Wells claws back $75 million from top execs in sales scandal

Wells claws back $75 million from top execs in sales scandal”

Wells Fargo's board of directors said Monday it was clawing back an additional $75 million from Stumpf and another former top executive for their roles in allowing the fake account scandal that has rocked the San Francisco bank in recent months to spiral out of control.

As my colleague James Rufus Koren reports, Wells Fargo has responded to the investigation by moving to take back more than $47 million in pay from Tolstedt and Stumpf. These amounts include a total of approximately $60 million in previously forfeited unvested equity awards ($41 million from Stumpf and $19 million from Tolstedt) and additional clawbacks from Tolstedt of vested options now valued at approximately $47 million and from Stumpf of approximately $28 million in previous equity awards.

"The board and management have taken decisive action to address issues raised by investigation, promote accountability, strengthen oversight and rebuild trust", said the bank in a statement.

WFC's most senior bank examine has been removed by a US regulator in the wake of the bank's unauthorized accounts scandal. The influential advisory group ISS has recommended shareholders should vote to oust nearly the entire board of directors, including the chairman Stephen Sanger.

As for the board, the report noted that "members believe they were misinformed" by a presentation made to the risk committee in May 2015.

But executives outside the community bank, including Chief Risk Officer Michael Loughlin, grew concerned after learning of the figure in April 2014 and summoned Tolstedt to a meeting that month. Most of the employees that were fired admitted that they engaged in misconduct, but frequently said they did so because of the culture at the bank, the report said.

The bank's board faulted Stumpf for assuming problems with Wells Fargo's sales force were limited to individual bad actors, among other things. Within the community bank, Tolstedt encouraged an aggressive sales culture, pursing rising targets that some managers complained weren't attainable.

Tolstedt, who was nudged out the door for her failure to fix issues like the glut of unauthorized accounts, resisted and impeded scrutiny or oversight from corporate risk management and the Board, according to the report. Stumpf already had agreed to give up $41 million in compensation, and Tolstedt had agreed to give up $19 million. Management was also slow to inform the board about the serious nature of the problem, including the firing of thousands of lower-level employees over sales practices, the report said. Additional "mass terminations" continued sporadically over the next decade until Wells Fargo was fined $185 million by regulators previous year.

The result was a "relentless focus on sales, abbreviated training and high employee turnover", the report said, adding that the bank was at times run more like a department store than a financial institution.

In the 110-page report, Stumpf was described as blinded by Wells Fargo's cross-selling success.

"Based on a limited review completed to date, Shearman & Sterling has not identified a pattern of retaliation against Community Bank employees who complained about sales pressures or practices", a footnote in the report said. "The Board's comprehensive findings provide another important opportunity to learn from our mistakes and take action to improve the way we operate, serve customers, and lead our team members".

"Growing indications that the situation was worsening and threatened substantial reputational harm to Wells Fargo" weren't enough to prompt Stumpf to investigate and critically analyze the problem, the report stated.

That report was sent to, among others, the chief auditor, a senior in-house employment lawyer, retail bank HR personnel and the head of sales & service development in the retail bank. After the Los Angeles City Attorney filed a suit over the bank's sales practices in May 2015, he sent an email to Sloan vowing to fight the suit.

That recommendation came after proxy advisory firm Glass Lewis suggested shareholders vote against six directors, including four who sat on the corporate responsibility committee. Wells Fargo's vision is to satisfy our customers' financial needs and help them succeed financially.

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