As noted in this NY Times article, MarketWatch article and Reuters article, CEO John Stumpf and the (now former) head of community banking for Wells Fargo have agreed to forfeit unvested equity awards to the tune of $41 million and $19 million, respectively (the CEO also agreed to forego bonuses for this year, nor draw any salary while an internal investigation is ongoing). These actions by the board more than effectuate what the company’s clawback policy would have otherwise required. The look of clawbacks going forward, perhaps? Here’s the related Form 8-K that Wells Fargo filed yesterday.
Here’s five notable items:
– The board was able to impose an “unvested equity” clawback that was much easier than clawing back dollars/stock that had already been delivered into the executive’s hands.
– Avoids possible need for the executive to amend past tax returns & file for a credit under Code Section 1341 (which Mike Melbinger has discussed in a few blogs).
– Necessary PR move, as the board was under a lot of pressure to show responsiveness. This came at little immediate cost to the company or the CEO (merely cancelling unvested equity awards for Stumpf). In theory, these forfeited awards could be made up in the future.
– We’ll see whether this situation leads to a restatement for the company. So far, news reports suggest it’s immaterial to the company’s financials. “Restatement” is such a subjective term as the numbers of “formal” restatements – those deemed material enough for an Item 4.02 8-K – are way, way down. In comparison, revision restatements (stealth?) are over 70% of all restatements now.
– Maybe a good lesson for drafting future clawback policies: don’t provide for a clawback triggered only upon a restatement…
Members of CompensationStandards.com might want to check out this blog that I posted yesterday: “Does Wells Fargo Prove That All This Governance Stuff Is Just a Charade?“…
Our Executive Pay Conferences: Only 3 Weeks Left! Clawbacks will be tackled during our upcoming “Tackling Your 2017 Compensation Disclosures: Proxy Disclosure Conference” & “Say-on-Pay Workshop: 13th Annual Executive Compensation Conference” to be held October 24-25th in Houston and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days.
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– Broc Romanek