The Director Compensation Project: Wells Fargo & Company

This post is part of an ongoing series that examines the way stock exchange independence rules relate to director compensation.  We are for the most part including companies from 2011’s Fortune 500 and using information found in their 2011 proxy statements.

Nasdaq and the NYSE have similar rules with respect to director independence.  NYSE Rule 303A.01 requires that each listed company’s board of directors be comprised of a majority of independent directors.  A director does not qualify as “independent” if he or she has a “material relationship with the company.”  NYSE Rule 303A.02(a).  In addition, the director is not considered independent under NYSE Rule 303A.02(b)(ii) if the director received more than $120,000 in direct compensation, other than director’s fees, during any of the previous three years.  NYSE Rule 303A.06 imposes a higher independence standard for directors serving on the company’s audit committee by requiring them to comport with Rule 10A-3 (C.F.R. §240.10A-3).

Independent directors are compensated for their service on the board.  The amount of compensation can be seen from examining the director compensation table from the Wells Fargo & Company (NYSE: WFC) 2011 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:  

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
John D. Baker II	151,000	140,025	0	0	291,025
Elaine L. Chao	49,500	116,675	0	0	166,175
John S. Chen	111,000	140,025	0	0	251,025
Lloyd H. Dean	166,000	140,025	0	0	306,025
Susan E. Engel	143,000	140,025	18,117	0	301,142
Enrique Hernandez, Jr.	166,000	140,025	0	0	306,025
Donald M. James	119,000	140,025	0	0	259,025
Richard D. McCormick	55,250	0	0	0	55,250
Mackey J. McDonald	115,000	140,025	0	0	255,025
Cynthia H. Milligan	199,000	140,025	18,303	0	357,328
Nicholas G. Moore	163,000	140,025	0	0	303,025
Federico F. Peña	18,500	70,000	0	0	88,500
Phillip J. Quigley	188,000	140,025	18,117	0	346,142
Judith M. Runstad	143,000	140,025	18,303	0	301,328
Stephen W. Sanger	148,000	140,025	0	0	288,025
Susan G. Swenson	125,000	140,025	0	0	265,025
John G. Stumpf	0	0	0	0	0

*As an employee director, Mr. Stumpf does not receive additional compensation for his board service.

 Director Compensation.  During 2011, the board held thirteen meetings.  Director attendance averaged 98% for meetings of the board and its committees.  Each director attended at least 75% of the total number of meetings for the board and committees on which he or she served.  Effective on January 1, 2011, the company ceased granting stock options to non-employee directors.  Effective January 1, 2012, the value of the annual stock award for directors increased from $140,00 to $150,000.  Upon Ms. Chao’s election to the board, she received 4,071 shares of common stock.  Upon Mr. Peña’s election to the board, he received 2,826 shares of common stock.

Director Tenure.  Effective at the 2011 annual meeting of stockholders, Mr. McCormick retired as a director. Ms. Chao was elected to the board on July 1, 2011.  Mr. Peña was elected to the board on November 1, 2011.  Several directors also sit on other boards.  For instance, Mr. Baker is a director for Patriot Transportation Holding, Inc.; Progress Energy Inc.; and Texas Industries, Inc.  Mr. Hernandez serves on the board for Chevron Corporation; McDonald’s Corporation; and is Chairman of the Board for Nordstrom, Inc.  Ms. Milligan has been a director since 1992 and has the longest tenure on the board.

Executive Compensation. Mr. Stumpf, President and CEO, earned the highest compensation in 2011 of $19,843,021.  Mark C. Oman, former Senior Executive Vice President of Home and Consumer Finance, retired on December 1, 2011.  He received a total compensation of $16,427,890, $7,957,453 of which was categorized as a “Change in Pension Value and Nonqualified Deferred Compensation Earnings.”  Mr. Oman’s 2011 retirement benefits were calculated pursuant to Securities and Exchange Commission rules and were based on his thirty years of employment with Wells Fargo, his age at retirement of 56 years, and the immediate payment of his retirement benefit in 2012.  Overall, Mr. Oman received a supplemental retirement arrangement in a lump sum of $12,159,452.