DEF 14A 1 d448653ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.      )

 

Filed by the Registrant    x     
Filed by a Party other than the Registrant    ¨     

 

Check the appropriate box:

 

¨    Preliminary Proxy Statement

 

¨    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x    Definitive Proxy Statement

 

¨    Definitive Additional Materials

 

¨    Soliciting Material Pursuant to §240.14a-12

 

Wells Fargo & Company


(Name of Registrant as Specified In Its Charter)

 

  


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

x    No fee required.
¨    Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1)    Title of each class of securities to which transaction applies:

 

 

  (2)    Aggregate number of securities to which transaction applies:

 

 

  (3)    Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

  (4)    Proposed maximum aggregate value of transaction:

 

 

  (5)    Total fee paid:

 

 

 

¨    Fee paid previously with preliminary materials.

 

¨    Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1)    Amount Previously Paid:

 

 

  (2)    Form, Schedule or Registration Statement No.:

 

 

  (3)    Filing Party:

 

 

  (4)    Date Filed:

 

 


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LOGO

 

WELLS FARGO & COMPANY

 

March 14, 2013

 

Dear Stockholder:

 

The 2013 annual meeting of stockholders of Wells Fargo & Company will be held on April 23, 2013 at 8:30 a.m., Mountain time, in The Grand America Hotel, 555 South Main Street, Salt Lake City, Utah. Please read the notice of meeting and proxy statement accompanying this letter carefully so that you will know what you are being asked to vote on at the meeting and what you will need to do if you want to attend the meeting in person.

 

Our proxy materials are available over the internet, and most of our stockholders will receive only a notice containing instructions on how to access the proxy materials over the internet and vote online. If you receive this notice but would still like to receive paper copies of the proxy materials, please follow the instructions on the notice or on the website referred to on the notice.

 

Your vote is important. Please vote as soon as possible even if you plan to attend the annual meeting. The notice and the proxy statement contain instructions on how you can vote your shares over the internet, by telephone, or by mail. If you need help at the meeting because of a disability, please call us at 1-866-878-5865, at least one week in advance of the meeting.

 

Thank you for your interest in Wells Fargo.

 

Sincerely,
LOGO

John G. Stumpf

Chairman, President and

      Chief Executive Officer


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WELLS FARGO & COMPANY

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

DATE AND TIME:    Tuesday, April 23, 2013, at 8:30 a.m., Mountain time
PLACE:   

The Grand America Hotel

555 South Main Street

Salt Lake City, Utah 84111

ITEMS OF BUSINESS:   

(1)      Elect as directors the 14 nominees named in the accompanying proxy statement;

  

(2)      Vote on an advisory resolution to approve executive compensation;

  

(3)      Approve the Company’s Amended and Restated Long-Term Incentive Compensation Plan;

  

(4)      Ratify the appointment of the Company’s independent registered public accounting firm for 2013;

  

(5)      Vote on a stockholder proposal to adopt a policy requiring an independent chairman, if properly presented;

  

(6)      Vote on a stockholder proposal to provide a report on the Company’s lobbying policies and practices, if properly presented;

  

(7)      Vote on a stockholder proposal to review and report on internal controls over the Company’s mortgage servicing and foreclosure practices, if properly presented; and

  

(8)      Consider any other business properly brought before the meeting.

WHO CAN VOTE:    You may vote only if you owned shares of common stock at the close of business on February 26, 2013.
VOTING:    It is important that your shares be represented and voted at the meeting. You can vote your shares over the internet or by telephone. If you received a paper proxy card or voting instruction form by mail, you may also vote by signing, dating, and returning the proxy card or voting instruction form in the envelope provided. Voting in any of these ways will not prevent you from attending or voting your shares at the meeting. For specific instructions on how to vote your shares, see the information beginning on page 5 of the proxy statement. Please call us at 1-866-878-5865, if you need directions to attend the meeting and vote in person.
MEETING ADMISSION:    You may attend the meeting only if you owned shares of our common stock at the close of business on February 26, 2013. If you or your legal proxy holder plan to attend the meeting in person, you must follow the admission procedures described beginning on page 7 of the proxy statement. If you do not comply with these procedures, you will not be admitted to the meeting.


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INTERNET

AVAILABILITY

OF PROXY MATERIALS:

   Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on April 23, 2013. Wells Fargo’s 2013 Proxy Statement and Annual Report to Stockholders for the year ended December 31, 2012 are available at: www.ematerials.com/wfc.

 

By Order of the Board of Directors,
LOGO

Anthony R. Augliera

Corporate Secretary

 

This notice and the accompanying proxy statement, 2012 annual report, and proxy card or voting instruction form were first made available to stockholders beginning on or about March 14, 2013.


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PROXY STATEMENT SUMMARY

 

This summary highlights certain information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting.

 

Annual Meeting of Stockholders

 

Date and Time:   

Tuesday, April 23, 2013

at 8:30 a.m., Mountain time

Place:   

The Grand America Hotel

555 South Main Street

Salt Lake City, Utah 84111

Record Date and Voting:    Only common stockholders as of the record date, February 26, 2013, are entitled to vote
Meeting Admission Requirements:    Only common stockholders and their duly appointed legal proxies who present the required identification and proof of stock ownership as of the record date will be admitted to the meeting.

 

Items of Business and Voting Recommendations

 

Items for Vote

  

Board Recommendation

1.      Elect 14 directors

   FOR all nominees

2.      Advisory resolution to approve executive compensation (say-on-pay)

   FOR

3.      Approve the Amended and Restated Long-Term Incentive Compensation Plan

   FOR

4.      Ratify the appointment of KPMG, LLP as the Company’s independent registered public accounting firm for 2013

   FOR

5-7. Three stockholder proposals

   AGAINST all proposals

 

Election of Directors (Item 1)

 

The following table provides summary information about each director nominee for election at the annual meeting.

 

Nominee

   Age    Director
Since
  

Independent

  

Principal Occupation

or Affiliation

  

Committees

John D. Baker II

   64    2009    Yes    Executive Chairman and Director, Patriot Transportation Holding, Inc., Jacksonville, Florida (motor carrier and real estate company)   

Audit and Examination;

Corporate Responsibility;

Credit

Elaine L. Chao

   59    2011    Yes    Distinguished Fellow, Heritage Foundation, Washington, D.C. (educational and research organization)    Credit; Finance

John S. Chen

   57    2006    Yes    Retired Chairman and Chief Executive Officer, Sybase, Inc., Dublin, California (computer software)    Human Resources

 

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Nominee

   Age    Director
Since
  

Independent

  

Principal Occupation or
Affiliation

  

Committees

Lloyd H. Dean

   62    2005    Yes    President, Chief Executive Officer and Director, Dignity Health, San Francisco, California (health care)   

Corporate Responsibility;

Governance and Nominating; Human Resources; Risk

Susan E. Engel

   66    1998    Yes    Chief Executive Officer, Portero, Inc., New York, New York (online retailer)    Credit; Finance; Human Resources

Enrique Hernandez, Jr.

