Wells Fargo takes back $15 million bonus from its former CEO

Wells Fargo’s board canceled the $15 million stock bonus it gave to former CEO Tim Sloan last year, the company said in a proxy filing Monday. Sloan also received no severance from the company when he resigned in March 2019, the bank disclosed in the filing.

Sloan, who served as CEO of the bank from 2016 to 2019, resigned under pressure from regulators in March of last year. An insider hire tasked with getting the bank back on track after its sales scandal, he was criticized by regulators and politicians as not focused enough on fixing the problems within the bank.

From 2002 to late 2016, the bank created millions of fake accounts in consumers’ names without their consent, amid an array of other misconduct that exposed weak risk management within the company.

In canceling the $15 million bonus from last year, awarding him no bonus for last year and no severance on top of that, it’s a stark sign that the board apparently came to view Sloan as part of the problem. That’s a change from March 2019, when Sloan resigned: then-board chair Elizabeth “Betsy” Duke said that he had the “full support of the board.”

Duke and fellow board member James Quigley resigned this month amid pressure from Congressional leaders, who were scrutinizing their activity as board members.

Many had questioned whether an insider like Sloan could fix a bank with the systemic cultural issues Wells had. It appears Wells Fargo’s board now believes that the skepticism was likely well-founded.

Ongoing scandal

The decision to cancel the bonus was made in determining the company’s bonuses for last year, which took place in recent months.

The board’s compensation committee said it “took into account, in addition to the timing of his resignation, the Company’s performance... the status of the Company’s risk management objectives and outstanding regulatory matters, including the progress that continued to be required on both at the time of his resignation.”

Sloan was tasked with getting the bank back on track after its sales scandal.

But in trying to move the bank past the scandal, he was criticized by regulators and politicians as not focused enough on fixing the problems within the bank that led to the misconduct.

In documents released in recent months, Sloan and the bank were upbraided for a slow and incomplete effort to fix the bank’s internal risk management plumbing. One regulator even said that the bank had made essentially zero progress on some of its regulatory matters in 2017 and 2018.

In 2018, with Sloan the helm, Wells invested millions of dollars into a flash media campaigns that touted the bank’s “re-establishment.”

But, to regulators, the bank had yet to submit complete plans to fix regulatory issues. After a disastrous Congressional hearing in March 2019 that inspired a formal rebuke from the bank’s top federal regulator, Sloan resigned.

New CEO Charlie Scharf, an outsider from the orbit of JPMorgan Chase CEO Jamie Dimon, has struck a contrite tone in contrast to Sloan’s confidence. Scharf has given numerous, detailed and frank apologies for the sales misconduct, and regulators appear more optimistic about his prospects to fix the bank’s problems.

Board matters

The compensation decisions, including Scharf’s pay, will be put to a vote of the bank’s shareholders at Wells Fargo’s annual meeting, scheduled for Salt Lake City on April 28. Such votes usually pass without issue.

If approved, Scharf will make $23 million for less than three months of work. The board awarded him $2.5 million in base salary, a $5 million bonus and $15.5 million in restricted stock.

Executives hired away from other firms, like Scharf, who was the CEO of Bank of New York Mellon, typically get larger compensation packages in their first year as an executive to make up for restricted stock that they lose out on when they leave their prior employer.

The next highest paid executive was Charlotte-based Mary Mack, CEO of Consumer & Small Business Banking, who was awarded $8.8 million for 2019.

Additionally, Wells Fargo shareholders will vote on the nomination of Steven Black, the former vice-chairman of JPMorgan, to the board. Scharf, a former JPMorgan executive himself, recommended Black’s nomination, according to the filing.

John Baker, a board member since 2009, announced he is retiring from the board at the meeting.

This story was originally published March 16, 2020 at 5:46 PM.