Wells Fargo Taps Adviser on Pay -- WSJ
September 24 2016 - 3:03AM
Dow Jones News
By Emily Glazer
Wells Fargo & Co.'s board tapped Shearman & Sterling LLP
to advise it on executive-compensation matters, amid calls to claw
back certain executives' pay over the bank's sales-tactics scandal,
people familiar with the matter said.
Robert Mundheim, a lawyer at the firm, is advising the Wells
Fargo board on whether it should claw back pay of Chief Executive
John Stumpf, Chief Operating Officer and President Timothy J. Sloan
and former retail-banking head Carrie Tolstedt, one of these people
said.
Ms. Tolstedt, who oversaw the unit responsible for the
questionable sales tactics during the time in which regulators said
they occurred, has stepped down from her position and is due to
retire at year-end.
Mr. Mundheim represented the board of J.P. Morgan Chase &
Co. during the time of the $6 billion trading loss known as the
"London whale" scandal.
Wells Fargo's decision to allow Ms. Tolstedt to retire with tens
of millions of dollars in compensation sparked heated questions
during a Senate Banking Committee hearing this week. In response,
Mr. Stumpf said that is a matter for the board's human-resources
committee.
While Mr. Stumpf is chairman of the board, he isn't a member of
that committee, which is led by Lloyd H. Dean, president and chief
executive of Dignity Health, a San Francisco-based not-for-profit
health-care system.
Mr. Stumpf said at the Tuesday hearing that the board committee
had already met on the matter.
A Wells Fargo spokeswoman declined to comment.
Wells Fargo has been on the hot seat since news spread that up
to two million unwanted or fictitious customer accounts were opened
by its employees in an effort to meet sales goals. The bank fired
5,300 employees over a five-year period and this month entered into
an enforcement action and paid a $185 million settlement to two
regulatory agencies and the Los Angeles city attorney's office.
The board's human-resources committee has been discussing a
range of options, but as of Thursday evening, it didn't have a
proposal to present the full board laying out specific
recommendations regarding executive pay packages, a person familiar
with the discussions said.
This person added that there has been tension among directors
over following "good corporate governance" versus the ticking clock
the board faces to move quickly on the matter, given public calls
for changes.
Wells Fargo faces another congressional hearing next week. Mr.
Stumpf has been asked to appear before the House Financial Services
Committee.
The bank's board is likely to make a decision regarding
compensation before that hearing, one of the people familiar with
the matter said.
Meanwhile, on Friday, a union-affiliated investment group and
some public pension funds sent separate letters to the bank's board
calling for clawbacks of executive pay following the sales-tactics
scandal, according to copies of the letters reviewed by The Wall
Street Journal.
CtW Investment Group, an arm of the union federation Change to
Win, also called for the appointment of two new board directors and
an independent review of what went wrong at the bank. Pension funds
of CtW affiliates hold about 12 million Wells Fargo shares, or
0.25% of shares outstanding.
Scott M. Stringer, comptroller for New York City, urged the
board's human-resources committee to consider taking back incentive
pay "from those ultimately responsible for the systemic misconduct"
at the bank, including Mr. Stumpf and Ms. Tolstedt.
Mr. Stringer oversees city public pension funds that own about
10.5 million Wells Fargo shares. In 2013, Wells Fargo agreed to
enhance its clawback policy in exchange for New York City pension
funds dropping a related shareholder resolution on the clawback
measure.
Under the revised policy, bank directors can recover pay from
employees engaged in misconduct and from executives who supervised
them.
In its letter, CtW said the bank's sales practices "evinces the
board's troubling lack of attention to the company's human capital
management practices. It also shows the risks such practices pose
to the company's reputation, operations, and long-term value,"
according to the letter sent by CtW Executive Director Dieter
Waizenegger.
If Wells Fargo's board "fails to act quickly to contain the
damage from the false-accounts scandal," including the changes CtW
calls for, then it said it won't support the re-election of
directors at the bank's 2017 annual shareholder meeting, according
to the letter.
--Joann S. Lublin contributed to this article.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
September 24, 2016 02:48 ET (06:48 GMT)
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