Wells Fargo belatedly answered a deafening wakeup call. Chief Executive John Stumpf will forfeit $41 million in unvested stock awards and forgo his salary while independent directors investigate the U.S. mega-bank’s fake-accounts scandal. The former head of community banking also will have her pay clawed back. It’s a shame it took years and a lashing in Congress for the board to hold top brass accountable.
The decision announced on Tuesday forces Stumpf to surrender the equivalent of some 40 percent of his compensation from between 2011 and 2015, when deposit and credit card accounts that customers allegedly didn’t ask for were being opened. It is one of the biggest condemnations of a bank boss since the financial crisis ushered in an era of tougher provisions related to pay.
Likewise, Carrie Tolstedt, Wells Fargo’s former retail boss, is giving up $19 million in unvested awards. Instead of retiring at year-end, she has left already and will receive no severance or bonus for this year. Lead independent director Stephen Sanger also warned further clawbacks and “other employment-related actions” may follow, depending on what the board’s probe uncovers.
The punishments are a welcome reversal. When Wells Fargo agreed to settle charges with regulators and pay a $185 million fine a few weeks ago, it disclosed that some 5,300 employees had been sacked. That exposed clear signs of weak risk management and cultural deficiencies, and yet the bank dismissed the problem as involving just 1 percent of its workforce. There was no sign any senior executive was among the thousands dismissed.
Since then, the $227 billion Wells Fargo has said the problems may have started even earlier than originally thought. Stumpf was also hauled in front of the U.S. Senate Banking Committee, where he withered under scrutiny that included progressive Senator Elizabeth Warren calling him “gutless” and urging him to resign.
Meanwhile, federal prosecutors have opened their own exams into the affair. At least five years after the wrongdoing began and only when pressure mounted, however, did Wells Fargo’s board get into gear. Shareholders will be given the final say on whether directors were complacent and acted too late.