{"id":12566,"date":"2016-09-28T11:18:39","date_gmt":"2016-09-28T11:18:39","guid":{"rendered":"http:\/\/www.biphoo.com\/bipnews\/?p=12566"},"modified":"2016-09-28T11:21:55","modified_gmt":"2016-09-28T11:21:55","slug":"wells-fargo-claws-back-millions-from-ceo-after-scandal","status":"publish","type":"post","link":"https:\/\/www.biphoo.com\/bipnews\/business\/wells-fargo-claws-back-millions-from-ceo-after-scandal.html","title":{"rendered":"Wells Fargo Claws Back Millions From CEO After Scandal"},"content":{"rendered":"

Wells Fargo Claws Back Millions From CEO After Scandal<\/span><\/strong><\/h2>\n

Wells Fargo Claws Back Millions From CEO After Scandal<\/strong> : Wells Fargo & Co. Chairman and Chief Executive John Stumpf will forfeit $41 million for the bank\u2019s burgeoning sales scandal, marking one of the biggest rebukes to the head of a major U.S. financial institution.<\/span><\/p>\n

The bank\u2019s board moved to rescind pay for Mr. Stumpf and former community- banking head Carrie Tolstedt ahead of a hearing of the House Financial Services Committee Thursday. Wells Fargo\u2019s board said Ms. Tolstedt, who oversaw retail banking during bad behavior there, will forfeit unvested equity awards valued at $19 million.<\/span><\/p>\n

The board said she won\u2019t exercise \u201coutstanding options\u201d during an investigation into the bank\u2019s sales practices. Ms. Tolstedt has also left the bank, earlier than her planned Dec. 31 retirement.<\/span><\/p>\n

Clawbacks, or their absence, became a big focus of a Senate Banking Committee hearing last week into the bank\u2019s sales tactics, which earlier resulted in a $185 million fine and regulatory action. During his appearance before that panel, Mr. Stumpf and the bank were roundly criticized for firing 5,300 employees over five years, yet taking no action against top executives. As many as two million accounts were opened using fictitious or unauthorized information.<\/span><\/p>\n

The awards being forfeited by Mr. Stumpf represent about a quarter of the total compensation he has accrued over his nearly 35 years at the bank, according to an independent analysis by human-resources consultancy Overture Group LLC. Mr. Stumpf earned total compensation of $19.3 million in 2015.<\/span><\/p>\n

The bank said that the $41 million is from Mr. Stumpf\u2019s unvested equity awards. It also said that he would forgo salary during an independent investigation the board is leading and has recused himself from all matters related to that as well as independent directors\u2019 deliberations. Neither he nor Ms. Tolstedt will receive a bonus for 2016.<\/span><\/p>\n

Ms. Tolstedt couldn\u2019t be reached for comment. Mr. Stumpf declined to comment through a bank spokesman.<\/span><\/p>\n

The bank\u2019s lead independent director, Stephen Sanger, said in the board\u2019s statement that further action may be warranted. The board\u2019s independent directors \u201cwill take such other actions as they collectively deem appropriate, which may include further compensation actions before any additional equity awards vest or bonus decisions are made early next year, clawbacks of compensation already paid out, and other employment-related actions.\u201d<\/span><\/p>\n

The results of that investigation, for instance, will determine what becomes of Ms. Tolstedt\u2019s roughly $35 million in unvested options, according to a person familiar with the matter.<\/span><\/p>\n

The closest a big-bank CEO has come in recent years to such a clawback occurred at J.P. Morgan Chase & Co. That bank halved annual compensation in 2012 for chief James Dimon to $11.5 million from $23.1 million in 2011 due to its London Whale trading scandal. But J.P. Morgan didn\u2019t formally claw back compensation.<\/span><\/p>\n

J.P. Morgan did impose the maximum pay clawbacks on three traders and other executives involved with the debacle, which cost the bank around $6 billion. Ina Drew, the former bank executive who oversaw the unit at the heart of the scandal, volunteered to return pay in line with the maximum clawback.<\/span><\/p>\n

Otherwise, there have only been sporadic instances of attempts to recover pay on Wall Street, usually involving lower-level employees.<\/span><\/p>\n

Action on pay is again likely to be an issue before the House panel. Rep. Jeb Hensarling (R., Texas), chairman of the Financial Services Committee, told reporters at a conference Tuesday that Wells Fargo shareholders would be justified in calling for compensation to be forfeited.<\/span><\/p>\n

