By Emily Glazer
Can $41 million in forfeited compensation buy John Stumpf job
security at embattled Wells Fargo & Co.?
For now, there are no signs he is contemplating giving up his
roles as chairman and chief executive over the bank's sales-tactics
scandal, and Wells Fargo's board hasn't held formal discussions
about the idea either, according to people familiar with the
matter.
That is despite the extraordinary rebuke the board handed down
Tuesday when it announced Mr. Stumpf had agreed to forgo all
unvested equity awarded to him, worth $41 million; not take a 2016
bonus; take no salary during an independent board investigation;
and recuse himself from all deliberations related to the sales
issues.
Mr. Stumpf's position is far from secure. On Thursday, he will
return to Capitol Hill for the second time in as many weeks,
appearing before the House Financial Services Committee to explain
the bank's allegedly widespread illegal tactics that led to as many
as 2 million accounts to be opened with fictitious or unauthorized
customer information.
Many senators who grilled Mr. Stumpf on the topic last week
welcomed the unusual step of a high-profile CEO giving up two years
worth of compensation to respond to their concerns. But a group of
Democratic senators also demanded more answers, sending a letter to
Mr. Stumpf Wednesday with 58 follow-up questions such as how the
sales abuses developed and what customers who were harmed could
do.
While San Francisco-based Wells Fargo's management and board
didn't know how widespread the problems were until this year
according to people familiar with the matter, the bank has fired
5,300 employees over five years related to the bad behavior. Now
its board is turning to the role of senior executives such as Mr.
Stumpf.
The internal investigation could be a major factor in Mr.
Stumpf's future at the bank. It is expected to take a few months,
but could wrap up by year-end, people familiar with the board said.
Mr. Stumpf, who was named CEO in 2007, will likely stay on through
that process, but the situation could change depending on the
board's findings, these people said.
The 63-year-old executive's performance before the Senate
Banking Committee a week ago was widely viewed as a failure, in
part because he wasn't able to show any substantive steps by the
bank or by its board following the scandal. He also deflected many
of the toughest questions. At the House hearing, Mr. Stumpf will be
able to point to the recent clawback action, but another subpar
performance could influence the board's thinking.
In a message to employees Tuesday, Mr. Stumpf said he "should
have acted sooner and more aggressively to correct weaknesses in
our operations." He said he recommended to the board, and it
approved, his forfeiting of about $41 million of stock awards,
"reflecting years of performance dating back to 2013."
Wells Fargo released a statement late Tuesday saying "our
management team will cooperate fully and is dedicated to
strengthening our culture and taking strong actions to ensure this
conduct does not happen again."
Some customers said Wednesday that they may not wait around.
California Treasurer John Chiang said his office would stop doing
some brokerage and underwriting business with Wells Fargo for one
year. New York's Metropolitan Transportation Authority is holding
up a routine review of Wells Fargo's application to underwrite MTA
bond deals while it reviews recent developments, according to
finance director Pat McCoy.
In a securities filing Wednesday, Wells Fargo said that federal,
state and local government agencies including the Justice
Department, state attorneys general and prosecutors' offices, and
congressional committees, "have undertaken formal or informal
inquiries, investigations or examinations" relating to the sales
practices that led to a $185 million settlement and enforcement
action earlier this month.
The bank said it has "responded and continues to respond" to the
requests for information. A number of lawsuits have been filed by
nongovernmental parties seeking damages or other remedies related
to the sales practices, the bank added.
The Wall Street Journal reported earlier this month that U.S.
Attorneys in the Southern District of New York and the Northern
District of California had issued subpoenas to the bank on the
matter. The district including Charlotte, N.C., where many Wells
Fargo employees work, also has joined in, people familiar with the
matter said.
The board's internal investigation may lead to further clawbacks
of prior compensation awarded to Mr. Stumpf, former head of
community banking Carrie Tolstedt or other executives. The board
Tuesday said Ms. Tolstedt would forfeit $19 million in unvested
equity compensation.
So far, the board's lead independent director Stephen Sanger,
former chairman of General Mills Inc., has been leading the board's
discussions, which don't include Mr. Stumpf, the people said. The
board over the weekend held a long meeting at which management
wasn't present in which the initial steps on clawbacks came
together, they added.
The board decided against asking Timothy J. Sloan, Wells Fargo's
president and chief operating officer, to forfeit any compensation
because he's only been in that role for less than a year, people
familiar with the discussions said. He also has spent most of his
time in the bank's corporate and investment banking divisions, as
opposed to the retail bank where the conduct in question took
place, the people added.
In Wednesday's securities filing, the bank said Ms. Tolstedt
agreed to not exercise her options until the board's independent
investigation is completed. Those are worth roughly $35 million
based on a $46 share price, according to an analysis by human
resources consultancy Overture Group LLC. The board will decide
whether those options would be forfeited at the conclusion of the
investigation.
-- Heather Gillers and Aruna Viswanatha contributed to this
article.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
September 28, 2016 18:46 ET (22:46 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Apr 2024 to May 2024
Wells Fargo (NYSE:WFC)
Historical Stock Chart
From May 2023 to May 2024