   57    2003    Yes    Chairman, President, Chief Executive Officer and Director, Inter-Con Security Systems, Inc., Pasadena, California (security services)    Audit and Examination; Corporate Responsibility; Finance; Risk

Donald M. James

   64    2009    Yes    Chairman, Chief Executive Officer and Director, Vulcan Materials Company, Birmingham, Alabama (construction materials)    Finance; Human Resources

Cynthia H. Milligan

   66    1992    Yes    Dean Emeritus, College of Business Administration, University of Nebraska-Lincoln, Lincoln, Nebraska (higher education)    Corporate Responsibility; Credit; Governance and Nominating; Risk

Federico F. Peña

   66    2011    Yes    Senior Advisor, Vestar Capital Partners, Denver, Colorado (private equity firm)    Audit and Examination; Governance and Nominating

Howard V. Richardson

   62    2013    Yes   

Retired Partner, PricewaterhouseCoopers LLP, New York, New York

(accounting and auditing firm)

   Audit and Examination

Judith M. Runstad

   68    1998    Yes    Former Partner and currently Of Counsel, Foster Pepper PLLC, Seattle, Washington (law firm)    Corporate Responsibility; Credit; Finance; Risk

Stephen W. Sanger

   66    2003    Yes    Retired Chairman and Chief Executive Officer, General Mills, Inc., Minneapolis, Minnesota (packaged food producer and distributor)    Governance and Nominating; Human Resources; Risk

John G. Stumpf

   59    2006    No    Chairman, Chief Executive Officer and President, Wells Fargo & Company, San Francisco, California    N/A

Susan G. Swenson

   64    1994    Yes    Retired President and Chief Executive Officer, Sage Software-North America, Inc., United Kingdom (business management software and services supplier)    Audit and Examination; Governance and Nominating

 

The Board recommends you vote FOR each of the nominees named above.

 

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Corporate Governance

 

Director Elections

   

Annual elections

   

Directors elected by a majority of votes cast in uncontested elections, by plurality vote in contested elections

 

Board Independence

   

13 of 14 director nominees are independent

   

All standing Board committees consist solely of independent directors

   

Lead Director—Stephen W. Sanger

 

Corporate Governance Highlights

   

Full Board meetings during last fiscal year—9

   

Meetings in executive session without management—7

   

96% average attendance by directors at Board and committee meetings

   

100% of non-management directors serve on four or fewer public company boards

   

Lead director and senior management participate in annual investor outreach program with the Company’s largest institutional investors to discuss and obtain feedback on corporate governance and executive compensation matters

   

Board members and governance policies disclosed on Company’s website at:

https://www.wellsfargo.com/about/corporate/corporate_governance.

   

The Board and its committees may retain their own advisors without management approval and at the Company’s expense

   

Robust stock ownership and retention policies for our non-management directors and executive officers

  ¡    

Non-management directors must own stock equal to five times annual cash retainer within five years of election to Board, and retain for one year after Board service ends

  ¡    

Executive officers must retain 50% of after-tax profit shares (assuming a 50% tax rate) acquired upon exercise of options or vesting of stock awards for one year following retirement

   

Directors and executive officers prohibited under our Codes of Ethics from engaging in short-selling or hedging transactions involving Company securities

 

Executive Compensation and Advisory Resolution

to Approve Executive Compensation (Say-on-Pay) (Item 2)

 

We highlight below the Company’s 2012 performance and 2012 compensation decisions for our named executives—John G. Stumpf (CEO), Timothy J. Sloan (CFO), David M. Carroll, David A. Hoyt, Avid Modjtabai and Carrie L. Tolstedt.

 

2012 Company Performance Highlights

 

Wells Fargo had record net income and EPS in 2012 despite an uneven economic recovery and a challenging interest rate environment. We continued to lead the financial services industry in areas key to our customers’ financial success and critical to the economy, including small business, home, and auto lending. At the same time, we remained focused on managing costs by serving our customers more efficiently but without forgoing opportunities to earn more of their business, such as helping more than 2 million customers refinance or purchase a home. We continued to benefit in other ways from our diversified business model, growing loans and deposits and increasing capital even as we

 

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returned more of it to our stockholders through higher dividends and additional share repurchases. We also continued to reduce our credit losses, nonperforming assets and liquidating loan portfolio balances, and resolved a number of significant mortgage-related legal matters.

 

2012 Compensation Highlights

 

Based on application of our compensation principles to the Company’s 2012 results, consideration of the Company’s performance and the individual performance of the named executives, and the other relevant factors described in the CD&A, the HRC approved the 2012 compensation actions shown in the table below for the named executives. The table is not a substitute for, and should be read together with the Summary Compensation Table which presents 2012 named executive compensation in accordance with SEC disclosure rules and includes additional compensation elements and other important information.

 

Named Executive

   Base Salary
($)
    Annual Incentive
Award
($)(1)
     Long-Term Equity
Incentive Award
($)(2)
     Total
($)
 

John G. Stumpf

     2,800,000        4,000,000         12,500,000         19,300,000   

Timothy J. Sloan

     1,700,000 (3)      1,600,000         5,500,000         8,800,000   

David M. Carroll

     1,500,000        1,425,000         5,500,000         8,425,000   

David A. Hoyt

     2,000,000        1,900,000         6,750,000         10,650,000   

Avid Modjtabai

     1,500,000        1,425,000         5,500,000         8,425,000   

Carrie L. Tolstedt

     1,700,000        1,530,000         5,500,000         8,730,000   

 

(1)   A portion of the award was paid in RSRs that vest over three years as described in the CD&A under “—2012 Compensation Actions for Named Executives; 2012 Annual Incentive Compensation.”

 

(2)   Dollar value of 2012 grant of Performance Shares at “target.” Actual pay delivered or realized will be determined in first quarter 2015 and may range from zero to 150% of the target shares depending on Company performance. See the CD&A under “—2012 Compensation Actions for Named Executives; 2012 Long-Term Incentive Compensation” for additional information.

 

(3)   Annual rate effective March 11, 2012. See the CD&A under “—2012 Compensation Actions for Named Executives; 2012 and 2013 Annual Base Salaries.”

 

For 2012, the HRC maintained the relative balance between annual fixed compensation and annual variable “at risk” compensation, and continued to weight long-term compensation over annual, and equity compensation over cash. The table below shows the CEO’s and the average of the other named executives’ 2012 base salary, annual incentive award and target long-term equity incentive grant value as a percentage of the total in the table above, as well as the relative percentage of equity compensation to that total.

