The chief executive of Wells Fargo & Co., Charles Scharf, received an overall 40.5% decline in total compensation to $20.39 million for fiscal 2020 — his first full year with the bank.
Wells Fargo provided a full compensation report for its top-five executives in Wednesday’s filing of its 2020 proxy report to investors. The bank released a preliminary compensation report Jan. 29.
Scharf took over as chief executive and president in October 2019 — the fourth chief executive since the bank’s fraudulent customer account scandal surfaced in September 2016.
Scharf was paid $2.5 million in salary, along with $4.35 million in incentive pay and stock awards valued at $13.54 million on the date they were awarded.
The vast majority of Scharf’s 2019 compensation, at $28.79 million, came from a one-time offer of stock awards meant to make him whole from the value of restricted share rights that he forfeited when leaving his chief executive job at Bank of New York Mellon.
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Scharf was paid a $5 million bonus as part of Wells Fargo’s offer to him, as well as $498,084 in salary.
The bank reported that the CEO pay ratio for Scharf is $274-to-$1 compared with its median employee’s compensation of $74,416.
The board’s human resources committee said it considered several factors in determining Scharf’s incentive compensation.
The most pivotal factor was the bank’s bottom-line financial performance, which plummeted from $19.55 billion in fiscal 2019 to $3.3 billion in fiscal 2020.
The board said the sharp profit decline was “significantly impacted by the effect of the pandemic on economic and market conditions.”
The biggest impact on Wells Fargo’s fiscal year — as it was for its national and super-regional competitors — was taking massive loan-loss provisions.
For Wells Fargo, it took a provision of $3.83 billion in the first quarter, $8.4 billion in the second quarter and $769 million in the third quarter before a $179 million recovery in the fourth quarter.
The provision has a direct impact on banks’ bottom lines because it sets aside money for loans that they project won’t be repaid as scheduled.
The board drastically reduced during the third quarter the quarterly dividend from 51 cents to 10 cents.
The committee credited Scharf and the executive management team with taking several consumer-assistance actions.
Those included: 3.6 million consumer and small business customers benefiting from deferring payments and waiving fees; funding 194,000 loans worth a combined $10.5 billion under the federal Paycheck Protection Program; allowing employees to work from home and establishing new employee benefits; and supporting communities through targeted donations and other recovery efforts.
The executive management team also was credited with maintaining “strong capital and liquidity throughout the period while navigating significant market” and its progress on addressing risk, control and regulatory issues related to multiple regulatory investigations into multiple business segments.
The total compensation for 2020 for top-five executive Mary Mack and John Shrewsberry were reduced because by a significant decrease in the value of their stock awards compared with 2019.
Mack, chief executive of the bank’s consumer and small business banking unit, is the only other top-five executive listed who is currently an employee.
Mack received a 2.5% raise in salary to $1.75 million. She received $1.67 million in incentive pay and total compensation of $8.54 million, down 18.9%.
Shrewsberry served as chief financial officer for most of 2020. He was paid $2 million in salary, unchanged from 2019, and $1.28 million in incentive pay. His total compensation was $7.96 million, down
Three of Wells Fargo’s named executives were new to the bank in 2020.
Scott Powell, chief operating officer, was paid $1.75 million in salary, a $3.2 million bonus, $1.71 million in incentive pay and stock awards valued at $7.9 million for total compensation of $14.62 million.
Leslie Owens, head of operations, was paid $669,847 in salary, a $1.5 million bonus and stock awards valued at $11.47 million for total compensation of $13.64 million.
Michael Santomassimo, the current chief financial officer, was paid $367,366 in salary, a $1.75 million bonus and stock awards valued at $5.99 million for total compensation of $8.11 million.
There are four shareholders proposals submitted for its virtual meeting at 10 a.m. April 27, all of which the board advises a vote against.
The first would require the board of directors “to take the steps necessary to enable as many shareholders as may be needed to aggregate their shares to equal 3% of our stock owned continuously for three years in order to enable shareholder proxy access.” The goal would be “to elect new ethical watchdog directors.”
The second would require the bank to implement the amended Delaware public benefit law in an effort “to rebuild trust, transform our company and better serve stakeholders.”
Among the goals are reducing certain board member fiduciary liabilities for breaches of stakeholder interests, and reducing the required shareholder approval for such a conversion from supermajority to a majority vote.
The third would require additional reporting on incentive-based executive compensation and declare risks of material losses.
The fourth would urge the board to “oversee a racial equity audit analyzing its adverse impacts on nonwhite stakeholders and communities of color. Input from civil rights organizations, employees and customers should be considered in determining the specific matters to be analyzed.”