Wells Fargo prevails in pay fight with former CEO Tim Sloan

• Key insight: Wells Fargo has won on summary judgment in a legal dispute with former CEO Tim Sloan, who argued that he was wrongly stripped of tens of millions of dollars in deferred compensation.
• Forward look: When asked about whether Sloan plans to appeal the decision, one of his lawyers said the former CEO’s legal team is considering its options.

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A San Francisco judge has sided with Wells Fargo in a dispute over the banking giant’s cancellation of millions of dollars of equity grants and bonus pay to former CEO Tim Sloan.

Sloan sued the bank in 2023, arguing that Wells made him a “scapegoat” for its phony-accounts scandal, wrongly stripping tens of millions of dollars from his deferred compensation.

The judge’s order, issued Friday by a state court judge in San Francisco, granted Wells Fargo’s motion for summary judgment, which means the bank prevailed without the case going to trial.

When asked whether Sloan plans to appeal the decision, one of his attorneys, David Lowe, said the former CEO’s legal team is considering its options.

“We disagree with the court’s decision, which we believe does not align with the evidence before the court,” Lowe said in an email.

Beth Richek, a Wells Fargo spokesperson, declined to comment.

Sloan was president and chief operating officer of Wells Fargo when the bank’s fake-accounts scandal exploded in 2016. Within weeks, CEO John Stumpf had resigned, and Sloan took over the top job.

His two-and-a-half-year tenure as CEO was rocky. The bank was contending with numerous investigations in connection with the burgeoning scandal, and regulators imposed an asset cap that limited the bank’s ability to grow.

In March 2019, Sloan testified on Capitol Hill that Wells Fargo was in compliance with the provisions of an 11-month-old regulatory order. The bank’s regulators privately questioned the accuracy of that testimony.

Shortly after Sloan’s congressional testimony, regulators made behind-the-scenes moves to force a change at the top of the bank. And less than two weeks later, Sloan was out.

Allen Parker, Wells Fargo’s general counsel, initially took over as interim CEO. Later in 2019, Charlie Scharf, a former chief executive at Visa and BNY, was hired to take the reins.

Sloan said in a court declaration submitted as part of his lawsuit that his congressional testimony was carefully vetted in advance. “My testimony was truthful, and it was accurate to the best of my knowledge and belief,” he stated.

In Sloan’s suit, his lawyers contended that when the CEO left Wells Fargo in 2019, he and the company’s board of directors decided not to negotiate a severance agreement, and instead agreed that certain deferred compensation from 2015, 2017, 2018 and 2019 would be paid out. The lawsuit described this decision as having been rooted “in the spirit of mutual trust.”

Sloan stated in his court declaration that around the time he offered to step away as CEO, he asked the company’s board that he receive his salary through retirement, a pro-rated bonus for 2019 and his remaining deferred compensation in the normal course. “The board agreed to these terms, and I noted their agreement in my handwritten notes,” Sloan stated.

In 2020, after the hiring of Scharf, Wells Fargo announced that it was cancelling a 2019 performance share award agreement with Sloan, according to the lawsuit. Wells Fargo allegedly notified Sloan in September 2021 that it was cancelling certain other deferred compensation.

“The bank not only reneged on the parties’ oral agreement that Mr. Sloan would receive his deferred compensation, but it breached the plain terms of the agreement,” Sloan’s lawsuit states.

“Other than politically charged or financially motivated and factually unsupported rhetoric from the bank’s critics, there is no documented criticism of his performance regarding the outstanding regulatory matters or anything else prior to his retirement, and Mr. Sloan is not aware of any such criticism or any failing on his part.”

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In court papers arguing for summary judgment in Wells Fargo’s favor, the bank said that it adhered to its contractual obligations.

“Sloan may believe he deserved tens of millions of dollars more. But … this case is not about hindsight disagreement, or Sloan’s view of what he deserved,” the bank’s lawyers wrote. “It is about contracts he accepted, the authority those contracts conferred, and whether Wells Fargo acted within that authority. It did.”

Wells Fargo also stated in court papers that the bank’s concern about its regulators is not evidence of improper motive, as Sloan argued. “A regulated financial institution does not act in bad faith by accounting for regulators’ assessments,” the bank’s lawyers wrote.

Some of the public filings in the case contain redactions, with the bank contending that they contain both confidential supervisory information and commercially sensitive information.

The judge’s ruling Friday was sealed, so the reasoning behind the decision to grant summary judgment to Wells Fargo was not clear. Superior Court Judge Christine Van Aken wrote that attorneys for the bank and Sloan have been ordered to prepare a public version of the order.