Wells Fargo chief to forfeit $56m in pay

Mr Stumpf, Wells Fargo chief executive, before the US Senate Committee on Banking, Housing and Urban Affairs in Washington, on Sept 20. The company is facing a hearing by the US House Financial Services Committee today.
Mr Stumpf, Wells Fargo chief executive, before the US Senate Committee on Banking, Housing and Urban Affairs in Washington, on Sept 20. The company is facing a hearing by the US House Financial Services Committee today.PHOTO: NYTIMES

Company will use clawback provision against him as it probes phoney accounts

NEW YORK • Wells Fargo has announced it would claw back compensation valued at US$41 million (S$56 million) from its embattled chairman and chief executive John Stumpf as the financial consequences of the scandal over illegally created sham accounts at the company reached the executive suite.

The action represented one of the first times since the 2008 financial crisis that a chief executive had been forced to give up compensation.

Many large companies have adopted clawback provisions at the urging of regulators and shareholder advocates, but boards have been hesitant to invoke them.

And it came one week after a blistering United States Senate hearing in which lawmakers criticised the company and its board for not holding its leaders financially accountable for the scandal.

Ms Carrie Tolstedt, who led the Wells Fargo community banking division engulfed in scandal, will surrender stock grants valued at about US$19 million, the board said as it announced an investigation into the company's practices.

The two executives will also forgo any bonus payments for the year.

The company, which has been reeling since the scandal was revealed this month, is facing a hearing by the US House Financial Services Committee today.

"We are deeply concerned by these matters," Mr Stephen Sanger, a Wells Fargo director, said in a statement. "We will conduct this investigation with the diligence it deserves - and will follow the facts wherever they lead."

Wells Fargo acknowledged this month that its employees had, over the course of several years starting in 2011, opened as many as 1.5 million bank accounts and 565,000 credit card accounts that might not have been authorised by customers.

The company agreed to pay US$185 million in penalties to settle cases brought by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the Los Angeles City Attorney, and said it had fired 5,300 employees for ethics violations.

A number of former employees say the illegal practices stemmed from intense pressure to meet unrealistic sales goals.

At last week's Senate Banking Committee hearing, Mr Stumpf was berated by some senators.

"You haven't returned a single nickel of your personal earnings," Senator Elizabeth Warren rebuked Mr Stumpf as she urged him to resign. "It's gutless leadership."

Mr Stumpf repeatedly said any forfeited compensation was an issue for the board - of which he is the chairman - to take up.

"Whatever the board accepts, whatever they do, I will accept and I will support," he said.

Mr Stumpf, 63, will forgo his base salary, US$2.8 million annually, during the investigation, Wells Fargo said. The US$41 million Mr Stumpf is forfeiting represents all of his unvested equity awards, but he already held nearly 5.5 million shares of stock owned outright or vesting imminently as of March, when Wells Fargo filed an annual disclosure of his holdings.

Based on Tuesday's closing share price of US$45.09, those 5.5 million shares would be worth nearly US$247 million.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on September 29, 2016, with the headline 'Wells Fargo chief to forfeit $56m in pay'. Print Edition | Subscribe