Wells Fargo CEO To Forfeit Tens Of Millions In Stock Awards Amid Scandal

Sep 27, 2016
Originally published on September 30, 2016 9:18 am

Updated 9 p.m. ET with executives forfeiting stock awards

Wells Fargo says its CEO John Stumpf will forfeit outstanding stock awards worth about $41 million in response to the scandal involving unauthorized customer accounts. Stumpf will also forego his salary while the company conducts an investigation.

Additionally, the bank announced former retail-banking head Carrie Tolstedt has left the company and is forfeiting outstanding stock awards worth about $19 million. She "will not be paid severance or receive any retirement enhancements in connection with her separation from the company," the statement reads.

Neither Stumpf nor Tolstedt will receive a bonus for 2016, the bank says. It adds that a special committee of independent directors will lead the investigation into the scandal.

"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," lead independent director Stephen Sanger said in a statement.

Sanger added that the bank could take further action based on the results of the investigation.

Earlier on Tuesday, The Wall Street Journal said the bank wants to resolve the issue before Stumpf testifies before the House Financial Services Committee on Thursday, citing a source familiar with the matter.

Wells Fargo said earlier this month it had agreed to pay $185 million to settle charges that it opened some 2 million deposit and credit card accounts for its customers without their permission over a five-year period.

At a Senate Banking Committee hearing last week, Stumpf was sharply criticized over the fact that the bank has fired some 5,300 employees connected to the illegal sales practices without taking any action against senior executives.

"Have you returned one nickel of the millions of dollars that you were paid while this scandal was going on?" asked Democratic Sen. Elizabeth Warren of Massachusetts.

He was also asked about the possibility of clawbacks of money paid to Tolstedt, who was set to retire with $124.6 million in stock and options. Stumpf had said the board was weighing what to do but refused to say when a decision would be made.

Since his appearance before the Senate panel, which was widely seen as something of a public relations disaster, Wells Fargo's board has expedited efforts to resolve the pay issue.

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STEVE INSKEEP, HOST:

For the chief executive of Wells Fargo, the verdict is in. The company's board says he has to forfeit $41 million in stock awards because of illegal sales practices. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: Regulators say Wells Fargo opened some 2 million deposit and credit card accounts on behalf of its customers without their permission. And earlier this month, the bank agreed to pay $185 million in fines for its actions. Last week, chief executive John Stumpf appeared before the Senate Banking Committee to apologize for what happened.

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JOHN STUMPF: And I am fully committed to fixing this issue, strengthening our culture and taking the necessary actions to restore our customers' trust.

ZARROLI: But Stumpf was harshly grilled by the senators, and his appearance was widely seen as something of a PR disaster. With the chief executive scheduled to make a second appearance on Capitol Hill this week, the company was anxious to diffuse some of the controversy.

Last night, the board announced that Stumpf and former retail banking chief Carrie Tolstedt would forfeit some of their unvested stock awards and bonuses this year. Cornelius Hurley is a professor of banking and law at Boston University.

CORNELIUS HURLEY: I think the bottom line is that it's a vote of no-confidence in the CEO, pending an investigation of indeterminate length and outcome.

ZARROLI: The Wall Street Journal reported that the money that Stumpf will forfeit amounts to about a quarter of what he has earned in his 35 years at the bank. Wells Fargo's board also hired an outside law firm to look into the unauthorized accounts, and it promised to let investigators take as long as they needed. In the meantime, Hurley says, that could present problems for the bank.

HURLEY: The fact that a bank of this magnitude - 1.9 trillion in assets - is going to be essentially leaderless during an indefinite investigation is pretty frightening.

ZARROLI: Stumpf couldn't be reached for comment. But in a letter to employees that was obtained by NPR, he said he had recommended to the board that his own pay be docked. He also said Wells Fargo had weathered many storms during its 164-year history. He said, we will weather this one, too. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.