Wells Fargo is facing calls to “claw back” compensation that was awarded to the retiring executive who ran the bank unit snared in an $185 million settlement announced last week over the creation of phony accounts.
The San Francisco-based bank said this summer that Carrie Tolstedt was stepping down as head of the community bank effective July 31 and retiring at the end of the year. She is set to leave the bank with millions of dollars of accumulated stock grants and other compensation, according to the bank’s proxy filing.
Bank analysts, financial reform groups and a former regulator have said Tolstedt should be subject to having her stock awards taken back. Former Democratic presidential candidate Bernie Sanders said in a tweet that it was a “disgrace” that Tolstedt will take home millions “while Americans were defrauded by Wells Fargo.”
“If you’re going to use clawbacks, this would be the situation,” Sheila Bair, the former head of the Federal Deposit Insurance Corp., told CNBC on Tuesday.
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Stock awarded to a Wells executive can be canceled for a variety of types of misconduct, including actions that cause reputational harm to the bank or failure to manage risks in the executive’s business group, according to the bank’s annual proxy filing.
In a CNBC interview Tuesday, CEO John Stumpf said “to the extent (clawbacks are) a consideration, we have a board process.”
Wells agreed last week to a settlement with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the City and County of Los Angeles for “widespread illegal practices” in which employees secretly opened accounts to meet sales targets and receive bonuses.
The community bank group, under Tolstedt’s watch, “failed to adequately oversee sales practices,” the OCC’s order says.
The bank has said it fired 5,300 managers and employees from 2011 to March 2016 over the matter, but hasn’t provided any names or job titles.
The bank has said Tolstedt’s retirement at age 56 was a “personal decision.” Mary Mack, a Charlotte-based executive, is now running the community banking group.
According to the bank’s proxy, as of Feb. 24, Tolstedt had a total of 2.5 million Wells Fargo shares and options to buy stock exercisable within 60 days. At Tuesday’s closing price of $46.96, those shares would be worth a total of $118.4 million, although the options would require her to pay a certain strike price to obtain each of those shares.
In 2015, Tolstedt, who is based in San Francisco, made $9.1 million in salary, bonus and stock awards, down from $9.5 million in 2014. She also made $18.8 million in 2015 by exercising previously awarded option awards, according to the proxy.
Among her other holdings, Tolstedt had an accumulated pension benefit of $1.2 million and a supplemental 401(k) plan balance of $1.7 million.
When an executive retires, his or her restricted stock and performance shares continue to vest as scheduled, but if the executive leaves involuntarily for cause they forfeit their stock, according to the proxy.
Wells Fargo has “strong recoupment and clawback policies” that are designed to encourage “stable performance” and “discourage our executives from taking imprudent or excessive risks that would adversely impact the company,” the proxy states.
It’s not clear if the bank would have to make public details of any clawback decision. If the bank’s board or its human resources committee decides to claw back compensation it will determine “whether and to what extent” it will disclose that determination, the filing says.
Wells Fargo has a 15-member board chaired by Stumpf, who is also CEO. The lead director is Stephen Sanger, the retired chairman of cereal maker General Mills.
The board’s human resources committee is chaired by Lloyd Dean, CEO of Dignity Health. The other members are: Sanger; Susan Engel, retired CEO of Portero Inc.; John Chen, CEO of BlackBerry; and Donald James, retired chairman of Vulcan Materials.