WFC Wells Fargo and Company

By Rachel Louise Ensign and Joann S. Lublin 

It's become the clawback heard round the financial world.

More than a half-dozen senators from both sides of the aisle applauded the decision by the Wells Fargo & Co.'s board to claw back an estimated $60 million in pay from two top executives this week.

The bank's board on Tuesday moved to rescind $41 million in pay for Chairman and CEO John Stumpf and $19 million from former community-banking head Carrie Tolstedt ahead of a hearing of the House Financial Services Committee Thursday.

The unusual move drew praise from senators who last week sharply criticized Wells Fargo's handling of a sales-abuse scandal that led the bank to pay a $185 million fine.

But the lawmakers indicated that Wells Fargo isn't out of the woods. Ten Democrats on the Senate Banking Committee released a letter Wednesday afternoon urging the bank and its CEO to respond to questions they felt weren't answered sufficiently at last week's hearing.

Sen. Elizabeth Warren (D-Mass) also reiterated suggestions she made during the earlier hearing that Mr. Stumpf resign, face federal investigations and "return every nickel he made while this scam was ongoing."

Sen. Warren was also joined by Sen. Jeff Merkley (D-Ore.), Sen. Robert Menendez (D-N.J.), Sen. Mark Warner (D-Va.), Sen. Heidi Heitkamp (D-N.D.), Sen. Sherrod Brown (D-Ohio), and Sen. David Vitter (R- La.), all fellow committee members, in saying the clawback was a good thing or a step in the right direction.

The unanswered questions though will likely be followed up on at Thursday's House hearing. One question focuses on how many low-level employees were fired for not meeting sales quotas at the bank and what could be done about customers allegedly harmed through fraudulent accounts before 2009.

Sen. Warner encouraged the bank's board to continue its review of executive pay so that "all culpable members of management are held responsible." The bank's board said Tuesday that law firm Shearman & Sterling LLP is leading its independent investigation of the matter.

Meanwhile, consultants who focus on pay noted it was unusual for a sitting CEO to accept a clawback. In past years, some banks have fought to take back pay from employees who had already resigned or been fired for cause.

David Yermack, a finance professor at New York University, said he wasn't aware of any prior clawbacks this big in the financial services sector.

"If he is really responsible for this (mess), why is he still in place?" Mr. Yermack said of Mr. Stumpf. One point helping him could be his generally strong performance in other areas, such as avoiding the huge mortgage fines that have plagued peers like Bank of America Corp. and J.P. Morgan Chase & Co. after the financial crisis.

For now, there are no signs Mr. Stumpf is contemplating a resignation. And there haven't been any formal discussions at the board about it either, according to people familiar with the matter. In a note to employees, Mr. Stumpf said he should have acted sooner to correct wrongful sales practices and pointed out that he recommended the $41 million clawback of unvested shares. He has said he wants to continue leading the bank.

--Emily Glazer contributed to this article.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

(END) Dow Jones Newswires

September 28, 2016 16:48 ET (20:48 GMT)

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