 

      Fixed    Variable “At-Risk”     
   Base Salary    Annual Incentive(1)    Long-Term Incentive    Equity*

CEO

   14%    21%    65%    70%

Non-CEO Average

   19%    17%    64%    66%

 

*   Includes the portion of the annual incentive award paid in RSRs that vest over three years.

 

Advisory Resolution to Approve Executive Compensation (Say-on-Pay)

 

The Board recommends that you vote FOR the advisory resolution to approve the compensation paid to the Company’s named executives. The HRC believes its 2012 compensation decisions were consistent with our compensation principles, they will benefit stockholders for short-term and long-term

 

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Company performance, and the compensation paid to the named executives for 2012 was reasonable and appropriate. Although your vote is advisory and not binding on the Company, the Board values our stockholders’ views on executive compensation matters and will consider the outcome of this vote when making future executive compensation decisions for named executives.

 

Approve Amended and Restated Long-Term Incentive Compensation Plan (Item 3)

 

The Board is asking our stockholders to approve the Amended and Restated Long-Term Incentive Compensation Plan (LTICP), including the Performance-Based Compensation Policy incorporated into the LTICP (previously a separate document). The Board believes that the LTICP is an important way to attract, retain and motivate key team members and directors to produce growth in stockholder value and provide incentive compensation. In addition to the other amendments to the LTICP discussed in Item 3 below, the Board believes the additional 150 million shares for which we are requesting approval will provide a reasonable pool of equity awards that will allow us to continue using equity awards as a fundamental part of our compensation framework in alignment with our compensation principles. Based on our current grant practices and possible business growth, we estimate that the increased share reserve will allow us to continue to grant additional equity awards for approximately four to five years. The actual number of years could be influenced by a number of factors, including business growth, stock price, competitive pay practices, regulatory requirements, and our continued use of performance-based awards.

 

One of the requirements under IRC Section 162(m) is that at least every five years our stockholders must approve the material terms of the performance goals or criteria pursuant to which incentive compensation intended to qualify as “performance-based compensation” is paid in order to be deductible by the Company for federal income tax purposes. Approval of Item 3 will constitute stockholder approval of the performance goals or criteria in the LTICP (including the Performance Policy portion). Stockholders last approved an amendment and restatement of the LTICP in 2008 and an amendment thereto in 2009 and last approved the Performance Policy in 2008.

 

The Board recommends that you vote FOR the approval of the Amended and Restated LTICP.

 

Ratify Appointment of Independent Registered Public Accounting Firm (Item 4)

 

As a matter of good corporate governance, the Board is asking our stockholders to ratify the appointment of KPMG LLP, as the Company’s independent registered public accounting firm for our fiscal year ending December 31, 2013.

 

The Board recommends that you vote FOR the ratification of KPMG as our independent registered public accounting firm for 2013.

 

Stockholder Proposals (Items 5 through 7)

 

Stockholders are being asked to vote on three stockholder proposals to:

   

Adopt a policy to require an independent chairman

   

Provide a report on the Company’s lobbying policies and practices

   

Review and report on internal controls over the Company’s mortgage servicing and foreclosure practices

 

The Board recommends that stockholders vote AGAINST each stockholder proposal for the reasons stated under “Stockholder Proposals” in this proxy statement.

 

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TABLE OF CONTENTS

 

     Page No.  

General Information

     1   

Information About the Proxy Materials

     1   

Information About the Annual Meeting

     4   

Ownership of Our Common Stock

     10   

•       Directors and Executive Officers

     10   

•       Principal Stockholders

     13   

•       Section  16(a) Beneficial Ownership Reporting Compliance

     14   

Item 1—Election of Directors

     15   

•       Director Nominees for Election

     15   

•        Board and Committee Meetings; Annual Meeting Attendance

     25   

•       Committees of the Board

     25   

•       HRC and GNC Use of Compensation Consultant

     29   

•        Compensation Committee Interlocks and Insider Participation

     30   

•       Other Matters Relating to Directors

     30   

•       Director Compensation

     31   

Corporate Governance

     35   

•       Director Election Standard

     35   

•       Director Independence

     36   

•       Board Leadership Structure and Lead Director

     37   

•       The Board’s Role in Risk Oversight

     39   

•       Risk Management and Compensation Practices

     40   

•       Communications with Directors

     42   

•       Director Nomination Process and Board Diversity

     42   

•       Succession Planning and Management Development

     44   

Information About Related Persons

     45   

•       Related Person Transactions

     45   

•       Related Person Transaction Policy and Procedures

     47   

Item 2—Executive Compensation and Advisory Resolution to Approve Executive             Compensation (Say-on-Pay)

     49   

•       Compensation Committee Report

     49   

•       Compensation Discussion and Analysis

     49   

•       Executive Compensation Tables

     71   

•       2012 Summary Compensation Table

     71   

 

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     Page No.  

•       2012 Grants of Plan-Based Awards

     75   

•       Outstanding Equity Awards at Fiscal Year-End 2012

     78   

•       2012 Option Exercises and Stock Vested

     82   

•       Post-Employment Compensation

     83   

•       2012 Pension Benefits

     86   

•       2012 Non-Qualified Deferred Compensation

     90   

•       Potential Post-Employment Payments

     95   

•        Advisory Resolution To Approve Executive Compensation (Say-on-Pay)

     99   

Equity Compensation Plan Information

     101   

Item 3—Approve the Company’s Amended and Restated Long-Term Incentive Compensation Plan

     104   

Item 4—Appointment of Independent Registered Public Accounting Firm for 2013

     115   

•       KPMG Fees

     115   

•        Audit and Examination Committee Pre-Approval Policies and Procedures

     116   

•       Audit and Examination Committee Report

     116   

Stockholder Proposals

     118   

Item 5—Stockholder Proposal To Adopt Policy Requiring Independent Chairman

     118   

Item 6—Stockholder Proposal To Provide a Report on Lobbying Policies and Practices

     121   

Item  7—Stockholder Proposal To Review and Report on Internal Controls Over Mortgage Servicing and Foreclosure Practices

     124   

Stockholder Information for Future Annual Meetings

     127   

Exhibit A—Amended and Restated Long-Term Incentive Compensation Plan

     A-1   

Glossary of Commonly Used Terms

     G-1   

 

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WELLS FARGO & COMPANY

 

420 Montgomery Street

San Francisco, California 94104

 

 

 

PROXY STATEMENT

 

 

 

GENERAL INFORMATION

 

You are invited to attend Wells Fargo’s 2013 annual meeting of stockholders and are entitled and requested to vote on the items of business described in this proxy statement. Please read this proxy statement carefully. You should consider the information contained in this proxy statement when deciding how to vote your shares at the annual meeting. In this proxy statement, we refer to the notice of the 2013 annual meeting of stockholders, this proxy statement, our annual report to stockholders for the fiscal year ended December 31, 2012, and the proxy card or voting instruction form as our “proxy materials.”

