Wells Fargo

Annual Meeting April 27

 CEO Charles Scharf’s total reported compensation was $20,392,046 in 2020, his first full year on the job. Although Scharf was only CEO for a few months in 2019, he was paid extraordinarily well, stemming largely from a one-time new-hire award (as I wrote about here). The staggered timeline of Scharf’s role as CEO and details of his compensation packages make basic year-on-year comparisons inadequate. Yet, some have reported that Scharf’s pay was “slashed” in 2020, a claim that does a disservice to the concerning details of his latest compensation package.

In particular, I want to call attention to his extremely high salary of $2.5 million, one of the highest of S&P 500 CEOs. As I’ve detailed before, salary drives up other components of pay. In this case, Scharf’s non-equity incentive compensation target is set at 200 percent of pay, with a maximum at 300 percent. This creates a potential payout of $7.5 million in cash alone. Even with more conservative target and maximum award opportunities (100 and 150 percent, respectively) that other Wells Fargo executives and most other CEOs are set at, Scharf’s bonus could still be much higher than most CEOs due to his high salary.

Based primarily on the discretion of the members of the compensation committee, Scharf’s non-equity incentive compensation award was $4,350,000 in 2020. In an oblique way, the company acknowledges that it didn’t do so well, stating:

“Financial results compared unfavorably with 2019 in many respects, but were significantly impacted by the effect of the pandemic on economic and market conditions and our efforts to address legacy issues through customer remediations.”

Given that Wells Fargo does not clearly discuss the metrics used to calculate performance-related compensation, it remains unclear how these COVID-related challenges affected Scharf’s bonus or if performance thresholds had been modified.   

The pay ratio between Scharf and a median employee was 1:274.