Wells Fargo CEO: We should have done more sooner
Wells Fargo announced Wednesday that eight top executives, including its CEO, won’t receive cash bonuses for 2016 in a step to “reinforce” accountability at the San Francisco-based bank following its sales scandal.
The bank said the compensation decisions weren’t related to findings of improper behavior by the executives, a list that includes two who based in Charlotte. But it noted the actions are “based on the accountability of all those in senior management for the overall operational and reputation risk of the company.”
In other action, Wells said Wednesday it is reducing by up to 50 percent performance-based stock awards granted to the eight executives in 2014 and scheduled to be distributed this month. Combined, the steps will reduce total compensation for the executives by $32 million, Wells said.
It’s the latest moves by the third-largest U.S. bank by assets to right itself after authorities in September accused Wells’ employees of opening about 2.1 million accounts that may not have been authorized by customers to meet high-pressure sales goals.
Since news of the scandal erupted, the bank has faced ongoing fallout, from new federal and state probes to slumping customer activity in its branches. On Wednesday, Wells disclosed the possibility that the number of customers affected by the scandal could rise as the bank continues reviewing the matter.
Wednesday’s actions mark the first taken against Wells’ highest-ranking executives since late September, when the bank announced then-CEO John Stumpf and then-community banking head Carrie Tolstedt were giving up stock awards worth tens of millions of dollars. Soon after, Stumpf stepped down and Wells announced Tolstedt was no longer with the company.
The new steps, which were taken by the bank’s board, affect executives based in San Francisco with the exception of Charlotte-based wealth and investment management head David Carroll and chief auditor David Julian.
The others are CEO and President Tim Sloan, who replaced Stumpf; Chief Financial Officer John Shrewsberry; Avid Modjtabai, head of payments, virtual solutions and innovation; Chief Administrative Officer Hope Hardison; Chief Risk Officer Michael Loughlin; and general counsel James Strother.
In a statement, board Chairman Stephen Sanger said Wednesday’s decisions reflect the board’s ongoing efforts to promote accountability and make sure Wells Fargo puts customer interests first.
“As we seek to regain trust, the board is taking decisive actions,” Sanger said. “We will continue to work to make right what went wrong and remain focused on providing the accountability and oversight that our customers, employees and investors expect and deserve.”
The eight sit on Wells’ operating committee, which is made of the company’s 11 highest-ranking executives. In its statement, the bank said Wednesday’s actions are “based on the accountability of all those in senior management for the overall operational and reputation risk of the company.”
All eight were members of the committee before it was reconstituted in November, the bank pointed out.
Cash bonuses made up roughly 9 percent of total compensation awarded to top executives for their work in 2015. Those compensation packages also include base salaries and stock awards.
In 2015, Sloan received about $11 million in total compensation, including a $1 million cash bonus, for his role as president and chief operating officer. In a statement Wednesday, Sloan said he “fully” supports the board’s actions, calling them “critical to Wells Fargo’s commitment to our customers.”
Wednesday move was not entirely unexpected: A person familiar with the matter told the Observer last month that Wells’ board was likely to scrap annual bonuses for some top leaders.
The new actions also come after Wells last week announced the firing of four executives in its retail bank, the first terminations stemming from the board’s ongoing investigation of the scandal. Before that, Wells Fargo fired 5,300 mostly lower-level branch employees between January 2011 and March 2016 for secretly opening accounts.
More details about compensation for top brass for their work in 2016 will be reported when Wells releases its proxy statement in mid-March. The proxy will also show which board members will be up for re-election at the board’s annual shareholders meeting.
On Wednesday, Wells said longtime board member Susan Engel informed the company Tuesday that she will not stand for re-election. Engel has sat on the board since 1998 and serves on its credit, finance and human resources committees.
Also Wednesday, Wells Fargo announced its annual meeting will be held April 25 in Ponte Vedra Beach, Fla., near Jacksonville. The announcement confirms a Charlotte Observer story last week that was the first to report the meeting’s date and location.