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)

Copyright (c) 2016 Dow Jones & Company, Inc.
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