The Director Compensation Project: Wells Fargo & Company (WFC)

This post is part of an ongoing series that examines the way stock exchange independence rules relate to director compensation. We are for the most part including companies from 2015’s Fortune 500 and using information found in their 2015 proxy statements.

NASDAQ and the NYSE have similar rules with respect to director independence. NYSE Rule 303A.01 requires that each listed company’s board of directors be comprised of a majority of independent directors. A director does not qualify as “independent” if he or she has a “material relationship with the company.” NYSE Rule 303A.02(a). In addition, the director is not considered independent under NYSE Rule 303A.02(b)(ii) if the director received more than $120,000 in direct compensation, other than director’s fees, during any of the previous three years. The NYSE imposes a higher independence standard for directors serving on the company’s audit committee by requiring them to comport with Rule 10A-3 (C.F.R. §240.10A-3) (see Rule 303A.06) and requires consideration by the board of directors of certain specified factors in designating directors for the Compensation Committee.  See NYSE Rule 303A.02(a)(ii).

Finally, as the Commission has noted with respect to director independence: 

• All compensation committee members must meet the general independence standards under NYSE’s rules in addition to the two new criteria being adopted herein. The Commission therefore expects that boards, in fulfilling their obligations, will apply this standard to each such director’s individual responsibilities as a board member, including specific committee memberships such as the compensation committee. Although personal and business relationships, related party transactions, and other matters suggested by commenters are not specified either as bright-line disqualifications or explicit factors that must be considered in evaluating a director’s independence, the Commission believes that compliance with NYSE’s rules and the provision noted above would demand consideration of such factors with respect to compensation committee members, as well as to all Independent Directors on the board. 

Exchange Act Release No. 68639 (Jan. 11, 2013); see also Exchange Act Release No. 68641 (Jan. 11, 2013).

Independent directors are compensated for their service on the board. The amount of “total compensation” can be seen from examining the director compensation table from the Wells Fargo & Company’s (NYSE: WFC) 2015 proxy statement. According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
John D. Baker II	165,000	160,035	0	0	325,035
Elaine L. Chao	107,000	160,035	0	0	267,035
John S. Chen	103,000	160,035	0	0	263,035
Llyod H. Dean***	152,000	160,035	0	0	312,035
Elizabeth A. Duke**
Susan E. Engel	143,000	160,035	0	0	303,035
Enrique Hernandez, Jr.***	194,000	160,035	0	5,000	359,035
Donald M. James	109,000	160,035	0	0	269,035
Cynthia H. Milligan***	150,000	160,035	0	0	310,035
Frederico F. Pena	138,000	160,035	0	0	298,035
James H. Quigley***	150,500	160,035	0	0	310,535
Howard V. Richardson****	8,750	0	0	0	8,750
Judith M. Runstad***	172,000	160,035	0	0	332,035
Stephen W. Sanger***	183,000	160,035	0	0	343,035
Susan G. Swenson	119,000	160,035	0	0	279,035
John G. Stumpf*	0	0	0	0	0
Suzanne M. Vautrinot**

*Employee director

**Joined the Board in 2015.

*** Received an annual cash retainer of $10,000, payable quarterly in arrears, and a fee of $2,000 per separate meeting not held concurrently with or immediately prior to or following a Company Board or committee meeting.

****Resigned effective January 31, 2014.

Director Compensation.  During fiscal year 2014, Wells Fargo held nine board of directors meetings and thirty-four committee meetings. Each current director attended at least 75% of the total number of board and committee meetings on which he or she served. Overall attendance of current directors at meetings of the board and its committees averaged 98.95%. Directors are reimbursed for expenses incurred from board service, including cost of attending board and committee meetings.      

Director Tenure.  In 2014, Ms. Milligan, who has held her position as a member of the Board of Directors since 1992, held the longest tenure. Mr. Hutchins and Mr. Kennard hold the shortest tenure as they joined in 2014. All but three of the directors sit on other boards: Ms. Chao serves as a director for News Corp. and Vulcan Materials Company, Mr. Chen serves as a director for BlackBerry Limited and The Walt Disney Company, Mr. Hernandez serves as a director for Chevron Corp., McDonald’s Corp., and as chairman for Nordstrom, Inc., Ms. Milligan serves as a director for Calvert Funds, Kellogg Company, and Raven Industries, Inc., and Mr. Quigley serves as a director for Hess Corp. and Merrimack Pharmaceuticals, Inc.

CEO Compensation.  John Stumpf, Wells Fargo’s President and Chief Executive Officer since 2007 and Chairman of the Board since 2010, earned total compensation of $21,426,391 in 2014. He earned a base salary of $2,800,000, stock awards of $12,500,029, incentive compensation of $4,000,000, deferred earnings of $2,108,162, and other compensation totaling $18,200. Timothy J. Sloan, Senior Executive Vice President of Wholesale Banking, earned total compensation of $10,448,138 in 2014. He earned a base salary of $1,829,885, stock awards of $7,000,053, incentive compensation of $1,600,000, and other compensation totaling $18,200.