Wells Fargo CEO John Stumpf and the former head of the bank’s consumer banking unit will give up stock awards worth tens of millions of dollars in the first visible action by the bank’s board over a fake accounts scandal.
The board of directors at the San Francisco-based bank said late Tuesday that Stumpf will forfeit $41 million in stock awards, while former retail banking executive Carrie Tolstedt will lose $19 million of her stock awards, effective immediately. Both are also giving up any bonuses for 2016.
The independent directors at Wells Fargo, which has its biggest employee hub in Charlotte, are also launching an investigation of sales practices that led the bank to pay $185 million in fines this month. The move comes ahead of Stumpf’s appearance Thursday before the House Financial Services Committee, his second trip to Capitol Hill in two weeks.
“We are deeply concerned by these matters, and we are committed to ensuring that all aspects of the company’s business are conducted with integrity, transparency and oversight,” Stephen Sanger, the board’s lead independent director, said in a statement. “We will proceed with a sense of urgency but will take the time we need to conduct a thorough investigation. ”
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Wells Fargo this month agreed to pay $185 million to settle allegations its employees opened millions of accounts without customers’ permission to reach aggressive sales targets. Stumpf has faced bipartisan outrage for his handling of the scandal.
Lawmakers, analysts and consumer advocates have urged the bank to “claw back” compensation from its CEO and Tolstedt. Sen. Elizabeth Warren, D-Mass., and others have also called on Stumpf to resign.
At last week’s Senate Banking Committee hearing, the 63-year-old CEO apologized and took responsibility for the bank’s actions but deferred to the board on compensation questions.
A special committee of independent directors will lead the investigation, working with the board’s human resources committee and law firm Shearman & Sterling LLP. Stumpf, who is also chairman of the board, has recused himself from all matters related to the probe.
Tolstedt announced this summer that she was retiring at the end of the year, but the bank said Tuesday that she has now left the company. She had already been replaced by Charlotte-based executive Mary Mack, effective July 31.
In addition to giving up certain stock awards, Wells said Tolstedt has agreed not to exercise any outstanding options while the investigation is pending.
“These initial actions will not preclude additional steps being taken with respect to Mr. Stumpf, Ms. Tolstedt or other executives as a consequence of the information developed in the investigation,” the bank said.
Tolstedt and Stumpf, however, are not giving up all of the compensation they have accumulated over the years. Wells Fargo last week told Democratic senators that Tolstedt holds common stock, stock options and other holdings totaling $96.6 million as of the Sept. 16 closing price.
The bank hasn’t provided a similar breakout for Stumpf. But according to Wells’ March proxy, he had common stock worth about $77 million as of Sept. 16, plus 3.8 million options to buy company stock exercisable within 60 days.
Since the financial crisis, industry critics have pushed banks to claw back compensation when wrongdoing occurs, but the action announced Tuesday is one of the more dramatic steps taken at a major bank.
Following the action by the board, bank spokesman Mark Folk said the company “fully supports the decision of the independent directors of the board.” The “management team will cooperate fully and is dedicated to strengthening our culture and taking strong actions to ensure this conduct does not happen again,” he added.
Folk also said Wells would eliminate product and sales goals in the retail bank effective Oct. 1, moving up the previously announced date of Jan. 1. “We are also making adjustments to ensure that as we make changes, we maintain fair and consistent compensation for retail bank team members and leaders,” he said.
In another development this week, U.S. Labor Secretary Thomas Perez told Warren in a letter Monday that his office will conduct a “top-to-bottom” review of cases, complaints or violations concerning Wells Fargo over the last several years.
That announcement came after Warren and other lawmakers on Thursday asked the Labor Department to investigate whether Wells violated federal law, including by failing to pay overtime to tellers and other bankers who worked late or on weekends to meet aggressive sales quotas.
On Tuesday, Warren commended the Labor Department for its decision, saying other federal agencies should promptly determine whether the bank and its senior executives should be prosecuted or otherwise sanctioned.
The Observer has previously reported that the U.S. Attorney’s Offices in Charlotte and San Francisco are heading up an investigation of the bank’s practices.
Staff writer John Arwood, Bloomberg News and the Associated Press contributed.