By now you've heard of the Wells Fargo scandal, where the Consumer Financial Protection Bureau (CFPB) found that the bank opened over 2 million fraudulent accounts, many of which were then charged fees and expenses without the consumers' knowledge. This practice started in 2011, the CFPB says, and noted that 5,300 employees were fired for cause--the cause being the opening of the fake accounts--over five years starting at that time.

Today the damage from the scandal is growing, with decision-makers in Congress, the state of California, and the Fed all weighing in on the bank's bad behavior.

Yesterday the scandal hit the executives' pockets, perhaps not for the last time.

John G. Stumpf, the Wells Fargo Chairman and Chief Executive, will give up $41 million of variable compensation, according to The New York Times. This would represent all of the unvested stock awards he received over the past three years. His vested awards remain in place.

Carrie Tolstedt, the Wells Fargo Community Banking executive in charge of the units in question, was permitted to quietly announce her retirement this past summer. Ms. Tolstedt took over community banking in 2008 and was routinely applauded for her high "cross-sell" ratios of retail products. But now she has also been subjected to a compensation clawback. She has reportedly given up $19 million (other reports say about $17 million) of her expected $124.6 million retirement benefit.

But, are the clawbacks enough?

The Proxy Statements' Standards

To answer that, let's turn to the group making the decision: the Wells Fargo board of directors. In the 2015 Proxy statement--the public document describing compensation policies--the company says it:

"...may adjust or eliminate incentive compensation awards, regardless of achieving applicable financial performance goals or individual qualitative objectives, if...a named executive has failed to comply with our Code of Ethics and Business Conduct or with our policies on information security, regulatory compliance, and risk management."

The statement is pretty general. It was more specific in 2013, one of the years during which the executives' deferred comp was conferred. And the awards vested over three years, by the way.

According to the '13 proxy statement, there are five reasons that compensation may be adjusted, which I summarize here:

  1. Executive misconduct which leads to reputational or other harm;
  2. Misconduct or material errors leading to financial harm;
  3. Gross negligence, including in a supervisory capacity;
  4. If the award was based on inaccurate performance metrics, or
  5. A downturn in financial performance or a material failure of risk management.

Wow. That is broad assurance. Investors could have come away happy in the knowledge that bad behavior or negligence would not be tolerated.

Many reports say that reputation harm is the reason being cited for the $60 million total clawback to date.

Apparently, when Senator Elizabeth Warren calls your executive "gutless," boards can wake up to the fact that they have a reputation to uphold--or not. No financial harm has yet been cited because the $185 million penalty was relatively small compared to bank, and the retail unit's, earnings.

Surprise Class Action Suit

But on Monday, six former Wells employees filed a class-action lawsuit, seeking $7.2 billion from the bank for firing them when they refused to open the fraudulent accounts.

That figure is certainly large enough for the Board to consider other reasons contemplated in this list. Financial harm is self evident, but the lack of supervision and risk management may also kick in. Or materially inaccurate performance metrics, for that matter (Ms. Tolstedt's famous cross-sell ratios, anyone?)

So--will the Board follow through? Because the scandal has gone beyond a PR flap. Now the Board may be facing a possible misstatement of fact in SEC filings. And these tend to get prosecuted under tough criminal statutes. And even if that doesn't happen, there are always shareholder suits aimed at the board members themselves.

My view is that both the general and the specific assurances of tough compensation policy mean that the board must act further. This means inspecting executive contracts and considering your fiduciary duty.

So, Wells Fargo Board--the next move is yours.