Wells Fargo said Monday that two former senior executives, including its long-time CEO John Stumpf, must return an additional $75 million in compensation after a scathing internal report found the bad sales practices that have rocked the mega bank date back far longer than initially acknowledged.
Stumpf, who stepped down in October, had already agreed to give up $41 million in compensation as the scandal roiled the San Francisco bank. Now, Wells Fargo says it will “claw back” an additional $28 million from Stumpf. The former head of retail banking, Carrie Tolstedt, who stepped down last year and agreed to give up $19 million in compensation, will lose an additional $47 million in stock options.
It is one of the largest clawbacks of compensation by a company in history and a sign that big U.S. banks feel increasingly under pressure to show the public that they can hold themselves accountable for wrongdoing.
The report was the culmination of a six-month investigation by the bank’s independent board members and comes as Wells Fargo struggles to move beyond the sales scandal. It indicates that the problems at Wells Fargo went on for far longer than originally acknowledged and likely involved more employees and customers.
Wells Fargo admitted last year, for example, that it had fired 5,300 employees over five years for opening accounts for customers they didn’t want or know about. But the report found that Stumpf was notified of a problem at one of the bank’s Colorado branches in 2002 that led to “mass termination” of bank employees, according to the report.
The roots of the problem, the report said, was the autonomy given to Wells Fargo’s community banking division and the apathy of senior executives who downplayed the problems. The executives tended to view the sales abuses as largely “minor infractions and victimless crimes” committed by a relatively few bad apples, and clung to a sales culture that had helped the bank grow so large.
“The Community Bank identified itself as a sales organization, like department or retail stores, rather than a service-oriented financial institution. This provided justification for a relentless focus on sales, abbreviated training and high employee turnover,” the report said.
Wells Fargo has been in lawmakers’ crosshairs since acknowledging last year that some of its employees created as many as 2 million fake accounts — from credit cards to checking accounts — to meet sales goals. In some cases, Wells Fargo customers faced various fees for accounts they did not request, or bank employees took money from an authorized account to create a fake one.
In a tense exchange, Senator Elizabeth Warren badgered Wells Fargo CEO John Stumpf on why he had not offered to give up any of his compensation or to resign in the wake of the fake accounts controversy.