Wells Fargo Sweetens the Pot for Top Executives

Wells Fargo got $25 billion in government aid through the TARP Capital Purchase Program initiative on Oct. 28; in exchange, it issued preferred stock and warrants to the Treasury.  To date, Wells Fargo has not repaid any of the loan.

Wells Fargo also was one of the 19 banks that regulators subjected to a financial "stress test" earlier this year to determine whether the bank could survive a prolonged economic recession.  After crunching the numbers, regulators advised Wells Fargo that it needed an additional $13.7 billion as a capital buffer to withstand another economic jolt. Almost immediately thereafter, Wells Fargo raised $8.6 billion through a stock offering that sold out on May 8.

In justifying the stock awards, the board said that it considered the pay practices at Wells Fargo's peer companies, the "Company's consistent ability to grow revenue, market share, net income and profitability over the short and long term; and the need for these executives' continued leadership while integrating Wachovia into Wells Fargo and directing the Company through the economic recession and beyond."

Steve Sanger, who is the retired chief executive of General Mills Inc. and heads the board's human resources committee, offered this assessment in the press release put out by Wells Fargo:

"We believe Wells Fargo's leadership team is the finest in financial services. They're leading the Company through the largest merger integration in U.S. banking history, and earned record profits in the first two quarters of 2009, despite the challenging economy. This is something no other financial company is achieving and few, if any, companies in any industry are achieving. Wells Fargo's compensation philosophy has always been to pay competitively, to reward performance relative to its peer group and to align management's interests with those of our shareholders. We must balance the need to appropriately pay and retain our top performaing tema members with the responsibility we have as a recipient of an investment from the U.S. Treasury on behalf of the U.S. taxpayers. We believe that these increases in compensation adhere to both the letter and spirit of the new executive compensation rules that apply to companies that received a U.S. Treasury investment."

Wells Fargo's stock closed Friday at $28.76 a share, compared to a closing price of $34.46 on the day it took the TARP money and $8.12 on the day its shares hit bottom in March. 

While the cash portion of John Stumpf's salary will remain at $900,000, he will also receive stock worth $4.7 million. Stumpf also got a grant of 108,528 restricted share rights, which will begin to vest in 2011.