John Stumpfâs decision to forgo $41 million in pay improves the chances for Wells Fargo & Co.âs embattled leader to defuse the bankâs bogus-account scandal, analysts say, though some lawmakers are calling for the lender to do more.
âThis is a good first effort by Wells Fargo to start to move this behind them,â Paul Miller, a banking analyst at FBR Capital Markets & Co., said Wednesday in an interview on Bloomberg Television. âThe question is — and I do not have the answer — is it enough?â
Stumpf, 63, voluntarily surrendered the millions in unvested stock, which reflected his performance back to 2013, and the board accepted, he told employees in a memo Tuesday. Carrie Tolstedt, who ran the community bank during the years when employees opened legions of unauthorized accounts to meet sales goals, will forgo about $19 million in unvested stock. Stumpf and Tolstedt, 56, who has left the firm, wonât get a bonus for this year.
Wells Fargo is under pressure to show itâs holding leaders accountable before Stumpf testifies at the House Financial Services Committee on Thursday. The CEO faced withering questions from lawmakers on both sides of the aisle during a Senate hearing last week, including calls from Massachusetts Democrat Elizabeth Warren for his resignation.
The bankâs decisions were âa small step in the right direction, but nowhere near real accountability,â Warren said Thursday in an e-mailed statement, reiterating her call for him to step down.
âWells employees who tried to raise the alarm about the creation of fake accounts were fired. Their lives were turned upside down,â Warren said. âBut John Stumpf is going to be just fine: he keeps his job and âmost of the millions of dollars he made while this massive fraud went on right under his nose.â
The total forfeited by the two executives would be more than 24 times the amount of fees the bank charged customers for the unauthorized accounts, according to KBW analysts led by Brian Kleinhanzl.
âThe monetary loss should be enough to quell the outrage of interested parties and should buy the CEO more time to deal with the ongoing scandal,â Kleinhanzl wrote in a note. The company âwill be able to manage through the scandal with current executive team intact,â he said.
The lenderâs actions were âfairly comprehensive,â Royal Bank of Canadaâs Joe Morford said in a note.
âWhile it is difficult to try to quantify the potential costs associated with these matters at this point, in our view any additional fines/penalties will likely be limited given the relatively modest financial damage to customers,â said Morford, who has an outperform rating on the stock.
Wells Fargo shares gained 1 cent to $45.10 at 11:21 a.m. in New York. The stock has tumbled about 10 percent since the bank announced a settlement with regulators, the worst performance in the 24-company KBW Bank Index.
The board said its independent directors will lead a company investigation into the matter, working with the human resources committee and the law firm Shearman & Sterling LLP, according to a statement Tuesday. The inquiry may lead to further compensation changes or employment actions, the company said.
That could include evaluating whether top executives including Stumpf should keep their posts, according to a person with knowledge of the panelâs deliberations.
âThere are still dozens of unanswered questions,â Senator Sherrod Brown of Ohio, the banking committeeâs top Democrat, said in a statement. âWe still donât know how many customers were harmed and how long this fraud continued.â
The news about executives forgoing pay and the boardâs review wonât affect the House Financial Service Committeeâs investigation into Wells Fargo, said a spokesman for Chairman Jeb Hensarling, a Texas Republican.
The U.S. Department of Justice, state attorneys general and Congressional committees have started âformal or informalâ investigations into the sales practices that led to the bogus accounts, Wells Fargo said Wednesday in a regulatory filing. The bank settled initial government inquiries this month, paying $185 million in penalties without admitting or denying wrongdoing. It had already fired 5,300 workers over five years.
During last weekâs Senate hearing, lawmakers from both parties faulted Stumpf for placing blame for the unauthorized accounts on lower-level employees, who they said were struggling to meet unrealistic sales goals. Warren also said that top bank executives tried to enrich themselves at the expense of workers who were making $12 to $16 an hour — an assertion Nomura Holdings Inc. analyst Bill Carcache said Stumpf should contest at Thursdayâs House hearing.
Stumpf should âpush back harder against this insinuation,â Carcache wrote Tuesday in a note to investors. If the unauthorized didnât boost Wells Fargoâs financial performance, âitâs difficult for Nomura to see how they could have boosted executive compensation.â