The hot seat Wells Fargo CEO John Stumpf currently resides on is nowhere close to cooling off, especially in the wake of Stumpf’s rough appearance Thursday before the House Financial Services Committee to discuss the bank’s fake account scandal.
During that hearing, various representatives called for Stumpf to resign from his position, and the committee’s highest ranking Democrat even stated that she plans to seek legislation to break up the bank.
One interested observer of Stumpf’s testimony was California’s state treasurer, John Chiang, who recently announced that the state is suspending the state’s “most highly profitable business relationships” with Wells Fargo for at least one year in the wake of the scandal.
Chiang apparently took quite the interest in Stumpf’s testimony, and needless to say, Chiang was unimpressed.
“Mr. John Stumpf must go,” Chiang said in a statement. “Following-up on last week's duck, dodge, and deny performance with another listless one has convinced me that Mr. Stumpf is not — and will never be — the change agent leader Wells Fargo so desperately needs.”
Earlier this week Chiang’s office said that California is suspending all investments made by the Treasurer’s Office in all Wells Fargo securities, and cutting off a number of other investments as it seeks substantial changes within Wells Fargo.
Included among those requested changes is the decoupling of the chief executive officer and chairman of the board positions at Wells Fargo. Currently, John Stumpf serves in both positions.
But Chiang now no longer feels Stumpf can serve in either role.
‘Wells Fargo has a storied history as old and golden as California. The two grew-up together during the pioneering Gold Rush era,” Chiang said.
“But today, the wheels have fallen off the bank's trademark stagecoach. Under Mr. Stumpf's watch, a culture emerged allowing greed to consume integrity,” Chiang said. “Wells Fargo now serves itself, not its customers. At (Thursday’s) hearing, he offered no credible explanations and, importantly, no believable path back.”
Chiang also took issue with the “clawbacks” of bonus money from Stumpf and Carrie Tolstedt, the former head of Wells Fargo unit responsible for the creation of as many as 2 million fake accounts.
“Wells Fargo's ‘clawbacks’ of $41 million in compensation to Mr. Stumpf is an insult to its 5,300 low-wage workers who took the fall and now stand in unemployment lines. It's an affront to the bank's legions of fleeced customers,” Chiang said.
“Specifically, the $41 million is comprised of unvested stock options, his 2016 bonus, and some small fraction of his $2.8 million 2016 base salary,” Chiang continued.
“What about the tens of millions of dollars in vested stocks, bonuses, salary and retirement compensation earned during the multiple years in which his bank ripped-off its own customers?,” Chiang concluded. “If he wants to plead a case to remain at the reins of Wells Fargo, let him begin with returning every nickel in ill-gotten gains.”
But Wells Fargo’s issues extend beyond California, as another state treasurer is joining Chiang in criticizing Wells Fargo and calling for changes.
On Thursday, Oregon State Treasurer Ted Wheeler said that Oregon trust funds, including the Oregon Public Employees Retirement Fund, Oregon Short-Term Fund, Oregon Common School Fund and State Accident Insurance Fund, hold “substantial” shares in Wells Fargo and will seek changes to the company.
In fact, Wheeler said that Oregon will push for management structure and executive compensation reforms at Wells Fargo.
According to Wheeler’s office, Oregon’s investment program is “large, complex and globally diversified,” and program’s market value sat at more than $90 billion as of Aug. 31, 2016.
Of that, the Oregon investment program’s aggregate Wells Fargo holdings totaled $1.14 billion, with $104 million in stock and the remainder in fixed income securities.
And Wheeler said that the state will work to protect those investments by pushing for “better accountability” by separating the board chairman and chief executive roles at the bank.
Wheeler also said that Oregon will seek to force Wells Fargo to claw back any previously paid compensation linked to “deceptive practices.”
Wheeler’s office said that it is also investigating potential legal action against Wells Fargo.
“Ethics matter,” Wheeler said. “As a responsible shareholder, we will hold corporate leadership accountable and demand reforms including a ban on bonuses connected to fraud.”