Wells Fargo chops execs’ pay $75 million more: accounts scandal
SAN FRANCISCO — Wells Fargo has rescinded an additional $75 million in pay for two executives, including its former chief executive officer, as part of a harsh self-evaluation of the bank’s role in a scandal linked to bogus accounts, the company said Monday.
Former CEO John Stumpf wound up losing a total of $69 million, including $28 million from the forfeiture of incentive compensation paid out under a long-term incentive program, and $41 million that the bank’s board of directors had previously clawed back from the ex-CEO, who quit last year after the scandal surfaced.
Carrie Tolstedt, who headed the community bank operation of Wells Fargo whose employees opened up to 2.1 million bogus accounts, suffered a total pay forfeiture of $66.3 million. That included an April 7 decision whereby the board of directors clawed back $47.3 million in stock options and a September decision to rescind $19 million in unvested stock awards.
“After decades of success, Stumpf was Wells Fargo’s principal proponent and champion of the decentralized business model and of cross-sell and the sales culture,” according to a report released Monday that detailed the causes of, and responses to, the accounts scandal. “His commitment to them colored his response when sales practice issues became more prominent in 2013 and subsequent years.”
Stumpf, the report said, chose to stand back and rely on the community bank to fix its own problems.
“Growing indications that the situation was worsening and threatened substantial reputational harm to Wells Fargo” weren’t enough to prompt Stumpf to investigate and analyze the problem in a critical fashion, the report stated.
One of the root causes of the banking scandal was that Stumpf gave Tolstedt too much of a free hand in running the community banking unit, according to the report.
“Stumpf’s long-standing working relationship with Tolstedt influenced his judgment,” the report stated. “Tolstedt reported to Stumpf until late 2015 and he admired her as a banker and for the contributions she made to the Community Bank over many years.”
In addition, Tolstedt and community banking executives were given free rein to run the Wells Fargo unit “like they owned it,” a practice that effectively created an independent company within Wells Fargo.
“Tolstedt and certain of her inner circle were insular and defensive and did not like to be challenged or hear negative information,” the report stated. “Even senior leaders within the community bank were frequently afraid of or discouraged from airing contrary views. Tolstedt effectively challenged and resisted scrutiny both from within and outside the community bank.”