Wells Fargo’s top executives were awarded more money last year despite the San Francisco-based bank’s major sales scandal, according to disclosures the company made Wednesday.
As Wells announced earlier this month, executives didn’t get cash bonuses, but the new regulatory filing show their salaries and stock awards were higher than what they received in 2015. That in effect offset the loss of cash bonuses.
Wednesday’s proxy filing shows the stock awards and salary increases were made in early 2016, before the sales scandal became public in September. But the compensation decisions were made when Wells was already communicating with regulators looking into its sales practices, for which the bank was fined $185 million by regulators.
Among the executives, CEO Tim Sloan earned $12.8 million in stock and base salary combined, up 17 percent from $11 million when he still served as president and chief operating officer. His base salary rose to $2.3 million, from $2 million.
Wells Fargo said in Wednesday’s filing that Sloan was awarded the higher base salary to reflect his increased responsibilities as COO and president, duties he assumed in November 2015. His pay package was significantly less than the $19.3 million awarded to predecessor John Stumpf in 2015.
Consumer advocates, however, were quick to criticize the higher compensation.
“Wells Fargo’s astronomical paychecks for its executives offer pretty vivid evidence of why you need strong regulators policing big banks,” Lisa Donner, executive director of Americans for Financial Reform, said in a statement Wednesday.
“Skewed incentives were at the root of the fraudulent account scandal, and the evidence suggests the bank has not made many of the senior bankers pay a serious price,” she said.
Wednesday’s filing provides the first full picture of how Wells Fargo compensated its highest-ranking executives in a year marred by the scandal. Also listed is David Carroll, head of wealth and investment management, the only Charlotte-based executive whose salary is large enough to trigger federal disclosures.
Carroll’s total compensation rose to $9.2 million from about $9 million, thanks to a rise in base salary and stock awards. Carroll and other executives aren’t guaranteed those stock awards, which will be paid out starting in 2019 if Wells reaches certain performance targets.
Regulators accused the bank’s employees of opening potentially millions of accounts without customer authorization to hit sales goals and receive bonuses. Employees went so far as to create phony email addresses in order to covertly enroll consumers in services they never consented to, regulators have said.
In a letter to shareholders Wednesday, Sloan and chairman Stephen Sanger thanked them for their support of Wells Fargo during 2016 – “a difficult year as unacceptable sales practices in our retail bank did not serve the interests of our customers, our team members, or our company.” Sloan and Sanger told shareholders the bank has taken “decisive actions” to make things right for customers and employees and is “fixing problems at their root cause.”
Last month, the bank said it fired four executives “for cause” in its retail bank, the first terminations resulting from an ongoing board investigation of the scandal. The four had worked in Arizona, California and Minnesota. And last week, Wells confirmed three more executives in California and Arizona – the epicenter of the scandal – had left the company.
To date, none of those executives were based in Charlotte, where the San Francisco-based bank employs about 24,100, its largest employment hub. The bank in July named Charlotte-based executive Mary Mack as Tolstedt’s replacement, putting her in charge of cleaning up the community banking unit at the center of the scandal.
Tolstedt and CEO Stumpf left the company last year amid the fallout from the scandal. They also forfeited a combined $60 million in stock awards and didn’t receive 2016 cash bonuses.
Wednesday’s filing also reveals that the board’s human resources committee approved a base salary increase for Tolstedt effective March of last year, long after a 2013 Los Angeles Times story first raised questions about sales practices at the bank. The step bumped her to $1.7 million, a $50,000 increase to “align with competitive market conditions,” the filing says.
In addition to cutting bonuses, Wells has also previously said that it was reducing by up to 50 percent certain stock awards granted to the executives in 2014 and scheduled to be distributed this month. Combined, the steps will reduce total compensation for the executives by $32 million, the bank has said.
Wells has said those moves were to “reinforce” accountability at the bank following the scandal, not to punish any specific wrongdoing. Wednesday’s filing says the board’s human resources committee arrived at the decision to eliminate cash bonuses in February, after discussions with Sloan.
Though none of the affected executives have been found individually culpable for the sales practices, “the (board committee) and Mr. Sloan viewed the senior leadership team as collectively responsible for our company’s performance,” the filing says.