Dignity Health CEO Lloyd Dean, chair of the Human Resources Committee at Wells Fargo & Co., and other Wells Fargo board members agreed to claw back $41 million from CEO John Stumpf as a penalty for the conglomerate's bank-account scandal.
Carrie Tolstedt, who is no longer with the company, will forfeit $19 million. She led Wells Fargo's community banking division that was at the heart of the scam that involved creating unauthorized bank accounts for unsuspecting consumers from 2011 to 2015.
The forfeited compensation will come from Stumpf's and Tolstedt's unvested stock awards. Both executives also will not receive a bonus for 2016, and Stumpf will not receive his salary while the company conducts an “independent investigation” into Wells Fargo's retail banking sales practices, the board said.
However, both executives still hold millions of dollars in stock options, and the board's ruling will not affect any salaries that have already been paid or any stock options that have already been vested. Stumpf still holds approximately $200 million in stock options even after subtracting the $41 million clawback, according to an analysis of Wells Fargo's most recent annual compensation disclosure.
The decision to rescind executive pay largely fell at the feet of the Human Resources Committee, which Dean has chaired since 2011. Dean has led San Francisco-based Dignity Health, a hospital system with $12.6 billion of annual revenue, since 2000 while also serving on the Wells Fargo board since 2005. He held the No. 16 spot on Modern Healthcare's 100 Most Influential People in Healthcare list for this year.
Modern Healthcare previously reported Dean and other not-for-profit health system CEOs collect sizable stipends while serving on the boards of publicly traded companies, some of which are not primarily in the healthcare industry. Dean's board compensation from Wells Fargo was $346,027 in 2015, and he's made $2.9 million at Wells Fargo over the past decade. Dean also had $4.2 million worth of Wells Fargo stock as of this past April.
Lawmakers scolded Stumpf last week for the bank-account scheme and demanded accountability. Sen. Elizabeth Warren (D-Mass.) called for his resignation. Other senators said the Wells Fargo board ought to take some kind of governance action.
Wells Fargo's compensation policies, which are crafted and enforced by Dean and other members of the Human Resources Committee, include a handful of “clawback and recoupment” provisions. The board has the power to claw back performance-based stock awards if there is “misconduct which has or might reasonably be expected to have reputational or other harm to the company.”
Dignity Health did not respond to a request to interview Dean.
It's possible the Wells Fargo board could claw back more executive pay.
“Based on the results of the investigation, the independent members of the board will take such other actions as they collectively deem appropriate,” Wells Fargo board member Stephen Sanger said in a statement. That could include “further compensation actions before any additional equity awards vest or bonus decisions are made early next year, clawbacks of compensation already paid out, and other employment-related actions.”