Open this photo in gallery: CEO Bharat Masrani will depart earlier than planned on Feb. 1.FRED LUM/THE GLOBE AND MAIL
Toronto-Dominion Bank
officer Bharat Masrani is stepping down earlier than expected and board chair Alan MacGibbon will depart later this year as part of a sweeping overhaul of its board of directors as the bank addresses the penalties from U.S. regulators linked to its anti-money laundering failures.
In October, TD pleaded guilty to conspiracy to commit money laundering after a decade of moving funds for criminal organizations and neglecting warnings from employees, resulting in a US$3-billion in fines and a host of non-monetary penalties from U.S. regulators and the Department of Justice.
As part of those penalties, the U.S. Federal Reserve required the bank to conduct an independent review of the bank’s board of directors and management.
Mr. Masrani will leave his role as CEO on Feb. 1, ahead of the departure date initially set for April. Mr. MacGibbon, who became the chair of the board less than a year ago, will step down later this year as the bank launches a search for his successor.
Incoming CEO Raymond Chun has taken centre stage in recent months, fielding questions about the bank’s strategic overhaul and remediation efforts during the lender’s quarterly earnings conference call in December and a banking conference earlier this month. Investors have been eager for a swift changing of the guard at the bank.
Mr. Chun, currently chief operating officer, will step into the role of CEO on Feb. 1, ahead of the previously announced date of April 10. Mr. Masrani will act as an adviser until July 31.
“Ray has moved quickly and decisively to launch a review of our strategy, operations, and investments, and has engaged with customers, clients and colleagues across the Bank. We are excited to have Ray take the helm and lead TD into the future,” Mr. MacGibbon said in a statement Friday. “I want to once again extend the board’s thanks to Bharat for his almost four decades of service to the bank and for his many contributions to TD’s success.”
The board has reduced the amount of time a director can hold their position. Directors serve for a 10-year term. Previously, they could request an extension for an additional five years. That discretionary term extension has been reduced to two years.
Five longstanding directors will vacate their seats on the board. Amy Brinkley, Colleen Goggins, Karen Maidment, Claude Mongeau and Brian Ferguson will leave the board as of April 10, when the bank will host its annual shareholder meeting. The remaining directors are more recent additions, having joined the board since 2020.
Four new members are joining the board, including two with previous experience from U.S. banks.
The board has also appointed new chairs to lead its committees, including corporate governance, human resources, risk, and a newly formed remediation committee to oversee the bank’s turnaround efforts.
TD said it has adjusted executive compensation “to reflect the seriousness of the U.S. AML failures, the associated costs to the bank, and the limitations imposed on the U.S. retail business.”
Forty-one executives, include former staff, received reductions to their variable compensation, totaling $30-million, including those that oversaw front line operations, control functions and internal audit.
Mr. Masrani received no cash incentive award or equity compensation for 2024, which reduced his total direct compensation by 89 per cent.
Variable compensation for TD’s most senior executives was reduced by at least 25 per cent from the target amount.
More to come