Dive Brief:
- Wells Fargo paid CEO Charlie Scharf just over $20.3 million in compensation in 2020, a drop of about 12% from $23 million in 2019, the bank said in a filing Friday.
- That figure breaks down to a $2.5 million base salary, a $4.4 million cash bonus and $13.5 million in long-term incentive compensation, split evenly between performance shares and restricted share rights, the bank said.
- Scharf's compensation package leaves him trailing Morgan Stanley CEO James Gorman, whose $33 million represents a 22% raise, and JPMorgan Chase CEO Jamie Dimon, whose compensation remained $31.5 million in 2020. But Scharf last year was better-paid than Goldman Sachs CEO David Solomon, who took a 36% cut to $17.5 million after that bank clawed back $10 million related to the 1MDB scandal.
Dive Insight:
As at Goldman Sachs, past mistakes weighed on Wells Fargo's compensation decisions. The company board's Human Resources Committee considered the bank's financial results for the year but acknowledged COVID-19's impact on the bottom line. Wells Fargo saw a 17.2% drop in net interest income in 2020 compared with 2019, for example, and in July, saw its first quarterly loss since 2008. The bank also had a 1.3% return on tangible equity — although Scharf told analysts last month that Wells has a "clear line of sight" to a 10% return and he expects to reach 15% over the long term, Bloomberg reported.
Beyond financial performance, Wells' board weighed the bank's pandemic-influenced actions such as aid processed through the Paycheck Protection Program (PPP), its liquidity throughout the pandemic, progress on the regulatory demands the bank faces, the build-out of the senior management team and the introduction of new diversity goals at the bank.
The bank began 2020 facing 12 enforcement actions but has resolved two. Scharf in June announced an initiative to double the number of Black leaders at the bank by 2025 and to reflect — in year-end pay packages — senior executives' efforts to increase representation. Scharf caught heat after the announcement for lamenting what he called "a very limited pool of Black talent to recruit from."
Scharf said in July he aimed to cut about $10 billion in annual expenses from the bank. To that end, the bank resumed job cuts that ultimately could number in the tens of thousands. But the bank also has looked to sell some of its lesser-performing units, such as asset management and its student-loan portfolio.
Wells Fargo is still operating under a $1.95 trillion asset cap imposed by the Federal Reserve nearly three years ago as a result of the 2016 fake-accounts scandal. The bank has missed out on $4 billion in profits in that time, Bloomberg reported in August, and the cap has cost Wells more than $220 billion in market value, the wire service estimated.
In addition to the $23 million Scharf received from Wells Fargo in 2019, the bank promised him $26 million in stock as part of a "make-whole award" intended to replace the value of awards he would forfeit by leaving BNY Mellon to take Wells' top role. That incentive temporarily made Scharf the highest-paid bank CEO in the U.S., according to S&P Global data.
