Amid mounting public and political pressure, Wells Fargo CEO John Stumpf will forgo more than $41 million in stock and salary, but it remains to be seen whether it will be enough for him to hold on to his job.
Earlier this month, Wells Fargo agreed to pay $185 million in penalties to resolve allegations that employees opened millions of unauthorized accounts.
In a Sept. 27 announcement, the company stated that Stumpf would forfeit unvested equity awards valued at approximately $41 Million and will forgo a salary during the investigation of the scandal.
In addition, Carrie Tolstedt, the former head of community banking for Wells Fargo, has left the company. She will not receive a severance and will not exercise any outstanding options during the investigation. Further, she has forfeited unvested equity awards worth about $19 million. Neither Stumpf nor Tolstedt will receive a 2016 bonus.
While Stumpf and Tolstedt have agreed to these terms, will it be enough to placate Congress and the public?
Stumpf was raked over the coals at a Senate Banking Committee hearing last week, with Sen. Warren (D-Mass.) calling for his resignation. It will likely be more of the same Thursday for Stumpf, as he returns to the Hill to testify before the House Financial Services Committee.
Meanwhile, in its Sept. 27 announcement, Wells Fargo revealed that it has launched an independent investigation of the scandal, to be led by a special committee of independent directors. The special committee will be working with the board’s human resources committee as well as independent counsel from Shearman & Sterling LLP.
Time will tell what will become of Stumpf. Will federal investigations lead to further loss of compensation? As detailed here, the SEC can require clawbacks of compensation and bonuses under 2002 Sarbanes-Oxley Act Section 304. But the provision only applies to the chief executive or chief financial officers, and only if there is a restatement resulting from “material noncompliance” with, or misconduct relating to, financial reporting requirements.
Will the special committee recommend his removal? Perhaps. Regardless, with mounting pressure from Capitol Hill, the public and governance experts, it seems unlikely that he will survive such a massive scandal.
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