Wells Fargo Scrutinized For Executive's Retirement Package
DAVID GREENE, HOST:
Federal prosecutors are investigating Wells Fargo. This week, that bank was fined $185 million by regulators. This was punishment for opening as many as 2 million bank accounts without customer consent or knowledge.
Next week, the Wells Fargo CEO will get a grilling on Capitol Hill. Among the questions he'll face - why Carrie Tolstedt, the Wells Fargo executive who ran the unit where this wrongdoing took place, is going to get $125 million in stock and options when she retires later this year.
ALAN SKLOVER: It seems to almost shock the conscience.
GREENE: That is Alan Sklover. He is an attorney who negotiates these kinds of executive deals. But he says he's rarely seen one as big as Tolstedt is getting.
SKLOVER: And she's not even a CEO. For shareholders to reward someone for retiring a senior executive vice president in that magnitude does call attention to - gee, how did this happen? - number one - and under what circumstances?
GREENE: So you'd be shocked even if she was not in charge of a unit that's being investigated. Just given her position, this seems astronomical to you.
SKLOVER: Absolutely. Now, look, this is my business. But I will tell you I still have a conscience. I find a senior executive to walk away with a package like that to be nothing less than obscene.
GREENE: So how did this happen? I mean, presumably, Wells Fargo was negotiating this, knowing that she had been in charge of a unit that was was being scrutinized, right?
SKLOVER: If I was her attorney, which I'm not - but if I was, that's where my concerns would arise. Apparently, over the last several years under her supervision, there's been fairly massive fraud. We all know that pay for performance is the way that corporations justify compensation.
And there's really nothing wrong with pay for performance. However, there's no question that her own salary, her own bonuses - they have been elevated as a result of this chicanery.
GREENE: You're saying something very important there. It is clear to you that she is getting a bigger reward, somehow, because of everything she's been through, leading a unit that has apparently done something pretty awful.
Can a company say at this point, like, you know, sure, by that criteria we set up before, you've succeeded? But it was done in a potentially illegal way. So we're going to not give you this huge package.
SKLOVER: OK. Now, that's the real nub. We've passed many different laws, many of which, by the way, are now just being tested in matters like this, such as Dodd-Frank with its clawback provisions.
So if a company in 2016 learns that there was malfeasance by an employee over the last two or three years, they can treat them as if they found out two years ago that the malfeasance took place. And they can seek recompense or clawback in the law.
GREENE: Clawback would be coming back and clawing back some of that money that they gave to someone like Carrie Tolstedt.
SKLOVER: That's right.
GREENE: I mean, doesn't Wells Fargo - won't they be under a lot of pressure to do something just, I mean, in terms of their public image here?
SKLOVER: In my view, after 30 years of doing this work, this Tolstedt case may be the poster child for whether or not a corporate board does what a corporate board is supposed to do, which is to do everything they can to protect the shareholders from abuse. The board has the obligation to get to the very, very bottom of this.
GREENE: That is Alan Sklover. He is an employment attorney in New York.
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