Wells Fargo Urged by Pension Fund to Alter Board, Recoup Payby
Lender should claw back pay from ex-retail bank head, CtW says
Union-affiliated group calls for Wells Fargo to expand board
Add union-affiliated pensions to the list of groups urging change at the top of Wells Fargo & Co.
CtW Investment Group, which speaks for a consortium of retirement funds managing more than $200 billion, urged the bank’s lead director Friday to appoint new board members and claw back executive pay. It joins U.S. lawmakers and other labor activists demanding senior-level accountability after the San Francisco-based bank opened accounts without customers’ authorization.
Wells Fargo should recover at least some money paid to Carrie Tolstedt, who oversaw the retail banking division before agreeing to retire this year, CtW wrote in a letter to lead director Stephen Sanger, who also sits on the board’s human resources committee. That panel is weighing whether and how to hold top executives accountable.
“The board erred in allowing Ms. Tolstedt to retire in July without requiring her to surrender some portion of these payments,” wrote CtW Executive Director Dieter Waizenegger. “Wells Fargo managers clearly understood for several years that the considerable pressure on front-line service workers and their managers to hit sales goals had led to the creation of false accounts."
Mary Eshet, a bank spokeswoman, declined to comment.
Authorities including the Consumer Financial Protection Bureau fined Wells Fargo $185 million on Sept. 8 for potentially opening about 2 million deposit and credit-card accounts without approval. The debacle escalated this week, when Senate Banking Committee members including Massachusetts Democrat Elizabeth Warren urged Chief Executive Officer John Stumpf to return compensation and resign.
New York City Comptroller Scott Stringer, whose office advises on $163 billion in municipal pension funds, including almost $500 million in Wells Fargo stock, also urged the bank to claw back pay from senior managers, including Tolstedt and Stumpf.
“The bank’s long-term shareowners now face mounting costs from these compliance failures,” Stringer said Thursday in a letter to Lloyd Dean, chairman of the board’s human resources committee. “The senior executives who are ultimately responsible -- and who benefited financially -- appear to be walking away unscathed.”
Wells Fargo has placed much of the blame on tellers and other junior employees, saying about 90 percent of 5,300 workers it fired for misconduct weren’t managers. That’s fueled a broader debate over banks’ sales practices, with some labor groups asserting firms are putting excessive pressure on branch workers to sell customers financial services and products they don’t need.
In its letter, CtW said Wells Fargo should name two directors to the 15-member board who have experience linking employees’ pay to corporate objectives. The group also demanded a third-party review of how sales incentives affect behavior.
Without such steps, CtW said it won’t support directors’ re-election at the next annual shareholder meeting. The pension funds the group represents hold about 12 million shares of Wells Fargo, according to CtW spokesman Matthew Painter.
Still, none of the bank’s largest investors has publicly called for changes. And analysts including Goldman Sachs Group Inc.’s Richard Ramsden have said the financial damage to consumers was probably limited and additional costs from any pending investigations aren’t likely to erode long-term profits.
CtW has taken aim at bank leaders before. Last year, it called for Bank of America Corp. CEO Brian Moynihan to give up his chairman title, a move that shareholders rejected. It also was among groups that successfully sought the removal of Moynihan predecessor Kenneth Lewis in 2009 over his handling of the Merrill Lynch acquisition during the financial crisis.