\u201cIf I was a shareholder, I\u2019d be outraged if there weren\u2019t clawbacks,\u201d Mr. Hensarling said. He promised to use his hearing and a committee investigation to find out how a \u201cfraud of this massive scale took place\u201d at the lender.<\/span><\/p>\n

\u201cTonight\u2019s announcement is a step in the right direction but there are still dozens of unanswered questions,\u201d said Sen. Sherrod Brown (D., Ohio), the top Democrat on the Senate Banking Committee. But he added that they still don\u2019t know how many customers were harmed, how long the \u201cfraud\u201d continued and how many low-paid employees were fired for failing to meet sales goals.<\/span><\/p>\n

In a prepared opening statement for Thursday\u2019s hearing, Mr. Stumpf didn\u2019t address issues related to pay, according to a copy of the testimony reviewed by The Wall Street Journal. He did say the bank would be accelerating its decision to end sales goals for retail-banking employees by October 2016 instead of January 2017, the date initially given when the change was announced earlier this month.<\/span><\/p>\n

Ms. Tolstedt became a point of focus at the Senate hearing. She stepped down from her role in July and was set to retire at year-end. Her total compensation, including accumulated stock and options earned over her 27 years at the bank, could run to about $96 million, according to a letter Wells Fargo sent senators last week. Ms. Tolstedt received total compensation for 2015 of $9.05 million.<\/span><\/p>\n

In response to heated questions about Ms. Tolstedt\u2019s compensation during the Senate hearing, Mr. Stumpf said that is a matter for the board\u2019s human-resources committee. While Mr. Stumpf is chairman of the board, he isn\u2019t a member of that committee, which is led by Lloyd H. Dean, president and chief executive of Dignity Health, a San Francisco-based not-for-profit health-care system.<\/span><\/p>\n

His answer, though, brought a rebuke from one senator. \u201cThe board should have already acted to claw back those salaries,\u201d Sen. Heidi Heitkamp (D., N.D.) said at the hearing. \u201cIf you had come here and said, the board now is clawing back, these are the things that we\u2019re doing…you would be in a lot better position sitting in that chair right now.\u201d<\/span><\/p>\n

The board last week tapped Shearman & Sterling LLP to advise it on whether and how it should claw back pay from top executives, the board confirmed Tuesday in a news release. The law firm is also leading an independent investigation for the board.<\/span><\/p>\n

Wells Fargo, like other banks, has detailed clawback policies and provisions. \u201cWells Fargo has strong recoupment and clawback policies in place\u201d in part to discourage its senior executives from taking \u201cimprudent or excessive risks that would adversely affect the company,\u201d the bank said in its latest proxy statement.<\/span><\/p>\n

Such provisions can be triggered by misconduct that does reputational harm to the bank; improper or grossly negligent failure, including in a supervisory capacity, to monitor or manage material risks to the bank or business group; and a material failure of risk management, among others.<\/span><\/p>\n

In 2013, Wells Fargo agreed to enhance its clawback policy in exchange for New York City pension funds dropping a related shareholder resolution proposed by the city comptroller\u2019s office. New York City pension funds own almost $500 million in Wells Fargo stock.<\/span><\/p>\n

Under the revised policy, bank directors can recover pay from employees engaged in misconduct and from executives who supervised them. \u201cThis bank needs to regain trust from both the public and investors, and clawing back profits from senior management would be a step in the right direction,\u201d New York City Comptroller Scott M. Stringer said in a statement.<\/span><\/p>\n

The Wells Fargo sales-practices scandal has already rekindled debate about clawbacks. Regulators earlier this year proposed tighter restrictions on how Wall Street bankers are paid and are finalizing the rules.<\/span><\/p>\n

Among them is a requirement for the biggest firms to claw back bonuses from employees engaged in misconduct that results in significant financial or reputational harm or any fraud. Those proposed rules would require banks to take back pay for wrongdoing for at least seven years after the executive receives the payment.<\/span><\/p>\n

Bankers have resisted the proposals, saying they have already tightened compensation standards and adopted voluntary clawback policies.<\/span><\/p>\n

Source :<\/strong> http:\/\/www.wsj.com\/articles\/wells-fargo-board-actively-considering-executive-clawbacks-1474985652<\/span><\/p>\n

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