 

In this proxy statement, the “Company,” “Wells Fargo,” “we,” “our,” or “us” all refer to the company named Wells Fargo & Company and its subsidiaries. We use abbreviations and other defined terms in this proxy statement. Please refer to the Glossary of Commonly Used Terms for definitions of the abbreviations and other terms frequently used in this proxy statement.

 

INFORMATION ABOUT THE PROXY MATERIALS

 

Why did I receive the proxy materials?

 

We have made the proxy materials available to you over the internet or, in some cases, mailed you paper copies of these materials because the Board is soliciting your proxy to vote your shares of our common stock at the annual meeting to be held on Tuesday, April 23, 2013 or at any adjournments or postponements of this meeting. The proxy materials were first made available to stockholders beginning on or about March 14, 2013.

 

What is a proxy?

 

The Board is asking you to give us your proxy. Giving us your proxy means that you authorize another person or persons to vote your shares of our common stock at the annual meeting in the manner you direct. The written document you complete to designate someone as your proxy is usually called a “proxy card” or a “voting instruction form” depending on how the ownership of your shares is reflected in our records. If you are the record holder of your shares, a “proxy card” is the document used to designate your proxy to vote your shares. If you hold your shares in street name, a “voting instruction form” is the document used to designate your proxy to vote your shares. If you participate in one of the Company Plans, then you will receive a “voting instruction form and proxy card” to designate your proxy to vote your shares. In this proxy statement, the term “proxy card” means the proxy card, voting instruction form, and the voting instruction form and proxy card unless otherwise indicated.

 

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What is the difference between holding shares as a “record” holder and in “street name”?

 

•    Record Holders

   If your shares of common stock are registered directly in your name on our stock records, you are considered the stockholder of record, or the “record” holder of those shares. As the record holder you have the right to vote your shares in person or by proxy at the annual meeting.

•    Street Name Holders

   If your shares of common stock are held in an account at a brokerage firm, bank, or other similar entity, then you are the beneficial owner of shares held in “street name.” The entity holding your account is considered the record holder for purposes of voting at the annual meeting. As the beneficial owner you have the right to direct this entity on how to vote the shares held in your account. However, as described below, you may not vote these shares in person at the annual meeting unless you obtain a legal proxy from the entity that holds your shares giving you the right to vote the shares at the meeting.

 

Why did I receive a notice regarding the internet availability of proxy materials instead of paper copies of the proxy materials?

 

We are using the SEC notice and access rule that allows us to furnish our proxy materials to our stockholders over the internet instead of mailing paper copies of those materials. As a result, beginning on or about March 14, 2013, we sent to most of our stockholders by mail or e-mail a notice containing instructions on how to access our proxy materials over the internet and vote online. This notice is not a proxy card and cannot be used to vote your shares. If you received only a notice, you will not receive paper copies of the proxy materials unless you request the materials by following the instructions on the notice or on the website referred to on the notice.

 

We provided some of our stockholders, including stockholders who have previously requested to receive paper copies of the proxy materials and some of our stockholders who are participants in our benefit plans, with paper copies of the proxy materials instead of a notice that the materials are electronically available over the internet. If you received paper copies of the notice or proxy materials, we encourage you to help us save money and reduce the environmental impact of delivering paper proxy materials to stockholders by signing up to receive all of your future proxy materials electronically, as described under “How can I receive my proxy materials electronically in the future?” below.

 

If you own shares of common stock in more than one account—for example, in a joint account with your spouse and in your individual brokerage account—you may have received more than one notice or more than one set of paper proxy materials. To vote all of your shares by proxy, please follow each of the separate proxy voting instructions that you received for your shares of common stock held in each of your different accounts.

 

How can I receive my proxy materials electronically in the future?

 

Although you may request to receive paper copies of the proxy materials, we would prefer to send proxy materials to stockholders electronically. Stockholders who sign up to receive proxy materials electronically will receive an e-mail prior to next year’s annual meeting with links to the proxy materials, which may give them faster delivery of the materials and will help us save printing and

 

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mailing costs and conserve natural resources. Your election to receive proxy materials by e-mail will remain in effect until you terminate your election. To receive proxy materials by e-mail in the future, follow the instructions described below or on the notice.

 

If we sent you paper copies of the proxy materials or the notice of internet availability of the proxy materials by mail and you would like to sign up to receive these materials electronically in the future, please have your proxy card available and register using one of the following choices:

 

•     Record Holders

   If you are the record holder of your shares, you may either go to www.ematerials.com/wfc and follow the instructions for requesting meeting materials or call 1-866-697-9377.

•     Street Name Holders

   If you hold your shares in street name, you may either go to www.proxyvote.com and follow the instructions to enroll for electronic delivery or contact your brokerage firm, bank, or other similar entity that holds your shares.

 

If you have previously agreed to electronic delivery of our proxy materials, but wish to receive paper copies of these materials for the annual meeting or for future meetings, please follow the instructions on the website referred to on the electronic notice you received.

 

What is “householding”?

 

SEC rules allow a single copy of the proxy materials or the notice of internet availability of proxy materials to be delivered to multiple stockholders sharing the same address and last name, or who we reasonably believe are members of the same family and who consent to receive a single copy of these materials in a manner provided by these rules. This practice is referred to as “householding” and can result in significant savings of paper and mailing costs.

 

Because we are using the SEC’s notice and access rule, we will not household our proxy materials or notices to stockholders of record sharing an address. This means that stockholders of record who share an address will each be mailed a separate notice or paper copy of the proxy materials. However, we understand that certain brokerage firms, banks, or other similar entities holding our common stock for their customers may household proxy materials or notices. Stockholders sharing an address whose shares of our common stock are held by such an entity should contact such entity if they now receive (1) multiple copies of our proxy materials or notices and wish to receive only one copy of these materials per household in the future, or (2) a single copy of our proxy materials or notice and wish to receive separate copies of these materials in the future. Additional copies of our proxy materials are available upon request by contacting:

 

Wells Fargo & Company

MAC #D1053-300

301 South College Street, 30th Floor

Charlotte, North Carolina 28202

Attention: Corporate Secretary

1-866-697-9377

 

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Who pays the cost of soliciting proxies?

 

We pay the cost of soliciting proxies. We have retained AST Phoenix Advisors to help the Board solicit proxies. We expect to pay $17,500 plus out-of-pocket expenses for its help. Members of the Board and our team members may also solicit proxies for us by mail, telephone, fax, e-mail, or in person. We will not pay our directors or team members any extra amounts for soliciting proxies. We may, upon request, reimburse brokerage firms, banks or similar entities representing street name holders for their expenses in forwarding the notice of internet availability of proxy materials and/or proxy materials to their customers who are street name holders and obtaining their voting instructions.

