John Stumpf walked away from his job at Wells Fargo this week. The CEO, under heavy fire for failing to monitor the bank’s opening upwards of two million customer accounts without their consent, is cleaning out his desk, going home, and taking $134 million with him.
With bonus incentives dangling in front of them for opening up as many customer accounts as possible, Wells Fargo employees for years created extra bank and credit-card accounts their clients hadn’t asked for. This cost customers millions in unexpected account and overdraft fees, while benefiting the employees and their superiors. A secretary who caught on to the scam reported it to HR and other Wells Fargo officials, and got fired for her trouble.
Of course, some consumers actually notice when they’re getting charged fees on accounts they never willingly opened. The scheme eventually came to light, and Wells Fargo fired 5,300 employees—isn’t it funny who always feels the pain first?
Meanwhile, the head of the bank’s community banking division, Carrie Tolstedt, tried to retire quietly in July, taking with her $125 million in contractual company stock and options. In August, while the bank was being investigated for fraud by the Consumer Financial Protection Bureau, Stumpf sold off $61 million in Wells Fargo stock, pocketing net proceeds of $26 million. In September, the bank agreed to pay the largest penalty ever imposed by the Consumer Financial Protection Bureau, $185 million. And we got to see Stumpf publicly flogged by Senator Elizabeth Warren.
Stumpf departs with an additional $134 million, not a “golden parachute,” but money he already has accumulated, mostly in vested company stock and options. He did voluntarily forfeit his 2016 salary and bonus, and $41 million in unvested stock. How sorry you feel for him over that is your own call.
The Securities and Exchange Commission has been trying to strengthen rules calling for companies to punish executive misconduct with compensation “clawbacks.” Observers of the Wells Fargo scandal are wondering if the bank will pursue more clawbacks from Stumpf and Tolstedt—and not necessarily holding their breath.
To most of us who live in that parallel universe where a $134 million payday could only mean a winning lottery ticket, this is just another (fill in your own adjective here) reminder of how members of the 1-percent club accumulate their wealth.
But wait, there’s more! In delving into Stumpf’s once-respected tenure at Wells Fargo (he is credited with steering the bank successfully through the last major financial crisis), I learned that he also makes significant income sitting on two corporate boards. Specifically, the retail giant Target pays him $272,521 a year to serve as one of its directors, and he rakes in another $375,737 annually as a director for the energy company Chevron.
This is a behind-the-scenes word most people don’t know or think much about, and maybe they should. According to the Boston Globe, median annual director pay at the 200 largest US public companies is $258,000, and some directors make $1 million or more. Most are (or were) corporate executives themselves, most are white men, and some sit on as many as five or six boards. The time they actually spend on board work, including meetings, is generally estimated at a few hours a week, give or take. And yet their pay packages have been increasing at a rate far higher than the typically stagnant wages of the average American worker.
Why should you care? For one, because highly paid corporate directors and the highly paid executives they hire tend to take care of each other, sometimes in a manner at odds with the best interests of the company and its shareholders and the general public. If you don’t believe me, I’ve got a Google search for you: “Enron.”
And for another reason, maybe we’ll have a better democracy if more people understand why they have so much and the rest of us have so little.
Or, you can just shut up and go back to your cubicle. And forget all about John Stumpf and others of his ilk. Which is exactly what they hope we’ll do.
Copyright 2016 Stephen Leon