A Wells Fargo office in Oakland. The bank’s CEO says that aggressive sales tactics were not part of an “orchestrated effort.” (Ben Margot / Associated Press)
James F. Peltz
September 19, 2016
When the Senate Banking Committee grills Wells Fargo & Co.’s chairman Tuesday about the banking giant’s sales scandal, look for the word “clawback” to come up more than once.
That’s a reference to rescinding, or clawing back, part of an executive’s previously granted compensation, and critics in Congress and elsewhere are demanding Wells Fargo take back at least part of the multimillion-dollar compensation awarded to one or more top executives.
But such clawbacks are unusual and it’s unlikely Wells Fargo will take that step, compensation experts said.
Wells Fargo Chairman John Stumpf was called to the hearing after the bank reached a $185-million settlement with federal and state regulators Sept. 8 over Wells Fargo’s aggressive sales tactics.
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In his prepared testimony to the committee, posted online by the New York Times on Monday, he made no mention of taking steps to claw back any pay, and instead offered a simple apology for the bank’s behavior.
“I am deeply sorry that we failed to fulfill our responsibilities,” Stumpf said. “I do want to make very clear that there was no orchestrated effort, or scheme as some have called it, by the company. I accept full responsibility for all unethical sales practices in our retail banking business.”
The tactics, first uncovered by the Los Angeles Times in 2013, involved thousands of bank employees opening as many as 2 million accounts that customers did not authorize in order to meet sales goals.
Investigations by the Los Angeles city attorney’s office and federal banking regulators described some of the steps employees took to open the savings, checking and credit card accounts as fraudulent and illegal.
They included bank employees who transferred money from legitimate accounts into unauthorized ones, created personal identification numbers for debit cards that customers did not request and created fake email addresses to secretly sign up customers for online banking.
Wells Fargo’s top executives have blamed lower-level employees for the problem and said there were no incentives to take improper actions. The San Francisco-based bank also said it discovered the problem itself and has fired 5,300 workers for improper sales practices since 2011.
But critics such as Sen. Elizabeth Warren (D-Mass.) contend Stumpf — who received $19.3 million in total compensation last year — and other senior managers should be held more accountable for the scandal. Warren is a member of the Senate Banking Committee.
They’ve also zeroed in on the compensation paid to Carrie Tolstedt, who ran the consumer banking unit that oversaw many of the sales practices. She announced her retirement in July after amassing salary, bonuses, stock, options and other compensation totaling $124.6 million in her career, Fortune reported, although others placed the figure in the mid-$90-million range.
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