 

INFORMATION ABOUT THE ANNUAL MEETING

 

What will I be voting on at the annual meeting?

 

This year you will be asked to vote on the following items of business:

 

   

The election of the 14 director nominees named in this proxy statement (Item 1);

 

   

An advisory resolution to approve executive compensation (Item 2);

 

   

A proposal to approve the Company’s Amended and Restated LTICP (Item 3);

 

   

The ratification of KPMG as our independent registered public accounting firm for 2013 (Item 4); and

 

   

If properly presented at the meeting, three stockholder proposals to: adopt a policy requiring an independent chairman (Item 5); provide a report on the Company’s lobbying policies and practices (Item 6); and review and report on internal controls over the Company’s mortgage servicing and foreclosure practices (Item 7).

 

As far as we know, stockholders will vote at the annual meeting only on the items listed above. However, if any other business properly comes before the meeting, the persons named as proxies for stockholders will vote on those matters in a manner they consider appropriate.

 

How does the Board recommend I vote?

 

For the reasons set forth in more detail later in this proxy statement, the Board recommends you vote:

 

   

FOR all the director nominees named in this proxy statement (Item 1);

 

   

FOR the advisory resolution to approve executive compensation (Item 2);

 

   

FOR the approval of the Amended and Restated LTICP (Item 3);

 

   

FOR the ratification of KPMG as our independent registered public accounting firm for 2013 (Item 4); and

 

   

AGAINST each of the stockholder proposals (Items 5 through 7).

 

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Who can vote at the annual meeting?

 

We are required under Delaware law to establish a record date for the annual meeting so we can determine which stockholders are entitled to notice of, and to vote at the meeting. The Board has determined that the record date for the annual meeting is February 26, 2013. Stockholders who owned shares of our common stock as of the close of business on that date can vote at the meeting. On that date, we had 5,273,850,272 shares of common stock outstanding and entitled to vote. Each share of common stock outstanding on the record date is entitled to one vote on each of the 14 director nominees and one vote on each other item to be voted on at the meeting. There is no cumulative voting.

 

How do I vote if I don’t attend the annual meeting?

 

You don’t have to attend the annual meeting to vote. The Board is soliciting proxies so that you can vote before the annual meeting. Even if you currently plan to attend the meeting, we recommend that you vote by proxy before the meeting so that your vote will be counted if you later decide not to attend. If you are the record holder of your shares, there are three ways you can vote by proxy:

 

•    By Internet

   You may vote over the internet by going to www.eproxy.com/wfc and following the instructions when prompted. In order to vote, you will need to have the control number that appears on the notice of internet availability of proxy materials or proxy card you received.

•    By Telephone

   You may vote by telephone by calling 1-800-560-1965 and following the recorded instructions. To vote by telephone, you will also need your control number referred to above.

•    By Mail

   You may vote by completing, signing, dating, and returning the proxy card you received in the mail, if you received paper copies of the proxy materials.

 

If your shares are held in street name, you may vote your shares before the meeting over the internet by following the instructions on the notice of internet availability of proxy materials you received or, if you received a voting instruction form from your brokerage firm, bank, or other similar entity, by mail by completing, signing, and returning the form you received. You should check your voting instruction form to see if internet or telephone voting is available to you.

 

If you received more than one notice of internet availability of proxy materials or proxy card, this means you hold shares of our common stock in more than one account. You must complete, sign, date, and return each proxy card or vote all shares over the internet or by telephone for each of your accounts. If you vote over the internet or by telephone, you should not mail back any proxy card you received.

 

If you vote using one of the methods described above, you will be designating Hope A. Hardison, Michael J. Loughlin, and James M. Strother, each of whom is a Company officer, as your proxies to vote your shares as you instruct. If you sign and return your proxy card or vote over the internet or by telephone without giving specific voting instructions, these individuals will vote your shares by following the Board’s recommendations above. If any other business properly comes before the meeting, these individuals will vote on those matters in a manner they consider appropriate.

 

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Can I vote in person at the annual meeting?

 

Yes. If you are a stockholder of record on the record date, you can vote your shares of common stock in person at the annual meeting. If your shares are held in street name, you may vote your shares in person only if you have a legal proxy from the entity that holds your shares giving you the right to vote the shares. A legal proxy is a written document from your brokerage firm or bank authorizing you to vote the shares it holds for you in its name. If you attend the meeting and vote your shares by ballot, your vote at the meeting will revoke any vote you submitted previously over the internet, by telephone or by mail. Even if you currently plan to attend the meeting, we recommend that you also vote by proxy as described above so that your vote will be counted if you later decide not to attend the meeting.

 

How do I vote the shares I hold in the Company 401(k) Plan or the Company Stock Purchase Plan?

 

If you participate in any of the Company Plans, you received a separate voting instruction form and proxy card with your proxy materials for each plan in which you participate. The voting instruction form and proxy card reflects all shares of our common stock you may vote under the particular plan as of the record date. If you participate in any of the Company Plans and you have a Company e-mail address, you received the proxy materials by e-mail. Participants who do not have a Company e-mail address received paper copies of the proxy materials.

 

Under the terms of the Company 401(k) Plan, the trustee of the plan will vote any shares you hold in the plan, but you have the right to instruct the trustee how to vote these shares. You can instruct the 401(k) Plan trustee how to vote your 401(k) Plan shares by voting over the internet or by telephone by following the instructions on the voting instruction form and proxy card, or by completing, signing, and returning your voting instruction form and proxy card. All of the voting instructions and votes given by participants in the Company 401(k) Plan will be tabulated and the voting results for the Company 401(k) Plan will be provided to the plan trustee. If you do not instruct the trustee how to vote your 401(k) Plan shares, the trustee will vote them in proportion to the voting instructions the trustee actually receives from all other 401(k) Plan participants in accordance with the terms of the plan, unless contrary to ERISA.

 

Under the Company SPP, you can vote all of your Company SPP shares directly through the custodian for the Company SPP. You can direct the Company SPP custodian to vote your Company SPP shares by voting over the internet or by telephone by following the instructions on the voting instruction form and proxy card, or by completing, signing, and returning your voting instruction form and proxy card. If you do not provide voting directions for your Company SPP shares, these shares will not be voted.

 

May I change my vote?

 

Yes. If you are the record holder of the shares, you may change your vote by:

 

   

Submitting timely written notice of revocation to our Corporate Secretary, Anthony R. Augliera, at MAC #D1053-300, 301 South College Street, 30th Floor, Charlotte, North Carolina 28202 prior to the vote at the annual meeting;

 

   

If you completed and returned a proxy card, submitting a new proxy card with a later date and returning it prior to the vote at the annual meeting;

 

   

If you voted over the internet or by telephone, voting again over the internet or by telephone by the applicable deadline shown in the table below; or

 

   

Attending the annual meeting in person and voting your shares by ballot at the meeting.

