Last week, Wells Fargo CEO John Stumpf testified before the Senate Banking Committee after the bank paid fines for creating over 2 million fake customer accounts to boost their sales growth statistics. Stumpf, under fire from senators demanding that the bank claw back executive bonuses as punishment for the scandal, insisted that any such decision would be made by a committee of the board of directors that handles compensation issues.
That board is made up of five current and former CEOs and executive chairpeople who have enjoyed giant salaries throughout their careers. Pulling the trigger on clawbacks would force them to turn on the system that made them rich. They’d also have to bite the hand that feeds them a steady supply of Wells Fargo stock.
This is a common situation, and it helps explain why executive compensation has inflated in recent decades. Corporate CEOs sit on one another’s boards and approve oversized pay packages, in the expectation that they will get the same treatment from their board in return. Some, like Stumpf, serve as both the CEO and board chairperson simultaneously.
Stumpf has said that he would make no recommendations to the board on whether they should claw back any of his compensation, or that of his fellow executives.
The Human Resources Committee of the Wells Fargo board evaluates and approves executive compensation plans for the bank. Here are its five members:
- John Chen, the executive chair and CEO of Blackberry, Inc. since November 2013. In 2014, as a reward for his employment, Chen received a stock-based bonus of $84.7 million on top of $1 million in salary. The board said that the $84.7 million stock award helped “align the interests of Executive Officers with the achievement of the Company’s long-term business objectives and the interests of shareholders.” Chen’s 2015 compensation, which included even more stock, was $3.4 million, and in 2016, $3 million.
- Donald James, the retired CEO of Vulcan Materials. James served from 1997 to 2014, and in his final year, he earned $13.36 million. Of that $3.9 million came from stock awards, and another $1.3 million in options.
- Stephen Sanger, the former CEO of General Mills from 1993 to 2008. In his final two years at the company, Sanger earned $19.15 million and $18.57 million, respectively. The majority of these earnings came in the form of stock grants and options.
- Lloyd Dean, the CEO of the nonprofit Dignity Health Foundation, one of the three largest hospital systems in California. Since Dignity Health is a privately held company, it’s difficult to find executive compensation statistics, but in 2010 the Institute for Health and Socio-Economic Policy reported Dean’s pay for that year at $4.76 million. Kaiser Health News reported in 2013 that Dean’s compensation had increased to $5.14 million, with $2.05 million of it in “bonus and incentive pay.”
- Susan Engel, the CEO of Portero, a luxury retail sales company, from 2009-2013, and before that the CEO and chairwoman of Lenox Group Inc., a holiday gift manufacturer, from 1996-2007. Engel received $837,865 in compensation from Lenox Group in 2006, the last year for which a proxy statement can be located. Her salary as CEO of Portero is unavailable because the company is privately held.
In addition to the millions bestowed upon them by their own boards, these current and former CEOs receive a generous stipend for being on the board of Wells Fargo. According to the company’s most recent proxy statement, in 2015 Chen made $279,027; James made $293,027; Sanger made $382,027; Dean made $346,027, and Engel made $331,027. The majority of those payments came in the form of stock as well.
Top executives often receive stock instead of a base salary because of a Bill Clinton-era law exempting “performance-based” pay from a cap on corporate tax deductions for executive compensation.
Under Wells Fargo’s self-imposed “clawback” policy, the Human Resources Committee can revoke executive stock awards in the event of misconduct, including anything that causes the company reputational harm or a failure in risk management. While companies rarely enforce these provisions, as former FDIC chair Sheila Bair told CNBC when the false account scandal broke, “If you’re going to use clawbacks, this would be the situation.”
At last week’s hearing, senators of both parties urged Wells Fargo to use the clawback provision, particularly for Carrie Tolstedt, the former head of community banking (chief overseer of retail account sales) who retired this year with career earnings of $125 million. Were Stumpf to retire, he would receive $123.6 million in his own right.
“To not invoke some degree of clawback for yourself and others involved would be committing malpractice from the standpoint of public relations,” said Sen. Bob Corker, R-Tenn., at the hearing. Stumpf replied that any decisions on clawbacks would result from “a board process.”
