Wells Fargo CEO denies orchestrated fraud in accounts scandal

Wells Fargo CEO John Stumpf apologized to customers for more than 2 million fake accounts opened in their names, but denied any orchestrated fraud by bank management.

In testimony to the Senate Banking Committee Tuesday, Stumpf also said the bank plans to expand the internal review of accounts and refund process by two years, starting in 2009 now.

He addressed the outrage over Carrie Tolstedt, the head of the division where the fake accounts were created who is set to walk away with $124 million in stocks and options, when she retires later this year. Stump indicated Tolstedt was pushed out after the bank determined she "did not do enough" to fix issues in the retail bank. Read More

Demand for ‘clawback’ of Wells Fargo executives’ multimillion-dollar pay expected at Senate hearing

When the Senate Banking Committee grills Wells Fargo & Co.’s chairman Tuesday about the banking giant’s sales scandal, look for the word “clawback” to come up more than once.

That’s a reference to rescinding, or clawing back, part of an executive’s previously granted compensation, and critics in Congress and elsewhere are demanding Wells Fargo take back at least part of the multimillion-dollar compensation awarded to one or more top executives.

But such clawbacks are unusual and it’s unlikely Wells Fargo will take that step, compensation experts said. Read More

In Wells Fargo Scandal, the Buck Stopped Well Short

Wells Fargo is trying to clean up the mess created by its high-pressure sales culture, which drove employees to open millions of unauthorized accounts in the names of customers. Pledging accountability, the bank is paying restitution to customers who were charged for these sham accounts, reviewing its process controls, and — as it announced Tuesday — eliminating sales goals for its retail bank products.

In connection with the “widespread illegal practices,” Wells Fargo has also fired 5,300 employees and managers, with one notable exception: the executive in charge.

Instead of bearing any responsibility for this scandal, Carrie Tolstedt, the divisional senior vice president for community banking who supervised the 6,000 retail branches where the wrongdoing took place, is retiring, taking with her millions in stock and options. Read More

Corporate Executives Are Making Way More Money Than Anybody Reports

There are two methods for measuring compensation. One appears everywhere. The other is correct.

On its website, the AFL-CIO, the largest federation of labor unions in the United States, has a page called Executive Paywatch that is meant to demonstrate just how much corporate executives’ pay dwarfs the compensation of the average worker. On this page, the AFL-CIO reports that the total pay of the CEOs of America’s largest corporations was, on average, 373 times larger than the earnings of an average American worker in 2014, and 335 times larger in 2015. These are striking ratios that are meant to bolster the AFL-CIO’s message: The top executives of America’s corporations are vastly overpaid, and most American workers are woefully underpaid.

For that reason, it may come as a surprise that the AFL-CIO’s calculations grossly understate just how much money executives make. While the AFL-CIO’s calculations are for CEOs at S&P 500 companies, our analysis of data for the 500 highest-paid senior executives (not all of whom are CEOs) from the ExecuComp database, which is maintained by Standard & Poor’s, suggests that the Executive Paywatch ratios are far too low. Data on these executives’ actual take-home pay, which is published, as required by law, in companies’ annual filings with the Securities and Exchange Commission (SEC), show that in 2014, senior executives made 949 times as much money as the average worker, far higher than the AFL-CIO’s ratio of 373:1. Read More

EpiPen Maker Dispenses Outsize Pay

The drugmaker buffeted by the furor over hefty price increases on its lifesaving EpiPen had the second-highest executive compensation among all U.S. drug and biotech firms over the past five years, paying its top five managers a total of nearly $300 million, according to a Wall Street Journal analysis.

The big pay packages are unusual because of Mylan NV’s relatively small size in the U.S. drug industry, where it is No. 11 by revenue and No. 16 by market capitalization.

Companies generally set their executive pay targets relative to peers in their own industry, with larger companies typically offering more generous pay than smaller ones. Pay also varies somewhat with corporate performance. Read More

FINRA’s Proposed Rules on Gifts, Gratuities, and Non-Cash Compensation

If adopted as proposed, the rules will largely expand supervisory resources needed to oversee compliance.

After a two-year silence, the Financial Industry Regulatory Authority (FINRA) has proposed amendments to Rule 3220 (Influencing or Rewarding the Employees of Others) (Gifts Rule) and Rule 3221 (Restrictions on Non-Cash Compensation) (Non-Cash Compensation Rule) and issued a new Proposed Rule 3222 (Business Entertainment) (Business Entertainment Rule) following its retrospective[1] rule review on gifts, gratuities, and non-cash compensation.[2] The comment period expires on September 23, 2016.

These proposed amendments and new rule codify past guidance and interpretation, reorganize and consolidate existing rules, and include several new concepts that would significantly affect current practice for many FINRA member broker-dealers.[3] Of particular note are the new limitations on non-cash compensation and sales contests, the annual limit on gift’s increase from $100 to $175 per person, and a lowered threshold for promotional items to $50 per person. Read More

Time Inc. staffers upset over Joe Ripp’s compensation package

Time Inc. staffers — who have seen dozens of colleagues pink-slipped in a series of recent downsizings — are up in arms over the hefty compensation package being doled out to exiting CEO Joe Ripp.

