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Wells Fargo Board Orders Review and CEO Forfeits Millions

Wells Fargo Board Orders Review and CEO Forfeits Millions
While the company's board investigates Wells Fargo's sales practices, its Chief Executive Officer John Stumpf will not get a salary and will forfeit unvested equity awards worth about $41 million, the bank said on Tuesday.
The bank said that no severance would be given and unvested equity awards worth about $19 million would be forfeited for Carrie Tolstedt, the former head of the retail division at the center of a burgeoning sales scandal, has left the company ahead of her planned Dec. 31 retirement date. Stumpf and Tolstedt will also not receive bonuses for 2016.
The penalties mark a sharp change from a few years ago when despite scandals at large banks, no CEO had to give back a bonus and represent one of the biggest financial sanctions ever levied against a major bank boss.
After government investigations revealed that some of its employees opened as many as 2 million accounts without customers' knowledge in order to meet sales targets, Wells Fargo, the United States' third-largest bank by assets, is under pressure to show it is holding its top brass accountable for the scandal.
While some lawmakers at the Senate Bank Committee meeting last week also called on him to resign, the company's failure to claw back executive bonuses was a big feature of Stumpf's appearance before the committee looking into the bank's sales tactics.
Stumpf will appear before the House Financial Services Committee on Thursday.
The San Francisco-based bank has fired about 5,300 employees, most of them low-ranking staff, in connection with charges over the account scandal and has agreed to pay $190 million earlier this month to settle regulatory charges over issue.
According to the bank statement, sided by the board’s human resources committee and the law firm Shearman & Sterling LLP, a special committee of the bank's independent directors will lead an investigation into the retail bank's sales practices.
The company said that further compensation changes or employment actions would result from the investigation.
"We are deeply concerned by these matters, and we are committed to ensuring that all aspects of the Company’s business are conducted with integrity, transparency, and oversight. We will conduct this investigation with the diligence it deserves," Stephen Sanger, the board's lead independent director, said in a statement.
The bank said that Stumpf, a member of the board, has recused himself from the investigation.
While tens of billions of dollars in penalties for mortgage fraud and other illegal activities were paid out but no executive had to give back their bonus since the financial crisis, Wall Street banks have introduced clawback provisions to take care of this.
Jamie Dimon, JPMorgan Chase's chief executive, had his 2012 bonus cut in half after the bank's board decided he should shoulder blame for $6.2 billion of "London Whale" trading losses and that is the closest a bank CEO has come to a clawback since the adoption of the measure.
It would eliminate sales goals in its retail banking on Jan. 1, 2017, Wells Fargo has previously said.

Christopher J. Mitchell

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