Federal regulators do not actually have to hope the collection of CEOs on the Wells Fargo board will reject personal self-interest and claw back executive pay. The Consumer Financial Protection Bureau and Office of the Comptroller of the Currency both have the authority to impose a civil money penalty on individual executives but declined to do so in the Wells Fargo case. Despite the fact that Wells Fargo was fined $190 million in the fake accounts scandal, the executives responsible for the misconduct have paid no price.
Top photo: John Stumpf, chairman and CEO of the Wells Fargo & Company, prepares for testimony before the Senate Banking, Housing and Urban Affairs Committee on Sept. 20, 2016, in Washington, D.C.
Unless/until the public stops sending their money to Wall St.
Daily, with credit card swipes.
Weekly, with blind trust in their 401K and pension deposits.
Stop complaining if you’re funding it.
Jail time or GTFO
I hope you’re writing a new article about the House committee vs. Stumph. There’s been a whole bunch of members going “Warren” on his ass, and it’s riveting watching the establishment rip at the empire of greed it’s corruption enabled.
“Why Wells Fargo’s Executives Will Keep Their Bonuses, Even After Fake Accounts Scandal”
That’s simple: because their are no Judge’s left in America who have as their first concern the Law and not how to get richer themselves.
It seems that in a public relations stunt, Stumpf has voluntarily given up $41 million in an attempt to make this all go away.
No doubt he will be well compensated for falling on his sword.
Look at the picture and the way his utter distain for the inconsequential people radiates from his face, a beacon, a clarion call to the likes of Clinton and Trump and their rabid followers.
Yep…..what a sociopath!
Looks like TI is going to have to eat a little crow this time – http://www.wsj.com/articles/wells-fargo-board-actively-considering-executive-clawbacks-1474985652
So what happens to this article now that you were completely wrong
There will be severe consequence if little employees like us would do such corrupt act but not these big shot CEO who actually runs our Government.
Shocked, shocked to find that gambling is going on in here!
Individually they should be fined for the bonuses they received × 3 or face jail time for ethical misconduct, business malpractice, and fraud.
AND they should be pleased and patriotic to accept that solution lest down the road they be removed from the country and dropped of on some remote south pacific island – by helicopter into the water and have to swim ashore.
Gee I can remember when Wells Fargo didn’t want me or my money, they basically said I didn’t have a good enough credit report for them.
I have had an account with Chase since it was Washington Mutual, and I also have an account with the Credit Union. Guess since the good stuff wasn’t going to come to Wells Fargo they didn’t want me.
Looks like I was one of the lucky ones. This happened close to 3 years ago. I have not tried opening an account with Wells Fargo and thankfully now that I see what crooks they truly are, I thank my stars that I wasn’t good enough for them. Prison is the only place any of these big bankers should be, but how many years have we been waiting for ANY BANKER OR STOCK BROKER IN THE USA TO BE PROSECUTED? Don’t hold your breathe. There is NO accountability for the upper echelon sadly. Government doesn’t even hold themselves, accountable for their terrorism around the world THEY ARE CREATING!
I fully expect my 401k to be stolen-again-as these crooks run out of ways to steal other peoples money. Obama has been a complete sell out when it comes to financial crime in this country and Hillary will be no better
The look on his face… “OH MY GOD THEY ARENT GONNA ARREST ME?
I punched that wall for nothing?”
Hellary Clinton complains about Wells Fargo irregulaties while simultaneously taking money from wallstreet thieves and supporting their agenda to take over world economies to rob them with the TPP, TPIP, TISA.
https://theintercept.com/2016/08/26/clinton-foundation-spin/
I was just reading two former employees filed suit on the 22nd, they’re asking for class action status to represent other former employees of the last ten years. The plaintiffs are seeking at least 2.6 billion in damages, very much looking forward to the follow-up articles David ; ) you gotta keep some light on this story.
