Wells Fargo claw backs spark boardroom drama
The behind-the-scenes acrimony at Wells Fargo
— as much as pressure from Capitol Hill and the public outcry — led to Chairman and CEO John Stumpf’s forfeiture of about $41 million in unvested equity, sources told CNBC’s Andrew Ross Sorkin.
The independent members of the bank’s board are furious with Stumpf over the handling of the sales practices scandal that led to a $185 million settlement with regulators and hearings in Congress, Sorkin said on “Squawk Box” on Wednesday, based on conversations he had with people close to the situation on both sides.
Board members feel they were kept in the dark, Sorkin reported. The Stumpf camp, according to Sorkin, feels the board was given an adequate heads-up about the situation, and they’re throwing Stumpf under the bus.
Asked for comment, a Wells Fargo spokesperson told CNBC via email: “The Company fully supports the decision of the independent directors of the board regarding executive accountability and the initiation of an independent investigation of our retail banking sales practices. Our management team will cooperate fully and is dedicated to strengthening our culture and taking strong actions to ensure this conduct does not happen again.”
The board announced Tuesday that it has “launched an independent investigation” into the matter, and Stumpf “recused himself ” from the probe. In addition to the forfeiture, Stumpf will forgo his salary while the investigation is being conducted.
Reading the tea leaves of the press release, Sorkin called attention to the CEO agreeing with the board on the actions taken, possibly implying they were not his ideas.
Here’s the direct reference:
The Independent Directors have taken a number of initial steps they believe are appropriate to promote accountability at the Company. They have agreed with Mr. Stumpf that he will forfeit all of his outstanding unvested equity awards, valued at approximately $41 million based on today’s closing share price, and that he will forgo his salary during the pendency of the investigation.
Wells Fargo also said Tuesday that Carrie Tolstedt, the former head of the community banking division, would not receive a severance payment.
Tolstedt also forfeited about $19 million in outstanding unvested equity awards and would not exercise her outstanding options during the investigation, according to the bank’s statement.
Following last week’s contentious Senate Banking Committee hearing, Stumpf will testify before the House Financial Services Committee on Thursday morning.
According to prepared remarks obtained by CNBC, the CEO will tell lawmakers he feels “deeply sorry” that Wells Fargo “failed to fulfill our responsibility to customers.” He’s also expected to say the bank undertook no “orchestrated effort” to provide products that consumers didn’t want.
The Wells Fargo settlement covered charges that fee-generating accounts were opened for unsuspecting customers by employees looking to hit sales targets and bonuses. As a result, 5,300 Wells Fargo employees were fired over a five-year period.