 

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If your shares are held in street name, you may change your vote by submitting new voting instructions to your brokerage firm, bank, or other similar entity or, if you have obtained a legal proxy from your brokerage firm, bank or other similar entity giving you the right to vote your shares, you may change your vote by attending the meeting and voting in person. If you participate in the Company Plans, you may change your vote by submitting new voting instructions to the trustee or custodian of the plan before the applicable deadline shown below.

 

What is the deadline for voting?

 

If You Are:

 

 

Voting By:

 

 

Your Vote Must Be Received:

 

A record holder  

•     Mail

 

•     Prior to the annual meeting

 

•     Internet or telephone

 

•     By 11:59 p.m., Central time, on April 22, 2013

A street name holder

 

•     Mail

 

•     Prior to the annual meeting

 

•     Internet or telephone

 

•     By 11:59 p.m., Eastern time, on April 22, 2013

A participant in the Company Plans  

•     Mail

•     Internet or telephone

 

•     By April 20, 2013

      By 11:59 p.m., Eastern time, on April 21, 2013

 

Are there any rules for admission to the annual meeting?

 

Yes. You are entitled to attend the annual meeting only if you were, or you hold a valid legal proxy naming you to act for, one of our stockholders on the record date. Before we will admit you to the meeting, we must be able to confirm:

 

   

Your identity by reviewing a valid form of photo identification, such as a driver’s license; and

 

   

You were a registered stockholder or held your shares in street name or in one of the Company Plans on the record date by:

 

  Ø  

verifying your name and stock ownership against our list of registered stockholders; or

 

  Ø  

reviewing other evidence of your stock ownership that shows your current name and address, such as a copy of your most recent brokerage or bank statement or your notice of internet availability of proxy materials for the 2013 annual meeting (internet notice), if you hold your shares in street name, or your most recent plan statement, if you are a participant in one of the Company Plans; or

 

   

You are validly acting as proxy;

 

  Ø  

for a registered stockholder as of the record date, by reviewing a written legal proxy granted to you and signed by the registered stockholder; or

 

  Ø  

for a street name holder as of the record date, by reviewing a written legal proxy from a brokerage firm or bank holding the shares to the street name holder that is assignable, and a written legal proxy to you signed by the street name holder, together with a brokerage or bank statement or internet notice showing the street name holder’s shares as described above.

 

If you do not have a valid form of picture identification and proof that you owned, or are legally authorized to act as proxy for someone who owned, shares of our common stock on February 26, 2013, you will not be admitted to the meeting.

 

At the entrance to the meeting, we will verify that your name appears in our stock records or will inspect your brokerage or bank statement, internet notice, or your plan statement if you are a

 

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participant in one of the Company Plans, as your proof of ownership and any written proxy you present as the representative of a stockholder. We will decide in our sole discretion whether the documentation you present for admission to the meeting meets the requirements described above. If you hold your shares in a joint account, both owners can be admitted to the meeting if proof of joint ownership is provided and you both follow the admission procedures described above. We will not be able to accommodate guests at the annual meeting. The annual meeting will begin at 8:30 a.m. Mountain time. Please allow ample time for the admission procedures described above.

 

The use of cameras (including cell phones with photographic capabilities), recording devices and other electronic devices is strictly prohibited at the meeting.

 

What is a broker non-vote?

 

The NYSE allows its member-brokers to vote shares held by them for their customers on matters the NYSE determines are routine, even though the brokers have not received voting instructions from their customers. The NYSE currently considers only the proposal to ratify our independent auditors (Item 4) as a routine matter. Your broker, therefore, may vote your shares in its discretion on this routine matter if you do not instruct your broker how to vote. If the NYSE does not consider a matter routine (Items 1 through 3 and 5 through 7), then your broker is prohibited from voting your shares on the matter unless you have given voting instructions on that matter to your broker. Therefore, your broker will need to return a proxy card without voting on these non-routine matters if you do not give voting instructions with respect to these matters. This is referred to as a “broker non-vote.” It is important, therefore, that you provide instructions to your broker if your shares are held by a broker so that your vote with respect to these non-routine items is counted.

 

How many votes must be present to hold the annual meeting?

 

A quorum must be present before we can conduct any business at the meeting. This means we need the holders of a majority of the outstanding shares of common stock entitled to vote at the meeting as of the record date to be present in person or represented by proxy at the meeting. We urge you to vote promptly by proxy even if you plan to attend the annual meeting so that we will know as soon as possible that enough shares will be present for us to hold the meeting. Solely for purposes of determining whether we have a quorum, we will count:

 

   

Shares present in person or by proxy and voting;

 

   

Shares present in person and not voting; and

 

   

Shares for which we have received proxies but for which stockholders have abstained from voting or that represent broker non-votes.

 

What vote is required to approve each item?

 

   

Election of Directors (Item 1).    Under our By-Laws, a nominee for director will be elected to the Board if the votes cast “FOR” the nominee exceed the votes cast “AGAINST” the nominee. As required by our Corporate Governance Guidelines, each nominee for director has tendered an irrevocable resignation that will become effective if he or she fails to receive the required vote for election at the annual meeting and the Board accepts the tendered resignation. For more information on the director resignation provisions in our Corporate Governance Guidelines, see the information under “Director Election Standard” below.

 

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Advisory Resolution to Approve Executive Compensation (Item 2).    Under our By-Laws, the advisory resolution to approve executive compensation will be approved if a majority of the shares present in person or by proxy at the annual meeting and entitled to vote on this item vote “FOR” this item.

 

   

Proposal to Approve the Amended and Restated LTICP (Item 3).    Under our By-Laws and NYSE rules, the proposal to approve the LTICP will be approved if a majority of the shares present in person or by proxy at the meeting and entitled to vote on this item vote “FOR” this item, provided that, as required by NYSE rules, the total votes cast on this item represent over 50% of the issued and outstanding shares of common stock entitled to vote at the annual meeting.

 

   

Ratification of KPMG (Item 4).    Under our By-Laws, the ratification of KPMG will be approved if a majority of the shares present in person or by proxy at the annual meeting and entitled to vote on this item vote “FOR” this item.

 

   

Stockholder Proposals (Items 5-7).    Each of the stockholder proposals will be approved if a majority of the shares present in person or by proxy at the annual meeting and entitled to vote on each of these stockholder proposals vote FOR each item.

 

How are votes counted?

 

   

Election of Directors (Item 1).    You may vote FOR or AGAINST each director nominee, or ABSTAIN from voting on a director nominee. We will not count abstentions or broker non-votes as either for or against a director, so abstentions and broker non-votes have no effect on the election of a director.

