Posts Tagged ‘bankers pay’

March 1st, 2010

Move Over Goldman, Wells is here!

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.


Wells Executive Salary Changes

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February 10th, 2010

The Connection between Bank TARP Repayments and Compensation.

There has been plenty of talk about bank compensation figures for 2009. Not just talk but a lot of action too…some real, some threatened. A Special Pay Master was appointed to provide compensation oversight over certain entities, threats of pay driven legislation looms on the banking industry.


Over the past two months, starting with the time that Q4 bank earnings were being published, different compensation statistics were sliced and diced:


1. There was the Wall Street J on compensation ratios


2. Not to be outdone, CNN Money published a general running list on compensation


3. And our very own: InvesGuard’s take on compensation


As a sort of a corollary to this already existing exercise on compensation figures, what I thought would be interesting would be to find out how many of those banks that repaid TARP, thereafter jumped to increase compensation, in any form, structure or format to its senior most employees. ..and this what I found


( Warning: I apologize if this is a socialist sounding blog post, but really, if there are companies who repay TARP just to be able to pay more to their employees, then either they did not need TARP funds in the first place and used it only to ‘play’ the market or if they really needed it, then by repaying it are putting their shareholders, and the general economy in peril.)


Now you have to remember that this is sourced from public filings, so only those compensation increases that affected ‘named executive officers’ of a company have been included. In other words, there may be pay increases for employees who are senior enough but are not ‘named executive officers’. Those are not included here.




1. We found Bank of America, rushing in January (after repaying TARP in December) to increase the pay of its brand new CEO as well as that of the President of its Consumer Small business and credit card banking division and the salary of its President of Home Loans. And this after determining salaries for these very same individuals in December 2009 based on the approval granted by the Office of the Special Master for TARP Executive Compensation.


2. American Express also increased base salaries of its CEO, Vice Chairman and Group President and CFO in January 2010. According to the SEC filing, the company’s Compensation committee approved a shift in compensation mix by increasing base salary, while reducing the aggregate compensation that generally could be earned through annual incentive awards and the Company’s cash-based portfolio grant program.


3. Over at Morgan Stanley, in January 2010, newly elected Chief Financial Officer, Ruth Porat, was awarded a salary of $750,000, a far cry from the $322,903 paid to the previous CFO Colm Kelheller for 2008. Of course, his cash bonus for 2008 ($2.9 million) more than made up for any salary deficiency.


4. In October 2009, State Street approved retention awards in the form of restricted stock and deferred stock to selected executive officers.


I have to add here, that there are some companies whose top executive officers continue to earn either zero or $1 salary or have given up some part of compensation even after repaying TARP and being under no obligation to do so.


1. Capital One announced in January 2010 that its CEO Mr. Fairbanks will continue to earn zero salary or bonus .


2. At Sterling Bancshares (SBIB), CEO Mr Bridgewater waived his right to receive any restricted stock units which were scheduled to vest in December 2009. According to the company’s filings, “Mr. Bridgwater voluntarily and unilaterally decided to execute this Irrevocable Waiver due to the unprecedented operating environment for the Company and financial institutions across the country, as well as due to the Company’s operating results for the third quarter of 2009.”


3. At Morgan Stanley, chairman and ex CEO John Mack gave up his year end bonus (were they actually giving him one?). New CEO has also “recommended” that he be paid no bonus for 2009.


4. At Old National Bancorp, CEO Mr. Jones and the board “mutually agreed” to pass on any bonus for 2009.


We are still pouring over data and there may be a second part to this post. Keep checking back.


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