Date
17 January 2017
Chief Executive John Stumpf is being held accountable after some of the bank's employees were found to have opened as many as 2 million accounts without customers' knowledge in order to meet sales targets. Photo: Reuters
Chief Executive John Stumpf is being held accountable after some of the bank's employees were found to have opened as many as 2 million accounts without customers' knowledge in order to meet sales targets. Photo: Reuters

Wells Fargo CEO forfeits millions over sales tactics scandal

Wells Fargo & Co. chief executive John Stumpf will forfeit unvested equity awards worth about US$41 million and will not get a salary while the company’s board is investigating the bank’s sales practices, the company says.

Carrie Tolstedt, the former head of the retail division at the center of a burgeoning sales scandal, has left the company ahead of her planned Dec. 31 retirement date, will get no severance and has forfeited unvested equity awards worth about US$19 million, Reuters reports, citing a statement from the bank said.

Stumpf and Tolstedt will also not receive bonuses for 2016.

The penalties represent one of the biggest financial sanctions ever levied against a major bank boss and mark a sharp change from a few years ago when despite scandals at large banks, no CEO had to give back a bonus.

Wells Fargo, the United States’ third-largest bank by assets, is under pressure to show it is holding its top brass accountable after government investigations revealed that some of its employees opened as many as 2 million accounts without customers’ knowledge in order to meet sales targets.

The company’s failure to claw back executive bonuses was a big feature of Stumpf’s appearance before a Senate Bank Committee meeting last week into the bank’s sales tactics.

Some lawmakers also called on him to resign.

Stumpf will appear before the House Financial Services Committee on Thursday.

The San Francisco-based bank agreed to pay US$190 million earlier this month to settle regulatory charges over the account scandal and has fired about 5,300 employees, most of them low-ranking staff, in connection with it.

A special committee of the bank’s independent directors will lead an investigation into the retail bank’s sales practices, helped by the board’s human resources committee and the law firm Shearman & Sterling LLP, according to the statement.

The investigation may lead to further compensation changes or employment actions, the company said.

“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,” Stephen Sanger, the board’s lead independent director, said in a statement.

“We will conduct this investigation with the diligence it deserves.”

Stumpf, a member of the board, has recused himself from the investigation, the bank said.

Wall Street banks have introduced clawback provisions in the wake of the financial crisis when tens of billions of dollars in penalties for mortgage fraud and other illegal activities were paid out but no executive had to give back their bonus.

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