Ripp, who had a five-year deal but is leaving after only three, will collect on his base salary through the contract’s expiration in 2018, according to an SEC filing.

He will also collect a bonus of not less than $1,420,000 annually. Read More

GuideStar Issues New Nonprofit Compensation Report

It’s not bedtime reading. It’s 4,297 pages long and costs $374 to download a single-user copy in PDF. The 16th edition of the GuideStar Nonprofit Compensation Report analyzes Form 990 return information for 96,000 nonprofit organizations. Compensation information for 135,000 staff positions is aggregated by national, state, metropolitan statistical area, gender, and NTEE (National Taxonomy of Exempt Entities) classification.

If you’re a nonprofit executive, board member, consultant, or researcher, the report is a valuable independent reference tool in determining how nonprofit sector executives and managers are paid. With the requirement that nonprofits be able to substantiate new and incumbent executive compensation based on board-led processes, boards can use the report to support consultant recommendations and anecdotal observations. It can also be referenced by executives themselves to see how they compare to their peers. Read More

Senators Question Wells Fargo CEO About Getting Some Manager Compensation Back

Arguing that committing a massive fraud that creates millions of phony consumer accounts should not be the sort of thing that banking executives should be allowed to get rich doing — lawmakers are beginning to ask Wells Fargo CEO John Stumpf some tough questions about just what exactly it intends to do about all those executives it bonused extravagantly for cheating people.

Specifically, they would really like to know if Strumpf has any interesting plans for clawing some of those funds back.

Led by consumer protection advocate Senator Elizabeth Warren, a group of Democratic Senators has asked Wells’ Chairman and CEO whether or not the bank intends to take some of that compensation back from executives and managers who allegedly suborned and supported the opening of two million fraudulent accounts. Specifically, the lawmakers referred to Carrie Tolstedt, who led the unit where the alleged misconduct occurred. Read More

Why Wells Fargo isn’t likely to claw back compensation from top executive

Wells Fargo is not likely to take back any of the millions in annual pay and share and cash bonuses paid to Carrie Tolstedt, until recently the executive in charge of its banking unit where thousands of employees allegedly cheated customers over the last five years.

On Thursday, Wells Fargo agreed to pay $185 million to regulators, including $100 million to the Consumer Financial Protection Bureau, to settle claims that it defrauded millions of customers since at least 2011 by opening millions of unauthorized deposit, debit and credit card accounts.

Tolstedt, Wells Fargo’s highest ranking female executive, led the bank’s community banking division from the bank’s merger in 2008 with Wachovia until her retirement in July. Regulators alleged the frauds in the businesses she managed have been going on since at least 2011. Tolstedt earned $9.05 million in annual pay and $7.3 million more in cash and stock bonuses in 2015,  Read More

Parties battle over Johnson's deferred compensation deal

The political fight continued to flare Thursday over the $10 million deferred compensation deal Republican U.S. Sen. Ron Johnson received more than five years ago from the firm he ran before joining the senate.

Johnson, who helped build Oshkosh-based plastics manufacturer Pacur, is in a heated rematch with Democrat Russ Feingold.

In a complaint filed Monday with the U.S. Senate Ethics Committee, Democrats claimed Johnson violated campaign finance law by using corporate money to reimburse himself for the $9 million he poured into the 2010 race against Feingold. Read More

From Monetization to Compensation: Refocusing on What’s Important

Ben Barokas, Co-Founder and CEO, Sourcepoint

Since the early days of online advertising, no conversation about the state of the industry, or the plight of digital publishers specifically, has been complete without a reference to monetization. The word “monetization” is central to the digital media ecosystem and – like the mythical Midas Touch – it evokes the concept of transforming objects to gold, resources to revenue. 

But – as King Midas himself discovered – the ability to turn resources, including digital materials and online content to riches, does have its downsides. As publishers have emphasized monetization, online audiences have grown increasingly disillusioned with a user experience that seems to place maximizing advertising revenues above consumer preference, and users are turning to ad blockers in frustration.

The words we choose can be highly impactful and as a result, sometimes, with a simple change in terminology, conversation and attitudes can be shifted and dialogue elevated to a higher level. Read More

Scandal-ridden Wells Fargo completely revamps compensation plan

Wells Fargo just announced it is totally revamping its compensation model for retail banking beginning January 1, 2017.

“We believe this decision is both good for our customers and good for our business,” Wells Fargo CEO John Stumpf said. “We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers.”

This change comes just after the Consumer Financial Protection Bureau levied the largest fine in its history — $100 million — against Wells Fargo Thursday for the "widespread unlawful" practices of employees who opened more than 2 million fake accounts to get sales bonuses. Read More

Democrats file ethics complaint against Johnson over deferred compensation package

State Democrats filed an ethics complaint Monday against Republican U.S. Sen. Ron Johnson over the $10 million deferred compensation package he received from the plastics manufacturing firm he ran before joining the Senate.