 

   

Advisory Resolution to Approve Executive Compensation (Item 2).    You may vote FOR or AGAINST this item, or ABSTAIN from voting on this item. Abstentions are counted as votes present and entitled to vote at the meeting and will have the same effect as votes against this item. Broker non-votes are not considered to be entitled to vote on this item and, therefore, will have no effect on the voting results of this item.

 

   

Proposal to Approve the Amended and Restated LTICP (Item 3).    You may vote FOR or AGAINST this item, or ABSTAIN from voting on this item. Abstentions are counted as votes present and entitled to vote at the meeting and will have the same effect as votes against this item. Broker non-votes are not considered to be entitled to vote on this item at the meeting and will not be included in determining the total votes cast on this item. Under NYSE rules, broker non-votes can have the effect of votes against this item, if the total votes cast on this item do not exceed 50% of our outstanding shares of common stock.

 

   

Ratification of KPMG (Item 4).    You may vote FOR or AGAINST this item, or ABSTAIN from voting on this item. Abstentions are counted as votes present and entitled to vote at the meeting and will have the same effect as votes against this item.

 

   

Stockholder Proposals (Items 5-7).    You may vote “FOR” or “AGAINST” each of these items, or “ABSTAIN” from voting on each of these items. Abstentions are counted as votes present and entitled to vote at the meeting and will have the same effect as votes against each of these items. Broker non-votes are not considered to be entitled to vote on these items at the meeting and, therefore, will have no effect on the voting results for these items.

 

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Is my vote confidential?

 

Yes. It is our policy that documents identifying your vote are confidential. The vote of any stockholder will not be disclosed to any third party before the final vote count at the annual meeting except:

 

   

To meet legal requirements;

 

   

To assert claims for or defend claims against the Company;

 

   

To allow authorized individuals to count and certify the results of the stockholder vote;

 

   

If a proxy solicitation in opposition to the Board takes place; or

 

   

To respond to stockholders who have written comments on proxy cards or who have requested disclosure.

 

The Inspector of Election and those who count stockholder votes may not be team members of Wells Fargo & Company but may be team members of Wells Fargo Bank who have been instructed to comply with this policy. Third parties unaffiliated with the Company will count the votes of participants in the Company Plans.

 

OWNERSHIP OF OUR COMMON STOCK

 

Directors and Executive Officers

 

Stock Ownership Policies.    To reinforce the long-term perspective of stock-based compensation and emphasize the relationship between the interests of our directors and executive officers with your interests as stockholders, we require our non-employee directors and our executive officers to own shares of our common stock. Our Board has adopted a stock ownership policy that each non-employee director, after five years on the Board, own stock having a value equal to five times the annual cash retainer we pay them, and maintain at least that stock ownership level while a member of the Board and for one year after service as a director terminates. Until one year following retirement, we require our executive officers to hold shares equal to at least 50% of the after-tax profit shares (assuming a 50% tax rate) acquired upon the exercise of options or vesting of RSRs and Performance Shares, subject to a maximum requirement of ten times the executive officer’s salary at the time of exercise or distribution of an award. Shares counted toward ownership include shares a non-employee director has deferred pursuant to the Directors Plan and any applicable predecessor director compensation and deferral plans, and shares (or share equivalents) an executive officer holds in the Company 401(k) Plan, Supplemental 401(k) Plan, Deferred Compensation Plan, the Direct Purchase Plan, and shares owned by an executive officer’s spouse. Compliance with these stock ownership requirements is calculated annually and reported to the GNC (for non-employee directors) or to the HRC (for executive officers).

 

To further strengthen the alignment between stock ownership and your interests as stockholders, our Code of Ethics prohibits all team members, including our executive officers, from engaging in short selling or hedging transactions involving any Company securities, including our common stock. Similarly, our Director Code of Ethics prohibits any member of our Board from engaging in short selling or hedging transactions involving Company securities.

 

Ownership Table.    The following table shows how many shares of common stock our current directors and nominees for director, our named executives, and all directors and executive officers as a

 

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group owned on February 26, 2013, and the number of shares they had the right to acquire within 60 days of that date, including RSRs and Performance Shares that vest within 60 days of that date. This table also shows, as of February 26, 2013, the number of common stock units credited to the accounts of our non-employee directors, named executives, and all directors and executive officers as a group under the terms of the applicable benefit and deferral plans available to them. None of our directors or executive officers, individually or as a group, beneficially own more than 1% of our outstanding common stock.

 

     Amount and Nature of Ownership(1)  
     (a)      (b)      (c)      (d)  

Name

   Common Stock
Owned(2)(3)
     Options Exercisable
within 60 days of
2/26/13(5)
     Common Stock
Units(6)(7)
     Total(8)  

Non-Employee Directors

           

John D. Baker II

     33,470         22,570         41,824         97,864   

Elaine L. Chao

     150         —           8,850         9,000   

John S. Chen

     20,850         41,289         11,187         73,326   

Lloyd H. Dean

     28,998         50,704         11,069         90,771   

Susan E. Engel

     11,726         65,665         80,325         157,716   

Enrique Hernandez, Jr.

     21,158         62,177         57,959         141,294   

Donald M. James

     3,863         23,101         42,321         69,285   

Cynthia H. Milligan

     58,592         64,784         25,272         148,648   

Nicholas G. Moore

     2,115         45,602         59,888         107,605   

Federico F. Peña

     1,275         —           7,546         8,821   

Philip J. Quigley

     86,310         68,892         129,007         284,209   

Howard V. Richardson(4)

     150         —           1,427         1,577   

Judith M. Runstad

     64,473         64,425         23,422         152,320   

Stephen W. Sanger

     15,357         63,835         74,033         153,225   

Susan G. Swenson

     75,182         65,889         33,744         174,815   

Named Executives

           

David M. Carroll

     142,858         149,571         —           292,429   

David A. Hoyt

     646,668         3,915,942         114,294         4,676,904   

Avid Modjtabai

     77,381         745,232         14,505         837,118   

Timothy J. Sloan

     157,718         2,279,892         36,703         2,474,313   

John G. Stumpf*

     665,359         6,048,402         71,733         6,785,494   

Carrie L. Tolstedt

     345,148         2,665,808         29,852         3,040,808   

All directors and executive officers as a group (27 persons)(4)

     3,164,195         20,524,332         963,301         24,651,828   

 

*   Mr. Stumpf also serves as a director.

 

(1)   Unless otherwise stated in the footnotes below, each of the named individuals and each member of the group has sole voting and investment power for the applicable shares of common stock shown in the table.

 

(2)   The amounts shown for executive officers include shares of common stock allocated to the account of each executive officer under one or more Company Plans as of February 26, 2013.

