After being raked over the coals for one of the biggest scams in Wall Street history, Wells Fargo CEO John Stumpf has agreed to forfeit $41 million in compensation.
Astoundingly, this is the first time a Wall Street banker has had to disgorge any of his ill-gotten pay.
But don’t get out the Kleenex box quite yet. In the past three years, Stumpf pocketed nearly $200 million in compensation. And of this, $165 million was in stock-based pay that was artificially inflated by illegal conduct.
Since at least 2011, Wells Fargo employees who were under extreme pressure to meet sales quotas created accounts without customers’ consent, making these customers vulnerable to overdraft and other fees. A new Public Citizen report suggests this behavior might’ve started even earlier, since Wells Fargo’s push to boost the number of accounts per customer, called “cross-selling,” began as early as the late 1990s.
After a federal agency exposed the scam this past August, Wells Fargo fired 5,300 lower-level employees while leaving Stumpf and other top brass unscathed.
Senator Elizabeth Warren (D-Mass.) pointed out in a blistering attack during a September 20 hearing that Stumpf regularly touted the bank’s aggressive sales practices in earnings calls with shareholders. His rosy, but completely false reports of increased accounts per customer boosted the Wells Fargo stock price, which increased by about $30 per share over the past four years.
This, in turn, inflated the value of Stumpf’s stock-based pay. Just over the past three years, he pocketed $165 million in stock options and stock grants — all of it artificially bloated by the scam.
What’s even more outrageous is that most of this scam-inflated stock-based pay was subsidized by taxpayers. Under a loophole in the tax code, companies can deduct unlimited amounts of executive pay from their federal income taxes, as long as it is so-called “performance-based” pay. As we documented in our annual Institute for Policy Studies “Executive Excess“ report, $154 million of Stumpf’s pay qualified for this write-off between 2012 and 2015.