Kory Kozloski, executive director of the Democratic Party of Wisconsin, wrote to the U.S. Senate ethics committee asking it to open an investigation to determine if Johnson violated Senate ethics rules and federal law.

Johnson received $10 million in deferred compensation from Oshkosh-based Pacur shortly before he was sworn into the Senate. During his 2010 campaign to unseat Democrat Russ Feingold, Johnson spent $9 million out of his own pocket to fund the race. Read More

Top Yahoo Execs in Line for $89.2 Million in Golden Parachute Compensation

How much money should executives of a failing tech company stand to take home as severance?

At Yahoo, the answer is $89.2 million, according to proxy filings. From USA Today:

"[CEO Marissa] Mayer could take home a whopping $44 million after her four-year stint as CEO; Goldman, $12.2 million. Chief Revenue Officer Lisa Utzschneider could make a $20.5 million soft-landing, and General Counsel Ronald S. Bell, $12.4 million. Co-founder David Filo, a board member who sports the title of "chief Yahoo", can look forward to a relatively modest padding of $65,742."

Those numbers represent what's called "golden parachute compensation," or severance packages allotted for executives who face a "qualifying termination" in connection with a sale of the company and change in command. Yahoo is slated to sell its core assets to Verizon for $4.8 billion. Read More

New Nasdaq Rule Requires Disclosure Of Third Party Compensation Of Directors And Nominees

Effective August 1, 2016, companies listed on Nasdaq are subject to a new rule requiring annual disclosure of the material terms of agreements or arrangements between directors or director nominees and third parties that relate to compensation or other payment in connection with that person’s candidacy or service as a director.

This new Nasdaq Rule 5250(b)(3) is designed to enhance transparency by making investors aware of previously undisclosed compensation arrangements that could lead to director conflicts of interest and encourage directors to focus on short-term results rather than create long-term value for the company. Nasdaq companies should consider the scope, timing and manner of these new disclosure requirements, particularly when preparing for their next proxy season. Read More

Bill Clinton Created This Terrible Corporate Loophole. Will Hillary Close It?

By David Dayen

Drug company Mylan has been widely condemned this year for the skyrocketing cost of its EpiPen, an emergency allergy medication. Now, media reports say that executive bonuses may have played a role in the price-gouging. The Wall Street Journal reported on Thursday that two years ago, Mylan put in place a “special incentive plan” to reward executives for hitting “aggressive profit targets.” The New York Times described the bonus as a “one-time stock grant” given to executives “if the company’s earnings and stock price meet certain goals by the end of 2018.”

This could explain why your EpiPen two-pack costs $600 today, versus half that amount in 2014: A drug executive’s bonus might depend on it.

The Mylan case is an example of how performance-based pay can end up hurting customers while fattening executives’ wallets. For the last two decades, the government has encouraged these kinds of schemes through a lucrative tax break that gave corporations incentives to focus on their firms’ stock price rather than their core business. A new report from the Institute for Policy Studies (IPS) shows how companies continue to exploit this loophole, costing taxpayers tens of billions of dollars and undermining the economy. Read More

The SEC Had Questions About a Bank of America Executive's $15.5 Million Pay Package

How did the banking giant come up with his super-sized compensation?

Why was Bank of America’s chief operating officer, Thomas Montag, paid so much more than most of the giant’s other executives in 2015?

The Securities and Exchange Commission raised the question in a June correspondence with CEO Brian Moynihan after reviewing the bank’s annual proxy filing. The emails rebuked the Bank of America for not adequately explaining how it determined executive compensation, and also singled out COO Montag, who was paid $15.5 million—the highest among the executives excluding Moynihan, who received $16 million.

The other five executives each earned an average of $9.8 million in stock and cash. Read More

Physician Compensation: Mind Your Ps and Qs and RVUs!

Many doctors emerge from their medical training with little knowledge of what and how they are paid. It seems counterintuitive that, after such extensive education, physicians still need to learn about something so fundamental that will affect the rest of their professional lives. In learning the business of medicine, physicians should start by gaining an understanding of their own compensation structure to avoid costly mistakes in their employment agreements.  

One of the most important standards against which a physician’s work is measured, and for which he or she is compensated, is the relative value unit (RVU). Understanding RVUs and their impact on earnings can go a long way toward helping physicians negotiate favorable employment agreements. Read More

Executive Compensation: How Should Internet CEOs Be Paid?

When it comes to executive compensation, some plans are more shareholder-friendly than others. Among large-cap Internet companies, it’s pretty common for executive compensation to be linked to execution, whether in qualitative or strategic measures. Also equity awards are a huge trend right now.

Executive compensation for founder-CEOs versus non-founder CEOs

Morgan Stanley analyst Brian Nowak and team reviewed the executive compensation plans employed by some of the biggest names in Internet right now to determine how well they align with shareholders’ interests. They picked up on several interesting trends such as a key difference in how founder-CEOs are compensated versus compensation for non-founder led firms. They then summarized their findings in an August 31 report titled “Executive Compensation: Is it Aligned with Shareholder Interests?” Read More