Wells Fargo said Monday that two former senior executives, including its longtime chief executive John Stumpf, must forfeit an additional $75 million in compensation after a scathing internal report found that they did too little to rein in the abusive sales practices that have rocked the mega-bank.
The moves came as Wells Fargo, a leader in consumer and mortgage banking, released a 110-page report analyzing the factors behind the scandal that involved opening of about two million deposit and credit card accounts without the customers' approval or knowledge. Yet if Stumpf and Tolstedt are allowed to walk away from the colossal mess they created with millions in their pockets, what kind of message does it send to people in or outside of banking who behave ethically and honestly?
"The investigation blames Wells Fargo's decentralized management structure and sales culture for the debacle, which completely absolves senior management other than Stumpf and Tolstedt, and the board, which remains unscathed by any of the problems at the bank, for the cause of the affairs of the bank".
But still, not everyone is convinced this is enough.
The bank's board of directors also faces a shareholders' vote that will decide which members remain, as Wells Fargo meets April 25 for its annual shareholders meeting in Ponte Vedra Beach, Florida. "This hampered the ability of control functions outside the Community Bank and the Board to accurately assess the problem and work toward a solution", the board said. "The board has total confidence in management, and while this investigation has concluded, our oversight of the company and commitment to accountability are stronger than ever".
"I'm very disappointed in the ISS and Glass Lewis recommendations, they do not take into account sufficiently the actions that the board has taken since the issue broke", he said.
The report noted that both Stumpf and Tolstedt ignored the growing problems and deflected criticism about the San Francisco-based bank's questionable practices.
Tolstedt, who declined to be interviewed for the board's investigation, rejected its conclusions in a statement from her attorney. "This provided justification for a relentless focus on sales, abbreviated training and high employee turnover", the report said.
We accept the Board's findings as a critical part of our journey to rebuild trust.
United Airlines to testify over passenger scandal
The company is now conducting a review of its policies on overbooked flights - with details expected later this month. Many lawmakers fly home almost every week while Congress is in session, so the United incident hit a raw nerve.
Past year it emerged staff at the bank had set up two million deposit and credit card accounts in customers' names without their approval.
John Stumpf, the CEO who retired under pressure from the scandal in October, was criticized for failing to grasp the gravity of the sales practice abuses and their impact on the bank.
The agency has also warned Wells Fargo that it is likely to order the bank to rehire another worker who said she was sacked in 2011 after trying to gain her supervisors' attention to accounts that she said had been fraudulently created. At another, it said there was "no evidence that Tolstedt showed serious concern about the effects of improper sales practices on Wells Fargo's customers".
Plath applauded the board for publishing its full investigation and the independent manner in which it was conducted.
The report also takes a stab at Tim Sloan, who served as Well Fargo's Chief Financial Officer from 2011 to 2014 and as head of the Wholesale Bank before he became President and Chief Operating Officer in November 2015. Clawing back money from disgraced executives is well and good, but changing the bank's culture to protect Wells Fargo employees (and customers) is far more important.
Timothy J. Sloan, who succeeded Stumpf as chief executive, was largely exonerated by the report, despite the fact that he was also a career Wells Fargo executive.
Incredibly, the judges who oversaw those cases were so appalled by what they saw that even they "made disparaging comments" about Wells Fargo's incentive system, according to the report. Wells was aiming for as many as eight financial "products" per household. The bank remains under investigation in several states, as well as by the Securities and Exchange Commission, for its practices.
Sloan promised during the conference call on Monday that Wells Fargo will "learn from these mistakes that are right there in black-and-white in this exhaustive board report".
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