Wells Fargo Claws Back Stock Compensation In Wake Of Fraud

Wells Fargo will actually claw back compensation from CEO John Stumpf and Carrie Tolstedt, the former head of the retail banking operation where the massive fraud in opening bogus accounts occurred. Claw back provisions have been implemented with increasing frequency since the financial crisis but have rarely been invoked. These provisions focus on stock grants rather than salary compensation. Stumpf will forego $41 million in stock which represents the entire amount of his stock awards that has not yet vested. Tolstedt will forfeit $19 million in unvested stock. Both will forfeit their bonuses for this year while Stumpf will also forego his nearly $3 million annual salary. But don’t feel too bad for Stumpf as his nearly 5.5 million in already vested stock is worth around $250 million. I think he might be able to live on that in his retirement. And I’m sure Tolstedt will be OK too.

Of course, the prior salaries and non-stock bonuses given to Stumpf and Tolstedt will not be taken back.  And the stock claw back doesn’t cost Wells Fargo anything as the stock had not yet vested. But since the stock has already been allocated, perhaps the bank might want to sell it in order to raise money to pay all those workers who were improperly fired for not making the ridiculous quotas and refusing to engage in the fraud to begin with.

These claw backs are all well and good and perhaps they will restrain some executives. But the only real way to crack down on these massive financial frauds is to finally send some of these executives to jail for some significant time.