Wells Fargo Board faults aggressive culture in sales scandal
Wells Fargo (NYSE:WFC) has announced its intentions to claw back tens of millions in additional compensation from top former executives involved in the fake account scandal that rocked the bank previous year.
Wells Fargo already has paid $185 million in fines to federal and local authorities and settled a $110 million class-action lawsuit over the fake accounts.
Sanger said Monday that the board will not fire management who may have been previously linked to the scandal amid the report's release.
The report blamed Stumpf for giving Tolstedt too much of a free hand in running the community banking unit.
Tolstedt declined for an interview and she rejected the conclusion revealed by the board.
Along with an earlier round of punishments of the two executives, Wells Fargo has clawed back a total of $69 million from Stumpf and $67 million from Tolstedt. Both were ultimately unwilling to accept criticism that the bank's sales-focused business model was failing. The $28 million that the board is taking back from Stumpf - the proceeds of a 2013 equity grant - will be deducted from his retirement plan payouts, Sanger said.
In the report, Tolstedt, who was head of the Community Bank, was described by the board as "insular and defensive". "Thousands of Wells Fargo's employees and officers engaged in serious criminal conduct ripping off millions of customers over many years", he said.
Branch-level managers said they often felt pressure from their supervisors to make sales, but that only rarely were they explicitly instructed to engage in misconduct.
The independent investigation found that "mass terminations" for sales abuse went back to "at least" 2002 and then "continued sporadically over the next 10 years".
Wells Fargo's decentralized model was partly inherited from Norwest, when the two banks merged in 1998, the report said.
Meanwhile, the board could find nothing worse to say about Stumpf than that he "was by nature an optimistic executive" who "nonetheless moved too slowly to address the management issue". And Stumpf and Tolstedt are only giving up a fraction of the $280 million and $100 million they earned, respectively, between 2011 and 2016, critics note.
That reputation came crashing down in a massive, years-long consumer fraud scandal that culminated in late 2016 when the Consumer Financial Protection Bureau hit Wells Fargo with the biggest fine ever imposed by the agency.
"From the moment we sued Wells Fargo over fake accounts through the time we resolved the case, the bank seemed determined to blame and fire low-level employees, rather than take responsibility at the top", Feuer said in a prepared statement.
Wells Fargo's findings are an ignominious career finale for Tolstedt, who was a fixture on Fortune's annual Most Powerful Women list, ranked at No. 27 as recently as 2015, recognized as the most powerful female banker in the U.S.at the time. Mr Stumpf had already given back $41m in equity awards, while Ms Tolstedt forfeited $19m in equity and was forced out without severance pay. Last week, two proxy advisory firms recommended shareholders vote against retaining several members of the board.
Wells Fargo said that, out of the 5,300 employees it fired for sales-practices violations, 172 were in Minnesota.
As a result of the investigation, the board has stripped more than $180 million from senior leaders, the report stated. It found that Stumpf's commitment to the Wells Fargo sales culture and its decentralized structure led him to "minimize problems", despite "growing indications that the situation was worsening".
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