Pressure will remain on John Stumpf of Wells Fargo, even after the chairman and chief executive agreed to forfeit more than $40m in pay over a deepening sham-account scandal that has triggered lawsuits, investigations and a record regulatory penalty.
Late on Tuesday the board of the San Francisco-based bank said that Mr Stumpf had agreed to give up unvested equity awards worth about $41m, and also forgo his $2.8m-a-year salary during a “thorough” investigation into the bank’s sales practices. Three weeks ago Wells was fined $185m by US regulators for allowing employees chasing sales targets to open as many as 2m accounts that customers did not authorise.
The move to take back pay was seen as an attempt to ease political pressure on the bank, and Mr Stumpf, ahead of a hearing of the House financial services committee on Thursday. Mr Stumpf had a torrid time during questioning last week on Capitol Hill by a Senate banking committee.
But on Wednesday Elizabeth Warren, the Democratic senator from Massachusetts, described Mr Stumpf’s agreement to surrender about $41m in unvested equity awards as “a small step in the right direction, but nowhere near real accountability”.
“As I said last week,” she tweeted, “Mr Stumpf should resign, return every nickel he made while this scam was ongoing, and face [Securities and Exchange Commission] and [Department of Justice] investigations.”
The independent board members hope to conclude their probe by the end of the year, said a person familiar with the board’s thinking. Members consider the measures taken so far as initial steps, and are willing to take additional action. That could extend to clawbacks of pay already paid out, and pressing Mr Stumpf to resign, said the person.
The sham-account scandal has been a blow for a bank that came through the financial crisis with its reputation relatively unscathed. Since the news broke, Wells has shed about one-tenth of its market capitalisation, losing its crown to JPMorgan Chase as the most valuable US bank by that measure.
“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,” said Stephen Sanger, lead independent director, in Tuesday’s statement.
The board also said that Carrie Tolstedt, who stood down after a nine-year stint at the head of Wells’ retail division in July, would forfeit unvested equity awards worth $19m and has left the company without severance pay about three months ahead of schedule. Neither Ms Tolstedt nor Mr Stumpf will receive a bonus for 2016.
On Wall Street
No bank will escape fallout from Wells Fargo scandal
Should regulators toughen rules on clawbacks, then all bank executives will be squirming
The two executives are giving up only unvested stock awards. They each own tens of millions of dollars worth of shares outright, which will not be affected by the agreement.
According to a Bloomberg analysis of Wells’ public filings, Mr Stumpf held 2.43m Wells shares early last month — worth about $109m at Wednesday’s prices. Ms Tolstedt was the second-biggest insider shareholder at the end of July, with 0.96m shares worth $43m.
Wells said it fired about 5,300 employees after uncovering illegal sales practices. But former employees have told the FT that if staff members cheated to hit targets, they did so because they feared they would lose their jobs if they did not. Several class-action lawsuits are under way.
Brad Sherman, a Democratic congressman from California, told the Federal Reserve chair Janet Yellen at a hearing on Wednesday that Wells had provided new justification for breaking up big banks.
“They created a system where they hired good Americans and turned 5,300 of them into felons,” he said.