SAN FRANCISCO--(BUSINESS WIRE)--The Board of Directors of Wells Fargo & Company (NYSE:WFC) today released the findings of the previously announced independent investigation into the Company’s retail banking sales practices and related matters. Led by a special committee of Independent Directors, the investigation was launched in September 2016 and assisted by Shearman & Sterling LLP. A 110-page report on the findings can be found at https://www.wellsfargo.com/assets/pdf/about/investor-relations/presentations/2017/board-report.pdf.
The Board’s goals in conducting the investigation were to understand the root causes of improper sales practices in the Community Bank, to identify remedial actions to ensure these issues can never be repeated and to help rebuild the trust customers place in the bank.
Shearman & Sterling conducted 100 interviews of current and former managers, employees, members of Wells Fargo’s Board of Directors and other relevant parties and searched more than 35 million documents. In addition, Shearman & Sterling reviewed the product of hundreds of interviews of more junior employees conducted by or on behalf of Wells Fargo. Shearman & Sterling also reviewed information concerning more than 1,000 investigations of lower-level employees terminated for sales integrity violations, which Wells Fargo’s Internal Investigations group conducted.
Chairman of the Board Stephen Sanger said, “This exhaustive investigation identified serious issues related to Wells Fargo’s decentralized structure and the sales culture of the Community Bank, all of which the Board and management have been working diligently to rectify. In addition to the progress we’ve already made to fix these issues, the Board has taken significant employment actions and executive compensation actions totaling over $180 million. The trust customers, employees and investors place in Wells Fargo is paramount -- and our work to rebuild and strengthen those relationships continues in earnest. The Board has total confidence in management, and while this investigation has concluded, our oversight of the Company and commitment to accountability are stronger than ever.”
The investigation identified a confluence of factors that led to the sales practices issues, which are being addressed by the Board and management, including:
- The Community Bank’s sales culture and performance management system
- Wells Fargo’s decentralized corporate structure, which gave too much authority and autonomy to the Community Bank’s senior leadership without the necessary oversight and encouraged deference to the business units, which housed their own risk and human resource management systems
- Carrie Tolstedt and other Community Bank leaders were unwilling to change the sales model or recognize it as the root cause of the problem, resisted and impeded scrutiny or oversight from corporate risk management and the Board and, when forced to report, minimized the scale and nature of problems
- Former Chairman and CEO John Stumpf, relying on the Bank’s decades of success with cross-sell and positive customer and employee survey results, was too slow to investigate or critically challenge the sales practices at the Community Bank and to appreciate the seriousness and the substantial reputational risk to Wells Fargo
The Board has already taken numerous actions and supported management steps to address these issues, promote accountability and strengthen oversight, including:
- Named Mary Mack head of Community Banking, succeeding Carrie Tolstedt
- Named Tim Sloan CEO upon the immediate retirement of John Stumpf
- Separated the roles of Chairman and CEO, and changed Company by-laws to require such separation
- Appointed Stephen Sanger Chairman and Betsy Duke Vice Chair
- Appointed two new, highly qualified Board members, Karen Peetz and Ronald Sargent
- Centralized and elevated previously decentralized risk and human resource management systems
- Implemented new Community Bank compensation program eliminating retail product sales goals
- Terminated for cause Carrie Tolstedt, former head of Community Banking
- Terminated for cause four current or former senior managers in the Community Bank
- Taken executive compensation actions totaling over $180 million (see below)
The compensation actions, among the largest in corporate history, include clawing back approximately $69 million from John Stumpf and $67 million from Carrie Tolstedt. These amounts include a total of approximately $60 million in previously forfeited unvested equity awards ($41 million from Stumpf and $19 million from Tolstedt) and additional clawbacks from Tolstedt of vested options currently valued at approximately $47 million and from Stumpf of approximately $28 million in previous equity awards.
About Wells Fargo
Wells Fargo & Company is a diversified, community-based financial services company with $1.9 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,600 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 269,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 27 on Fortune’s 2016 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially.
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