When Wells Fargo CEO John Stumpf appears before the House Financial Services Committee on Thursday for his next legislator-led beat down, he will do so with a lot less money in his wallet.
During Stumpf’s recent trip to Capitol Hill, he took blunt criticism from both sides of the aisle, repeatedly deferring to the bank’s board of directors when questioned about whether his compensation or the compensation of Carrie Tolstedt, the former head of Wells Fargo unit responsible for the fake account scandal surrounding the bank, would be affected by the scandal.
Well, the board answered those calls Tuesday, clawing back millions in stock options, bonuses, and other financial benefits from Stumpf and Tolstedt, although the moves apparently weren’t enough for Stumpf’s loudest critic in Washington.
On Tuesday evening, the independent directors that sit on Wells Fargo’s board announced that they are taking a “number of initial steps” that they believe are “appropriate” given the issues uncovered at the bank that led to a $185 million fine by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the city and county of Los Angeles.
Included among those steps are requiring Stumpf to forfeit all of his outstanding unvested equity awards, which are valued at approximately $41 million based on Tuesday’s closing share price for Wells Fargo’s stock.
The independent directors of the board are also launching an “independent” investigation into the company’s business practices. Stumpf will recuse himself from all matters related to the independent directors’ investigation and deliberations, the director said.
Stumpf will also give up his salary during the board’s investigation.
Stumpf will also not receive a bonus for 2016. According to Marketwatch report from earlier this year, Stumpf received a bonus of $4 million as part of his 2015 compensation.
Tolstedt’s compensation was also directly in the Senate Banking Committee’s crosshairs, considering that the bank allowed her to "retire" in the midst of the scandal with $124 million in compensation.
But that’s not the case anymore.
According to the independent members of Wells Fargo’s board, Tolstedt will also forfeit all of her outstanding unvested equity awards, valued at approximately $19 million.
Tolstedt will also not receive a bonus for 2016 and will not be paid severance or receive any “retirement enhancements” in connection with her separation from the company, the board members said.
Tolstedt also agreed that she will not exercise her outstanding options during the board’s investigation.
According to the board members, these “initial actions” will not prevent the board from taking further action against Stumpf, Tolstedt, or any other executives as a result of its investigation.
“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,” Wells Fargo’s lead independent director, Stephen Sanger said.
“We will conduct this investigation with the diligence it deserves -- and will follow the facts wherever they lead. Our thousands of outstanding team members and millions of loyal customers and shareholders deserve no less,” Sanger continued.
“Based on the results of the investigation, the independent members of the board will take such other actions as they collectively deem appropriate, which may include further compensation actions before any additional equity awards vest or bonus decisions are made early next year, clawbacks of compensation already paid out, and other employment-related actions,” Sanger added.
“We will proceed with a sense of urgency but will take the time we need to conduct a thorough investigation,” Sanger concluded. “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.”
While the board’s actions will likely quiet some of the bank’s critics, and soften some of the barbs Stumpf will likely take on Thursday, one of the bank’s loudest critics is decidedly unsatisfied with the board’s decision.
Sen. Elizabeth Warren, D-Mass, who made nationwide headlines with her grilling of Stumpf, launched a series of tweets Wednesday morning, stating that the board did not do enough and that Stumpf should face far more serious consequences than just the financial ones placed upon him by the board.
This is a small step in the right direction, but nowhere near real accountability. https://t.co/7Aj4fxXp9x— Elizabeth Warren (@SenWarren) September 28, 2016
.@WellsFargo employees who failed to meet management's outrageous sales goals were fired.— Elizabeth Warren (@SenWarren) September 28, 2016
.@WellsFargo employees who tried to sound the alarm about the creation of fake accounts were fired. Their lives turned upside down.— Elizabeth Warren (@SenWarren) September 28, 2016
.@WellsFargo CEO Stumpf will be just fine: he keeps his job & most of the money he made while massive fraud went on under his nose.— Elizabeth Warren (@SenWarren) September 28, 2016
As I said last week: Mr. Stumpf should resign, return every nickel he made while this scam was ongoing, & face SEC & DOJ investigations.— Elizabeth Warren (@SenWarren) September 28, 2016