WFC Wells Fargo and Company

By Emily Glazer 

Wells Fargo & Co.'s board is actively considering whether to claw back pay from former retail-banking head Carrie Tolstedt as well as from Chief Executive John Stumpf, according to a person familiar with the matter.

The board is deliberating in the wake of the bank's sales-tactics scandal and could make a decision as soon as Tuesday, the person said. The board wants to take action before Mr. Stumpf returns to Capitol Hill; he is scheduled to testify Thursday before the House Financial Services Committee.

A Wells Fargo spokeswoman declined to comment.

Clawbacks, or their absence, became a big focus of a Senate Banking Committee hearing last week. Mr. Stumpf and the bank were roundly criticized for firing 5,300 employees over five years yet taking no action against top executives.

Ms. Tolstedt became a point of focus at the Senate hearing because she oversaw the bank's retail banking operations during the time in which regulators allege "widespread illegal" practices took place. She stepped down from her role in July and is set to retire at the end of the year. Her total compensation, including accumulated stock and options earned over her 27 years at the bank, could run about $90 million, according to a letter Wells Fargo sent senators last week.

Wells Fargo has been on the hot seat since news spread that up to 2 million unwanted or fictitious customer accounts were opened by its employees in an effort to meet sales goals. The bank this month entered into an enforcement action and paid a $185 million settlement to two regulatory agencies and the Los Angeles City Attorney's office.

In response to heated questions about Ms. Tolstedt's compensation during the Senate hearing, Mr. Stumpf said that is a matter for the board's human-resources committee. While Mr. Stumpf is chairman of the board, he isn't a member of that committee, which is led by Lloyd H. Dean, president and chief executive of Dignity Health, a San Francisco-based not-for-profit health-care system.

His answer, though, brought a rebuke from one senator. "The board should have already acted to claw back those salaries," Sen. Heidi Heitkamp (D, N.D.) said at the hearing. "If you had come here and said, the board now is clawing back, these are the things that we're doing...you would be in a lot better position sitting in that chair right now."

The board last week tapped Shearman & Sterling LLP to advise it on whether it should claw back pay from top executives, The Wall Street Journal reported.

Wells Fargo, like other banks, has detailed clawback policies and provisions. "Wells Fargo has strong recoupment and clawback policies in place" in part to discourage its senior executives from taking "imprudent or excessive risks that would adversely affect the company," the bank said in its latest proxy statement.

Clawback triggers include misconduct that has reputational harm to the bank; improper or grossly negligent failure, including in a supervisory capacity, to monitor or manage material risks to the bank or business group; and a material failure of risk management, among others.

In 2013, Wells Fargo agreed to enhance its clawback policy in exchange for New York City pension funds dropping a related shareholder resolution proposed by the city comptroller's office. New York City pension funds own almost $500 million in Wells Fargo stock.

Under the revised policy, bank directors can recover pay from employees engaged in misconduct and from executives who supervised them.

Mr. Stumpf's total pay package for his 35 years at the bank adds up to about $160 million, according to an independent analysis by human resources consultancy Overture Group LLC. That includes stock awards, stock options and performance shares, among other aspects of his pay package, based on the bank's Sept. 26 share price of $45, according to Mark Reilly, a managing director of Overture.

"This bank needs to regain trust from both the public and investors, and clawing back profits from senior management would be a step in the right direction," New York City Comptroller Scott M. Stringer said in a statement.

Write to Emily Glazer at emily.glazer@wsj.com

(END) Dow Jones Newswires

September 27, 2016 13:07 ET (17:07 GMT)

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