Wells Fargo

Annual Meeting: April 28, 2020

Wells Fargo has yet another new CEO this year, with yet another extraordinarily high total pay package:  incoming CEO Charles Scharf’s total compensation is $34,286,574. Included in the package is a $5 million annual incentive for 2019, though Scharf only took the office in October. The largest component is a stock award valued at $28,7988,490. The intention of this award was to “make him whole” from the value of restricted shares forfeited when left his prior position at Bank of New York.

New hire payments are part of the ever-escalating problems of CEO pay. The value of the equity award, 570,421 restricted share rights, was based on the closing price of Wells Fargo stock on the day they were granted. They are only time-based, vesting equally over five years. They are guaranteed, then, to have some value regardless of how the company performs.

Were they necessary? Bank of New York’s goal was presumably to encourage Scharf to remain with the company and align his interests with those of Bank of New York’s shareholders. Why should Wells Fargo’s shareholders pay for his decision to separate from his previous job?

In the normal world we live in, salary increases may be an inducement, but that is already part of the offer. His salary is doubling from $1.25 million at Bank of N.Y. Mellon to $2.5 million at Wells Fargo. I’ve been writing about the high cash salaries received by Wells Fargo CEOs since 2016. Scharf is the third CEO since 2016. In addition, shareholders are likely to object to the discretionary $5 million cash bonus.

To its credit, the board succeeded in clawing back some of the compensation given to former CEO Timothy Sloan. The proxy also includes a thorough discussion of incentive compensation and risk for all levels of employees and an impressively detailed discussion of its commitment to increase diversity.

The pay ratio median employee to CEO is 550:1