Wells Fargo’s top boss is in line for a hefty payday that could top well over $100 million, were he to resign in the wake of a scandal over bogus accounts that bank workers opened for unwitting customers, a disclosure that unleashed what some experts call the bank’s worst problems in years.
“Without a doubt, this is Wells Fargo’s biggest crisis since the Great Recession,” Ken Thomas, a banking analyst and president of Miami-based Community Development Fund Advisors, said Monday. “Wells Fargo has always been a highly respected bank up to now.”
On Sept. 8, Wells Fargo was hit with $185 million in fines for secretly opening millions of unauthorized accounts by using customers’ funds without their knowledge to meet sales goals and get bonuses, federal officials said.
Further outrage could descend on Wells Fargo because the bank’s chief executive officer and chairman, John Stumpf, would qualify for a handsome pay package were he to step down from his posts at the bank, according to publicly filings with the Securties and Exchange Commission.
“Payments like this put companies in a bad light when there is controversy,” said Michelle Leder, an expert on company public filings who runs the online site Footnoted.
Stumpf, were he to retire from Wells, would be in line for a package valued at around $125 million, according to calculations provided to this newspaper by San Mateo-based Equilar, a top expert on executive compensation. The value of what Stumpf would take with him on his way out the door would fluctuate a bit depending on the value of Wells Fargo’s stock.
Carrie Tolstedt, who until July was a senior executive vice president in charge of community banking, stands to haul away roughly $90 million, the Equilar assessment determined. The unauthorized bank account activity occurred in the community banking unit. Prior to the scandal coming to light, Tolstedt had announced that she would retire from the bank at the end of this year.
“Executive pay is really about the philosophy behind the compensation package and whether it was based on the company’s performance, and increasing the value of the company’s shares over time,” said Dan Marcec, a spokesman for Equilar. “In this case, there is the perception that there was wrong doing by the bank.”
For Stumpf, the retirement compensation package breaks down this way: stock valued at $74 million, unvested shares of stock valued at $25.2 million that’s eligible for retirement, a pension worth nearly $20 million, and deferred compensation valued at $4.4 million, according to the Equilar estimates. Those were based on the most recently available proxy statements from Wells Fargo, which were filed in March.
“The amounts could be higher,” Marcec said.
The exit package for Tolstedt breaks down to $38.2 million in stock, $11.5 million in unvested shares, a $1.2 million pension and $1.8 million in deferred compensation.
But it’s also entirely possible that Wells Fargo’s board or compensation committee could decide to claw back, or cancel, some or all of the stock options or bonus of top executives at the bank, including Stumpf and Tolstedt.
“If the company’s profits were achieved through nefarious means, or there is a belief it was nefarious, then it’s up to the board of directors to make a decision on that,” Marcec said.
In what the Consumer Financial Protection Bureau described as a “widespread illegal practice,” bank employees opened more than 2 million deposit and credit card accounts that might not have been authorized by consumers, the agency said on Sept. 8.
Since the announcement of the scandal and the fines against Wells Fargo, the bank’s shares have tumbled 9.8 percent. That’s a loss of $24.7 billion in market value, according to statistics derived from the Bloomberg News database. San Francisco-based Wells Fargo fell 1.9 percent on Monday.
Following the revelation of the bogus account activity, shareholders have sued the bank, demands of widened for Stumpf to resign or at least suffer a pay cut or loss of stock options, and the U.S. Department of Justice has issued subpoenas to the bank.
“The board of directors is asking itself what can it do to protect the brand of Wells Fargo, the stagecoach brand,” Thomas said. “If they have to push Stumpf out of the stagecoach, then that’s what they are going to do.”
