Lately, Citigroup appears to be putting its best foot forward. Its CEO provided a very confident (albeit doubtful) front during the recent congressional hearings held by the Oversight Panel for TARP. President and CEO of Citi Mortgage Mr. Sanjiv Das also appeared reasonably confident in Citi’s ability to ‘assist’ underwater homeowners in the recent House Financial Services Committee hearing.

It appears that these Citigroup executives are not too far from the mark…and not just based on their behavior or how confident they were at congressional hearings. Based on recent SEC filings and published information, Citigroup appears to have taken a lead over both Bank of America and Wells Fargo so far as InvesGuard’s non financial scores are concerned.

Look at InvesGuard scores for Citigroup, Bank of America and Wells Fargo below:

A legend of the scores and what they mean has been included at the end of this post.

InvesGuard scores and grades companies based on non-financial information. Different parameters are considered including:

1. Number of transactions between the company and its directors (other than director fees) that may give rise to conflict of interest situations.

2. Directors who also perform consulting services for the company resulting into reduced Director Independence.

3. Level of transparency in Board Audit Committee reports.

4. Relevance of experience of Board members especially those who hold Board level finance, credit and risk committee positions in the financial industry.

5. A look at the quality of a company’s guidelines, charters, principles etc under which it operates.

6. Social and environmental factors such as lending practices, emissions, waste management, recycling etc.

For 2009, Citigroup’s chief area of improvement has been its Board of Directors. Although concerns continue over some aspects, the Citigroup Board is stronger than it used to be. Out of 9 parameters or ‘Core’ comparison events between Bank of America, Citigroup and Wells Fargo, Citigroup has scored the highest or shared the highest score for 7 of these ‘core’ events. These core events include such parameters like CEO and senior management effectiveness, aligned director shareholder interests etc.

Of the three companies, Wells Fargo has by far performed the worst on the Board of Directors and Senior Management front. Its poor scores will get even worse for 2010 with the jump in CEO and senior executive pay without any apparent long term strengthening of shareholder value. Hitting it the hardest, is Wells’ absence of a Board level Asset Quality committee. Even its Board level Finance and Credit committees appear to have some directors with less than relevant experience.

InvesGuard’s Internal Control Environment primarily includes a comprehensive review of a company’s Board Audit Committee including quality of this committee’s reports, its members, their compensation, as well as its charter. Conflict of Interest is also considered within the Internal Control Environment category.

For 2009, all three companies did not explicitly prevent their directors from providing consulting services to each of these companies. Providing consulting services has the potential to take away the independent perspective that directors are expected to provide. It could potentially cloud their judgement. In fact, Citigroup paid consulting fees of $100,000 to Director Joss during 2009 in addition to regular director compensation.

For more detailed information on these scores please visit our store at http://store.invesguard.com/ or send me an email at tejus@invesguard.com

Check back later this week when we will be adding final 2009 JP Morgan Chase and Goldman Sachs scores.

Legend for the scores used in the graphs

A vigilant reader pointed out that this post had some repeats in a couple of paragraphs…..Wordpress went a little crazy when I tried to insert that table at the end.
My apologies to everyone. The post is now clean.

Sometime back,we covered a post investigating whether financial institutions are rushing to re instate compensation and pay policies now that they were out of the emergency funding program- TARP. There were several companies that we named here that changed their compensation structure including increasing cash salaries for senior executives.

One more that we are adding to that list is Wells Fargo. The changes instituted at Wells affect cash salaries of top executives . These changes have caused their cash salaries to jump so steeply that it could potentially eclipse any compensation issues that ‘all-time-poster-boy-for-excessive- compensation’- Goldman Sachs may appear to have.

On February 26th, the Board Compensation Committee (or Human Resources Committee as it is called over at Wells), made some changes to the compensation structure of its top executives. These executives are now to be paid their full salaries in cash versus being paid partly in the form of company stock which was the erstwhile compensation structure under Wells Fargo’s Long Term Incentive Compensation Plan.

Back in August 2009, salaries of these executives were increased to reflect an increased percentage of remuneration in company stock , but the cash portion of their salaries remained unchanged.

Wells Fargo repaid the entire amount it had borrowed under the Government’s TARP program in December 2009. Following this repayment, the Board Compensation committee of Wells Fargo increased the base salaries of the same senior executives yet again but this time the increased salaries will be paid entirely in cash with no stock component. These changes will be effective March 2010.

From the table below, it is painfully obvious that cash salaries for these executives have significantly jumped. John Stumpf, Chairman and CEO has seen his cash salary jump from $900,000 to $2,800,000 as was the case for Mark Oman(Senior Executive Vice President and head of Home and Consumer Finance), who had announced his retirement from Wells Fargo at the end of 2009. Not only does he continue with the company, but he also received a bump of $1,400,000 in his cash salary which takes his total cash salary to $2,000,000. As everyone knows, increments for middle to lower rung managers and staff are frozen at most companies with maximum salary increases of 2% to 3%. How does one justify this kind of salary hike of more than a 100%?

On the other hand, Wells shares have languished around $25- $27 a share. Wells Fargo closed at $27.34 a share on 2/26/2010. It looks like popular backlash against excessive compensation as well as the threat of regulation have not deterred Wells’ Board from rewarding executives for what appears to be an execution of their usual and not any kind of ‘above and beyond’ type of job responsibilities. With all the public attention on Goldman officers and their compensation, salary changes at other financial institutions seem to be going unnoticed under the radar.