[Note: Includes updates, below, on Sep. 28th and on Oct. 12th, 2016.] The following is a portion of testimony before the Senate Banking Committee on Sep. 20, 2016, between US Senator Elizabeth Warren and Mr. John G. Stumpf. Mr. Stumpf, 63, is the senior executive at Wells Fargo, one of the Big Four banks of the United States. He was elected to the Wells Fargo board of directors in June 2006, named chief executive officer in June 2007, and became chairman in January 2010. Senator Warren, 69, is the senior United States Senator from Massachusetts. Formerly, she was a professor of law, frequently cited in the field of commercial law, and taught at U. of Texas School of Law, U. Pennsylvania Law School, and Harvard Law School.
Sen. Warren: Since this massive years-long scam came to light, you have said repeatedly, quote, “I am accountable.” But what have you actually done to hold yourself accountable? Have you resigned as CEO or Chairman of Wells Fargo? (Asked twice)
Mr. Stumpf: No, I have not.
Sen. Warren: Have you returned one nickel of the millions of dollars you were paid while this scam was going on? (Asked twice)
Mr. Stumpf: No.
Sen. Warren: Have you fired a single senior executive, and by that, I don’t mean regional manager or branch manager. I’m asking about the people who actually led your community banking division or your compliance division.
Mr. Stumpf: We’ve made a change to lead our regional bank.
Sen. Warren: I just said, I’m not asking about regional managers. I’m not asking about branch managers. I’m asking if you have fired senior management? People who actually led community banking division, who oversaw this fraud, or the compliance division that was in charge of making sure that the bank complied with the law. (Asked twice)
Mr. Stumpf: No.
Sen. Warren: No. OK. So, you haven’t resigned, you haven’t returned a single nickel of your personal earnings, you haven’t fired a single senior executive. Instead, evidently your definition of accountable is to push the blame to your low-level employees who don’t have the money for a fancy PR firm to defend themselves. It’s gutless leadership. Here’s what really gets me about this, Mr. Stumpf. If one of your tellers took a handful of twenty-dollar-bills out of the cash drawer, they’d probably be looking at criminal charges for theft. They could end up in prison. But, you squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock, and put hundreds of millions of dollars in your own pocket. And when it all blew up, you kept your job, you kept you multi-million dollar bonuses, and you went on television to blame thousands of $12 an hour employees who were just trying to meet cross-sell quotas that made you rich. This is about accountability. You should resign. You should give back the money that you took while the scam was going on, and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission.
(Source: NBC News)
(For the story that prompted the testimony by Mr. Stumpf, see the Wall Street Journal report, “Wells Fargo CEO Testifies Before Senate Banking Committee.”)
Epilogue of Sep. 28, 2016:
Wells FargoChairman and Chief Executive John Stumpf will forfeit $41 million in pay because of the bank’s burgeoning sales scandal, marking one of the biggest rebukes to the head of a major U.S. financial institution. The bank’s board moved to rescind pay for Mr. Stumpf and former community-banking head Carrie Tolstedt ahead of a hearing of the House Financial Services Committee [Sep. 30, 2016]. Wells Fargo’s board said Ms. Tolstedt, who oversaw retail banking during bad behavior there, will forfeit unvested equity awards valued at $19 million. Clawbacks became a big focus of a Senate Banking Committee hearing last week into the bank’s sales tactics, which earlier resulted in a $185 million fine and regulatory action. The awards being forfeited by Mr. Stumpf represent about a quarter of the total compensation he has accrued over his nearly 35 years at the bank.
(Source: The Wall Street Journal, Update of Sep. 29, 2016)
Epilogue of Oct. 12, 2016:
Wells Fargo & Co. Chairman and Chief Executive John Stumpf is stepping down from both roles, effectively immediately, as the bank’s sales tactics scandal continues to roil the firm, a person familiar with the matter said.
Mr. Stumpf will be replaced by President and Chief Operating Officer Timothy J. Sloan, who was widely expected to succeed Mr. Stumpf when he retired in the future.
The bank’s independent chairman Stephen Sanger will take over as board chairman, the person said. Elizabeth Duke, a current board director and former Federal Reserve governor, will become vice chairman of the board, this person said.
(Source: The Wall Street Journal, Update of Oct. 12, 2016)