The Wells Fargo scandal is turning into a make-or-break moment for a reform measure that has until now been mostly theoretical — clawing back pay from embattled banking executives.

The immediate question is whether the San Francisco-based megabank will seek to hold higher-ups financially responsible for the conduct of some 5,300 employees who were fired in connection with the opening of more than 2 million sham accounts for existing customers. Longer term, the close attention being paid to the Wells Fargo imbroglio seems likely to impact the final shape of pending rules on incentive compensation for bankers.

Politicians and the media are focusing much of their outrage on Carrie Tolstedt, the onetime consumer banking chief at Wells who was paid more than $15 million in 2015. Her retirement at age 56 was announced in July.

It was on her watch that retail bankers created some 2 million phony bank and credit card incentives in order to meet sales targets and receive bonuses. In a letter to Wells Fargo Chairman and Chief Executive John Stumpf, five Senate Democrats said Thursday that the bank publicly justified certain bonuses paid to Tolstedt by noting the strong cross-selling ratios inside her division.

"That is a direct reference to the extraordinary number of accounts created by her division, many of which were never authorized by customers," wrote Sens. Elizabeth Warren, Sherrod Brown, Jack Reed, Robert Menendez and Jeff Merkley.

But the issue cuts deeper than any one person. Wells Fargo's clawback policy covers not only the company's top executives, but also certain other highly compensated employees.

Of course, having such a policy is one matter; using it is another. A Wells spokesman declined to comment Friday on whether the firm is considering the use of clawbacks.

Even if Wells does seek to recoup pay that turned out to be based on inflated numbers, the company will almost certainly face litigation from those employees, and its efforts could well fail.

Whatever decisions Wells Fargo makes, the saga's outcome carries important implications for the rest of the banking industry.

If the megabank successfully recoups substantial amounts of money, its actions could become a blueprint for other institutions. Alternatively, the scandal could end up demonstrating the practical challenges associated with clawing back executives' pay, which might cause interest in clawbacks to fade among bankers, regulators and reform advocates alike.

Under another scenario, Wells might decide to defy the public outrage and forego clawbacks. This path could invite tougher regulations that give banks less discretion about when to go after ill-gotten gains.

Wells Fargo is under pressure to make key decisions quickly. Warren and her Democratic colleagues want Stumpf to tell them by Monday whether Wells will take action to claw back incentive compensation paid to any senior executives.

The senators' letter also asks Wells Fargo to provide any internal assessments that the bank has done with respect to whether its clawback triggers apply to Tolstedt's incentive pay.

"We welcome the opportunity to provide the committee with information on this matter and to discuss steps we have taken to affirm our commitment to customers," Wells Fargo spokesman Ancel Martinez said in an email.

Stumpf is scheduled to testify Tuesday before the Senate Banking Committee, where he will undoubtedly face tough questions about Tolstedt's compensation.

"There's no attempt to claw this back yet, and the company has been aware of this for some time," said Aaron Klein, a fellow in economic studies at the Brookings Institution. "If you want to understand why Americans are still so angry, it's the feeling that everybody on Wall Street has gone back to business as usual — which is, 'We all get paid big bucks, and screw the little guy.' "

Wells Fargo's 2016 proxy statement describes situations in which the bank can claw back compensation. For example, it states that clawbacks are triggered by "misconduct" by an executive officer "that contributes to the company having to restate all or a significant portion of its financial statements."

Wells has not so far restated any of its financial results in connection with the current scandal. The $185 million fine it is paying amounts to just 3% of its second-quarter profit.

The firm's proxy statement also says that clawbacks are triggered when "incentive compensation was based on materially inaccurate financial information, whether or not the executive was responsible." That provision applies not only to the bank's executive officers, but also to certain other highly paid employees.

Of course, it is up to Wells itself to determine whether any of the incentive compensation triggers were "materially inaccurate."

Wells' policy uses vague, subjective language that gives leeway to the company's board, said Divesh Sharma, an accounting professor at Kennesaw State University who has studied clawback policies.

While such policies have become common at U.S. corporations over the last decade, they are frequently subject to interpretation and rarely invoked. "I liken it to a toothless tiger," he said.

Even when a company seeks to recoup funds, it may have a hard time doing so.

"It does make it very difficult to get the money back, when in fact the person says, 'I don't have the money anymore. And in fact you paid me money for the work I did,' " Sharma said.

The Wells scandal is unfolding while federal regulators are in the process of writing new incentive compensation rules for the banking industry. A multiagency proposal, which includes provisions related to clawbacks, was released in May. Public comments were due in July.

Susan O'Donnell, who consults with banks on executive compensation, said that she worries the Wells Fargo scandal will result in stricter rules, as well as a faster timeline for completing the regulations. "It's a bit concerning," said O'Donnell, a partner at Meridian Compensation Partners.

Under the proposed rules for banks with at least $50 billion of assets, clawbacks can be triggered by misconduct resulting in significant financial or reputational harm, fraud, or intentional misrepresentation of information used to determine payouts. But banks would retain considerable discretion under the proposal.

In a comment letter filed with the Federal Reserve Board and other agencies, Americans for Financial Reform called for the clawback requirements to be tightened.

For its part, Wells Fargo argued that the proposed rules could make the bank less competitive in the market for high-quality employees and called for the clawback provisions to be dialed back. "Negative consequences for talent and risk culture would be an undesirable outcome," the firm said in its July 22 comment letter.

John Heltman contributed to this report.

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