously disclosed.
According to the bank, the revocation of the senior executives’ bonuses are “not based on any findings of improper behavior in the board of directors’ ongoing independent investigation” into how 5,000 of the bank’s former employees opened as many as 2 million accounts without authorization in order to get sales bonuses.
Those fake accounts led to a $185 million fine from the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the city and county of Los Angeles.
And in its 10-K filing with the Securities and Exchange Commission, Wells Fargo disclosed that its internal investigation could lead to “an increase in the identified number of potentially impacted customers.”
The bank also said that its internal investigation could lead to “additional legal or regulatory proceedings, compliance and other costs, reputational damage, the identification of issues in our practices or methodologies that were used to identify, prevent or remediate sales practices related matters, the loss of additional team members, or further changes in policies and procedures that may impact our business.”
The details of Wells Fargo’s SEC filing was reported first by Reuters.
The bank said that denying the bonuses is not based directly on the board’s investigation into the fake accounts. Instead, the decision is “based on the accountability of all those in senior management for the overall operational and reputation risk of the company,” the bank said.
According to the bank, the following executives will not receiving a cash bonus for 2016:
- Tim Sloan, president and chief executive officer
- John Shrewsberry, chief financial officer
- David Carroll, head of wealth and investment management
- Avid Modjtabai, head of payments, virtual solutions and innovation
- Hope Hardison, chief administrative officer
- David Julian, Chief Auditor
- Michael Loughlin, Chief Risk Officer
- James Strother, general counsel
The bank said that additionally, the performance share equity awards these executives received in 2014 that vested after 2016 will be reduced by as much as 50%.
According to the bank, the total reduction in compensation is approximately $32 million, based on 2016 target bonuses and the current price of Wells Fargo shares.
Wells Fargo previously denied $60 million in bonuses to its former CEO and board chairman, John Stumpf, and to Carrie Tolstedt, the former head of Wells Fargo unit responsible for the fake account scandal surrounding the bank.
“These compensation actions for the operating committee, though not related to any findings of improper behavior, are part of the board’s ongoing efforts to promote accountability and ensure Wells Fargo puts customer interests first,” Wells Fargo’s Chairman of the Board Stephen Sanger said.
“As we seek to regain trust, the board is taking decisive actions,” Sanger continued. “We will continue to work to make right what went wrong and remain focused on providing the accountability and oversight that our customers, employees, and investors expect and deserve.”
The move to claw back the bonuses comes just over a week after the bank announced the termination of four senior managers over the fake accounts.
“I fully support the board’s actions and believe they are critical to Wells Fargo’s commitment to our customers,” Sloan said. “It is my personal mission to foster a culture of accountability at all levels of the company and to ensure we are second to none in customer service and advice, ethics, and integrity. Today’s action is another step in that direction.”