On Tuesday, lawmakers scolded Wells Fargo chief executive Tim Sloan for hours, telling him the bank had not done enough to rehabilitate itself after years of scandals about its practices toward customers. Some called for Sloan to be fired.
The next day, the bank's board of directors gave Sloan a 5 per cent raise, increasing his total compensation to US$18.4 million (NZ$26.9m. Of that, US$2m is an "annual incentive award" - in other words, a bonus.
Sloan's pay is now 283 times the median pay of the bank's more than 200,000 employees.
The bonus was based on Wells Fargo's "financial performance" and Sloan's "continued leadership on the Company's top priority of rebuilding trust," the company said in its annual letter to shareholders. The company's stock price fell 27 per cent last year in a tough market, but its yearly profit rose to US$22.4b compared with US$22.2b in 2017, and the company's board noted that Sloan had led a massive stock buyback program.
"Another raise for the Wells Fargo CEO in the midst of more scandals and fumbling Congressional testimony. This is not how fair and competitive markets are supposed to work," Representative Katie Porter, a Democrat from California, who questioned the sincerity of Wells Fargo's efforts to reform itself during Tuesday's House Financial Services Committee hearing, said on Twitter.
Meanwhile, one of Wells Fargo's chief regulators, the Federal Reserve, distanced itself from Sloan's pay increase. "The Federal Reserve does not approve pay packages. We expect boards of directors to hold management accountable," the agency said in a statement.
To be sure, despite his raise, Sloan earns less than many of his competitors. Jamie Dimon, the chief executive of JPMorgan Chase, earned $31 million last year after the bank reported record profits. Bank of America's Brian Moynihan received a 15 per cent raise to $26.5 million. Michael Corbat of Citigroup earned US$24m last year.
The industry has been enjoying what Dimon has called a "golden age." Regulators have begun loosening tough rules put in place after the global financial crisis, and the corporate tax cut has helped boost profits to record levels.
But Wells Fargo is still weathering a sustained backlash from its admission two years ago that it had opened millions of sham accounts that customers didn't want and more recent revelations that it had mistakenly foreclosed on hundreds of customers and improperly repossessed thousands of cars.
Sloan, a 31-year veteran of the company, has spent years apologizing for the bank's bad behaviour and attempting to rebuild its reputation with customers, regulators and lawmakers. He told the House Financial Services Committee on Tuesday that the bank had revamped its board of directors, significantly increased its charitable giving and no longer emphasizes sales goals that were blamed for many of the company's problem.
"Wells Fargo is a better bank than it was three years ago, and we are working every day to become even better," Sloan told the committee.
But Wells Fargo still faces a lot of sceptics.
The Office of Comptroller of the Currency has said it was "disappointed" by Wells Fargo's rehabilitation efforts. Sen. Elizabeth Warren, D-Mass., has led an effort calling for Sloan to be fired. Last year, the Federal Reserve banned the bank, which has nearly $2 trillion in assets, from growing any bigger after finding it responsible for "widespread consumer abuses."
At the hearing earlier this week, Representative Maxine Waters, chairwoman of the Financial Services Committee, called for the bank to be broken up and for regulators to remove Sloan as CEO. "Mr Sloan shouldn't be getting a bonus, he should be shown the door," she said in a statement Thursday.
Wells Fargo declined to comment on Waters' statement.
- Washington Post