Why did Wells Fargo suspend its Performance-Based Compensation Policy?

Wells Fargo suspended its Performance-Based Compensation Policy because the Emergency Economic Stabilization Act of 2008 (EESA), enacted due to the Troubled Asset Relief Program (TARP), reduced the annual compensation tax deductibility cap for senior executives to $500,000 and eliminated the exception for performance-based compensation. The committee deemed the policy unnecessary under these new limitations.

Did any senior executives receive cash bonuses for 2008?

No, none of the senior executive officers received cash incentive compensation for 2008. This was because the company did not meet the performance goals set under the suspended Performance-Based Compensation Policy for that year.

What are Restricted Share Rights (RSRs) and why were they granted?

Restricted Share Rights (RSRs) are awards that entitle the holder to receive a share of the company's common stock upon meeting certain vesting conditions. They were granted to three senior officers (Howard I. Atkins, David A. Hoyt, and Mark C. Oman) as permitted by the American Recovery and Reinvestment Act of 2009. These RSRs are intended to provide a form of compensation when cash incentives and traditional deductibility were impacted by EESA/TARP.

Are there any conditions attached to the RSR grants?

Yes, the RSRs vest over a period of three years (starting July 2012), and their vesting can be delayed or canceled if required by EESA or other applicable regulations. A key condition is that the senior executives must agree to hold at least 50% of the after-tax shares acquired upon vesting for a specified period.

WELLS FARGO & COMPANY/MN 8-K: Leadership Changes

Summary

This 8-K filing by Wells Fargo & Company/MN on February 26, 2009, reports on significant changes to executive compensation in light of the Emergency Economic Stabilization Act of 2008 (EESA) and the Troubled Asset Relief Program (TARP). The company's Human Resources Committee suspended the Performance-Based Compensation Policy effective January 1, 2009. This action was taken because EESA reduced the tax deductibility cap for executive compensation to $500,000 for TARP participants and eliminated the performance-based exception. Consequently, no senior executive officers received cash incentive compensation for 2008, as the company did not meet the policy's performance goals. Additionally, the filing details the granting of Restricted Share Rights (RSRs) to three senior officers as permitted by the American Recovery and Reinvestment Act of 2009. These RSRs are valued at one-third of their 2008 total annual compensation and vest over several years, with conditions tied to EESA compliance and a requirement for officers to hold a significant portion of vested shares. Base salaries for two officers were also increased.

Key Highlights

1Wells Fargo suspended its Performance-Based Compensation Policy effective January 1, 2009, due to changes in tax deductibility rules under EESA.
2No senior executive officers received cash incentive compensation for 2008 because the company did not meet the policy's performance goals.
3Restricted Share Rights (RSRs) were granted to three senior officers (Howard I. Atkins, David A. Hoyt, and Mark C. Oman), valued at one-third of their 2008 total annual compensation.
4The RSRs vest in installments between July 2012 and July 2014, with vesting contingent on EESA compliance.
5Senior executives receiving RSRs are required to hold at least 50% of the after-tax shares acquired upon vesting.
6The annual base salaries for Chief Financial Officer Howard I. Atkins and David A. Hoyt were increased to $700,000 from $600,000, effective March 1, 2009.
7The changes reflect the impact of regulatory actions and economic conditions on executive compensation practices.

WELLS FARGO & COMPANY/MN 8-K Report, Executive Changes (Feb 27, 2009)

Summary

Key Highlights

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