The world’s least-needy men – who mass-dispossessed Americans with predatory lending and illegal foreclosures, while simultaneously undermining America’s credit and credibility in the global financial market with fraudulent debt-trading and fraudulent investment-ratings – BEG charges of TREASON.
They are criminals by PREFERENCE (these are not survival crimes) and they perpetrated a malicious attack against their own country, ON TOP of their malicious attack against masses of their fellow countrymen, yet they haven’t even been imprisoned (let alone publicly hanged).
The reason Wells Fargo understands that it can use the mass-implementation of identity-theft to fraudulently open accounts as a form of aggressive ‘marketing’, and flagrantly steal ‘fees’ from its customers, is because the US is more corrupt than ANY of the nations it has the effrontery to mock.
The problem isn’t that an overtly criminal sleazebag is happy to keep the bonus that an overtly criminal institution is happy to give him; the problem is that when banks can undermine the entire country without ever paying the penalty, then there’s no way to convince banks that they’re not allowed to commit lesser crimes with the same impunity.
A treasonous degree of market manipulation, not only went unpunished, but was rewarded with a bonus trillion-dollar market-manipulation-spree.
Who’s surprised that Wells Fargo is unafraid to engage in theft, identity theft, and fraud?
The entirety of Wells Fargo’s executives and directors (and any other scum lurking at the top of that pond) should be sentenced to the slave-labour that black people ‘somehow’ end up sentenced to for smoking marijuana.
i like your style ;-)
And yet people still vote for Barack Obama or George Bush or Hillary Clinton or Donald Trump or any number of another Senators and House of Representatives residents who will never prosecute these people. If they’re not going to prosecute them if they’re not going to go to the heart of the corruption then they are complicit in the corruption and part of it. That means our current sitting president our next president the president before him. All your justice department heads cabinet members, a majority of senators and House of Representatives are complicit in the corruption. If you vote Republican or Democrats you are complicit in the corruption and part of the problem.
Voters are not to blame.
Very recently, voters tried to put a far less corrupt candidate at the top of the Democratic Party ticket. Despite a surprisingly impressive effort, voters were undermined and overpowered by the ham-fisted manipulation of the shamelessly corrupt leadership of the Democratic Party.
It is not the fault of voters that they don’t have the option to elect a leader who isn’t corrupt.
Voters currently have the ‘choice’ to vote for a bank-serving, warmongering monster, or to vote for a monster who is also a slave to greed and hostility, but whose greed routinely involves looting the things he is in charge of, while driving them into bankruptcy, and whose hostility already involves asking, “Why shouldn’t we use nuclear weapons?”
Voters who use their fleeting and miniscule influence to vote for a “third-party” candidate (no matter how pure their intentions) have no more influence than those who refuse to vote. They only serve to leave the decision in the hands of others.
There is no democracy in America.
what i don’t understand is why stockholders don’t sell their stock and invest somewhere else? these huge amounts of money don’t even trickle down to stockholders much less any one else with all their tax loopholes.
Most normal people – who are the only people who would care – are only involved in the stock market in the sense that their pension (which they don’t really control), is invested in mutual funds (which they don’t control at all), that are invested by bankers who are perfectly happy to invest in any number of crooked banks.
There is not ONE, NOT ONE, big bank that did not fire it’s
It is time for Warren Buffett to step in. He is the largest shareholder. And I understand he is not happy with the Wells administration.
Why? He’s the beneficiary of their bad behavior.
Thanks for pointing out that Warren’s ‘baby’ CFPB HAS the authority to seek redress. Will someone please hold Clinton’s feet to the fire on this one? Posting comments here is fine but i hope we’re writing to CFPB too: http://www.consumerfinance.gov/
The Mafia of the 21st century..and where are their admiring masses? In D.C.
Hey, just started reading your book, Chain of Title..so far so good..thanks..Bob
Hellary doesnt lie… Hillary Clinton has a message for Wells Fargo customers:
remember, we have to finish her sentences..
