Wells Fargo CEO Still Faces Risks, Despite $41 Million Clawback -- Update
September 28 2016 - 01:39PM
Dow Jones News
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, according to people familiar with the matter. And there
haven't been any formal discussions at the board about Mr. Stumpf's
resigning from either of his positions, according to the
people.
That is despite the extraordinary rebuke handed down by the
board Tuesday night. The bank's board said Mr. Stumpf agreed to
forgo all unvested equity awarded to him, worth $41 million; not
take a bonus during 2016; take no salary during an independent
investigation by the board; and recuse himself from all
deliberations related to the bank's sales-tactics scandal.
But 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" sales tactics that led to
as many as 2 million accounts opened with fictitious or
unauthorized customer information. The bank has fired 5,300
employees over five years related to the bad behavior.
The board's investigation could be another potential factor in
Mr. Stumpf's future at the San Francisco lender. It is expected to
take a few months, and there is hope it could wrap up by year-end,
people familiar with the board said.
It is likely that Mr. Stumpf would stay on through that process,
but the situation could change depending on the board's findings,
these people said.
How Mr. Stumpf handles his House appearance could also play into
his longevity at the bank. The 63-year-old executive's performance
before the Senate Banking Committee a week ago was widely viewed as
flawed, in part because he wasn't able to show any substantive
steps by the bank or by the 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 board's most recent
actions.
In a message from Mr. Stumpf sent to employees, the executive
said he "should have acted sooner and more aggressively to correct
weaknesses in our operations that allowed wrongful sales practices
to occur in our retail banking business." 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 night saying it
"fully supports the decision of the independent directors...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."
The bank also said in a securities filing Wednesday that
federal, state and local government agencies including the
Department of Justice, state attorneys general and prosecutors'
offices, and Congressional committees, "have undertaken formal or
informal inquiries, investigations or examinations relating to
certain sales practices" that were the subject of 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. The bank added that a number of lawsuits
have been filed by non-governmental parties seeking damages or
other remedies related to the sales practices.
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, has also joined in, people familiar with the
matter said.
It is also possible that this investigation leads 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 its initial steps on compensation 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 had only been in that role for less than a year, people
familiar with the discussions said. He has also spent most of his
time in the bank's wholesale unit, known for corporate and
investment banking, as opposed to the retail bank where the conduct
in question took place, the people added.
In Wedneday's securities filing, the bank said Ms. Tolstedt
agreed to not exercise her options, worth roughly $35 million,
until the board's independent investigation was completed. The
board will decide whether those options would be forfeited or not
at the conclusion of the investigation.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
September 28, 2016 13:24 ET (17:24 GMT)
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