Wells Fargo (WFC) - Get Report CEO John Stumpf should voluntarily take a pay cut this year, and the lender's board of directors should consider stripping him of the role of chairman, according to Mike Mayo, the outspoken bank analyst at brokerage firm CLSA.
Mayo made the comments in a report to clients Monday after Stumpf was grilled last week by U.S. lawmakers over allegations that employees illegally ginned up as many as 2 million unauthorized customer accounts to meet high-pressure sales quotes. U.S. Senator Elizabeth Warren, a Massachusetts Democrat, accused Stumpf of "gutless leadership" during a hearing in Washington, asserting that employees were pressured into opening the accounts to save their jobs. Warren also said that Stumpf should resign.
"Our support for the CEO is now wavering and contingent on his ability to better detail repercussions to top management and contain reputational damage," Mayo wrote. "Shareholders have a right to know what will be done to the pay of top executives, to the composition of the board and for impacted customers."
Wells Fargo agreed this month to a $185 million settlement with regulators over accounts opened without authorization from 2011 through 2015. The San Francisco-based lender has already been hit with several lawsuits accusing management of pressuring employees to "cross-sell" as many as eight accounts per customer as part of a strategy called "Going for Gr-eight!" to supercharge growth.
Mayo had previously called for Wells Fargo to claw back pay from retiring retail-banking chief Carrie Tolstedt, who garnered at least $53 million in pay since her annual compensation was disclosed starting in 2010.
During the Senate hearing, Stumpf repeatedly declined to say whether he would recommend pay clawbacks for himself or Tolstedt, asserting that the issue would be left to the board's compensation committee. While Stumpf serves as chairman of the board, he isn't a member of the compensation committee.
"Wells needs to clarify how and why these problems could continue for so long, so that investors are assured these problems are resolved," Mayo wrote. "The CEO should voluntarily reduce his compensation for the current calendar year," while the board should be restructured, including "possibly splitting the chair from the CEO."
Wells Fargo didn't immediately reply to a request for comment. The bank's stock has fallen 12% to $44.79 this month, a much larger drop than the broader S&P 500, amid backlash from regulators and consumers over the accounts.
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