Clinton Foundation Took Cash from Wells Fargo
http://www.breitbart.com/big-government/2016/09/21/clinton-foundation-took-donations-wells-fargo/
Hellary does not lie. She “objects” (bla bla bla) to the unfortunate circumstance of wells fargo but at the same time………………..
Imagine yourself with access to the information that gives value to the Corporation employing you?This includes intellectual property, financials, etc…. The CEO has access to it all. What happens if the CEO takes information to a competitor? How about any executive for that matter? It could be and most likely is devastating to the company. Compensation is a defense to corporate espionage. Otherwise known as honesty money……
Engineers transferring companies is far more damaging. That’s why you see that once a product comes out, all the competitors come out with their version withing a year or two.
It’s IP leakage.
Why are they not going to prison?
Because they’ve purchased their Monopoly game ‘Get Out of Jail Free’ cards long ago, with private and corporate campaign contributions to both major parties, courtesy of (among other things) the Citizens United and McCutcheon decisions of a 5-4 right-wing Supreme Court.
It’s also the result of Bill Clinton’s repeal of the Glass-Steagall act in 1999, spearheaded by Congressional Republicans and former Wall Streeters in the Clinton Admin.
“Why are they not going to prison?”
They own the prisons.
I really hope Warren stays on this and sees Stumph gets attired in orange. It will be a great victory for all and a huge stake in the heart of corporate America.
Hillary would never let that happen, and Warren is too much a sycophant in Hillary’s orbit to object meaningfully.
http://money.cnn.com/2016/09/08/investing/wells-fargo-created-phony-accounts-bank-fees/
David, I’m surprised you left out the most critical piece of information regarding this scandal.
The fact that over 5,300 Wells Fargo employees were actually fired for their part in this. Really? You couldn’t spare 1 sentence about them?
And so the low level employees that succumbed to unconscionable pressure to meet their quota get fired with no where to go and these criminals keep their hundred million dollar compensation packages. THIS is AN OUTRAGE!
Yup, the little guys gets squeezed to do horrible things for his boss. Can’t complain through the Whistleblower line as he/she KNOWS that will get them terminated.
Company gets caught. Employees get fired. CEO & Execs get bonuses. Why it is that the CEO isn’t strung up by the 5,300 is beyond me.
Oh yea, The banks and 1% control the police and military. That’s why.
Perhaps some of the 5300 terminated will exercise their 2nd amendment rights as donnie says.
One can only hope. ;)
Who is ultimately to blame, Republicans, Democrats or the people who voted them into office knowing they were lying to them
Boards of Directors in US corporations serve no useful function other than to provide a facade of oversight. Only the most naive would believe that the board does that. What boards do is provide income to otherwise unemployable rich people, and cover for high level executives. They serve the same function in the private sphere as Congress does in the public one.
A CEO wants to do something, so goes to his (not sexist; most US CEOs are male) board, whose members owe him for the privilege of serving, and they grant approval. When some shareholder questions the action, the CEO can then assure them that the board oversaw his action and vetted it before it took place. Similarly, corporations lobby Congress to have regulations removed, and then, when hauled before a committee to explain some outrageous action, can honestly say they were only following the rules, and [and this has actually happened] that if Congress does not like it, they should write regulations prohibiting it.
So, in a sense, corporate boards in the US are as useful as Congress, and equally effective in regulating corporate behavior. Of course it does not have to be that way: I would mention that other countries require oversight boards to have labor representation, etc. but I won’t because I will be accused of being un-Americun.
What good are regulations when the government employees in charge of enforcement refuse to do their jobs?
As the article points out, the OCC & CFPB both have the power to act, but will not do so. The employees are probably planning to take jobs at big banks after leaving government.
You left out the most interesting part of this story and one this is common practice all over the industry:
The fake accounts were set up to avoid meeting high sales goals that many bank tellers have.
If you ever wonder why your teller is always yammering on about stocks and retirement when you go to the window, that is why.
The second thing left out of the story is also important, I think. It’s common that the fat cats don’t get hurt in situations like this. In lieu of no prosecution, it’s important for us consumers to encourage our friends from using other banking institutions.
Research before you buy! Protest with your wallet.