 

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(3)   For the following directors, named executives, and for all directors and executive officers as a group, the share amounts shown in column (a) of the table include certain shares over which they may have shared voting and investment power:

 

   

John D. Baker II, 5,276 shares held in a trust of which he is a co-trustee and a partnership in which he is a managing member; also includes 639 shares held for the benefit of family members as to which he disclaims beneficial ownership;

 

   

David M. Carroll, 141,622 shares held jointly with spouse;

 

   

John S. Chen, 4,000 shares held in a trust of which he is a co-trustee;

 

   

David A. Hoyt, 595,687 shares held in trusts of which he is a co-trustee;

 

   

Nicholas G. Moore, 1,000 shares held in a trust of which he is a co-trustee;

 

   

Federico F. Peña, 1,275 shares held in a trust;

 

   

Philip J. Quigley, 86,310 shares held in a trust of which he is a co-trustee;

 

   

Judith M. Runstad, 40,000 shares held by spouse;

 

   

Stephen W. Sanger, 15,357 shares held in trusts of which he is a co-trustee;

 

   

Timothy J. Sloan, 122,096 shares held jointly with spouse;

 

   

John G. Stumpf, 561,367 shares held in trusts of which he is a co-trustee, and 5,066 shares held by spouse in an IRA account;

 

   

Carrie L. Tolstedt, 329,148 shares held in a trust of which she is a co-trustee; and

 

   

All directors and executive officers as a group, 2,274,209 shares.

 

(4)  

Mr. Richardson and one of our executive officers also own 2,000 and 8,000 shares, respectively, of Depositary Shares, each representing a 1/1000th interest in a share of Non-Cumulative Perpetual Class A Preferred Stock, Series N, and in each case which represents less than 1% of the outstanding shares of that series of preferred stock.

 

(5)   Includes the following number of RSRs and 2009 Retention Performance Shares (including dividend equivalents credited as of February 26, 2013) that will vest within 60 days of February 26, 2013: Mr. Stumpf—16,117 RSRs and 599,885 Performance Shares; Mr. Sloan—65,381 RSRs; Mr. Carroll—3,299 RSRs; Mr. Hoyt—6,870 RSRs and 299,942 Performance Shares; Ms. Modjtabai—6,492 RSRs; and Ms. Tolstedt—6,600 RSRs; and all executive officers as a group—233,757 RSRs and 899,827 Performance Shares.

 

(6)   For executive officers, includes the following common stock units credited to their accounts as of February 26, 2013 under the terms of the Supplemental 401(k) Plan and/or Deferred Compensation Plan, which amounts will be paid only in shares of common stock:

 

Name

   Supplemental
401(k) Plan
     Deferred
Compensation Plan
 

David M. Carroll

     —           —     

David A. Hoyt

     57,081         57,213   

Avid Modjtabai

     14,299         206   

Timothy J. Sloan

     36,703         —     

John G. Stumpf

     71,733         —     

Carrie L. Tolstedt

     29,852         —     

All executive officers as a group

     296,206         59,221   

 

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(7)   For non-employee directors, includes common stock units credited to their accounts pursuant to deferrals made under the terms of the Directors Plan and predecessor director compensation and deferral plans. All of these units, which are credited to individual accounts in each director’s name, will be paid in shares of our common stock except for 32,613 shares in the aggregate, which will be paid in cash.

 

(8)   Total does not include the following RSRs and/or target number of Performance Shares (including dividend equivalents credited on that target number as of February 26, 2013) granted under the Company’s LTICP that were not vested as of February 26, 2013, or expected to vest within 60 days after February 26, 2013. Upon vesting, each RSR and Performance Share will convert to one share of common stock. Performance Share amounts are subject to increase or decrease depending upon the Company’s satisfaction of performance goals. See also the Outstanding Equity Awards at Fiscal Year-End table.

 

Name

   RSRs      Performance
Shares
 

David M. Carroll

     4,748         536,963   

David A. Hoyt

     119,753         684,998   

Avid Modjtabai

     4,518         479,620   

Timothy J. Sloan

     132,234         362,454   

John G. Stumpf

     23,729         1,227,638   

Carrie L. Tolstedt

     81,133         572,712   

All executive officers as a group

     703,728         4,833,445   

 

Principal Stockholders

 

The following table contains information regarding the only persons and groups we know of that beneficially owned more than 5% of our common stock as of December 31, 2012.

 

Name and Address

of Beneficial Owner

  

Amount and Nature
of Beneficial Ownership

of Common Stock

  

Percent
of Common
Stock Owned

(a)    (b)    (c)

Warren E. Buffett

Berkshire Hathaway Inc.(1)

3555 Farnam Street

Omaha, Nebraska 68131

   466,410,061    8.8%

BlackRock, Inc.(2)

40 East 52nd Street

New York, New York 10022

   279,195,611    5.3%

 

(1)   Based on the amended Schedule 13G/A filed on February 14, 2013 with the SEC by Berkshire Hathaway Inc., a diversified holding company which Mr. Buffett may be deemed to control. Mr. Buffett and Berkshire Hathaway share voting and dispositive power over 464,170,061 reported shares, which include shares beneficially owned by certain subsidiaries of Berkshire Hathaway. Mr. Buffett reports sole voting and dispositive power over 2,240,000 of the shares.

 

(2)   Based on a Schedule 13G filed on February 11, 2013 with the SEC by BlackRock, Inc. on behalf of itself and certain of its subsidiaries. Each of BlackRock and its subsidiaries has sole voting and dispositive power over all reported shares.

 

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Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act and related regulations require our directors, executive officers, and anyone holding more than 10% of our common stock to report their initial ownership of our common stock and any changes in that ownership to the SEC and the NYSE. We are required to disclose in this proxy statement the failure to file these reports by any reporting person when due. We assist our directors and executive officers in complying with these requirements. All reporting persons of the Company satisfied these filing requirements during 2012. In making these disclosures, we are relying on written representations of each reporting person and copies of the reports filed with the SEC.

 

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ITEM 1—ELECTION OF DIRECTORS

 

Director Nominees for Election

 

The Board has set 14 directors as the number to be elected at the annual meeting and has nominated the individuals named below. All nominees are currently directors of Wells Fargo & Company and, except for Howard V. “Rick” Richardson, have been previously elected by our stockholders. Mr. Richardson was elected as a director by the Board effective on January 1, 2013, and is standing for election by our stockholders for the first time at the annual meeting. Nicholas G. Moore, a current director, and Philip J. Quigley, a current director, are not standing for re-election and will retire when their terms expire at the annual meeting. The Board has determined that except for John G. Stumpf, each nominee for election as a director at the annual meeting is an independent director as discussed below under “Director Independence.”

 

The Board recommends you vote FOR each of the nominees set forth below.

 

Directors are elected to hold office until the next annual meeting and until their successors are elected and qualified. All nominees have told us that they are willing to serve as directors. If any nominee is no longer a candidate for director at the annual meeting, the proxyholders will vote for the rest of the nominees and may vote for a substitute nominee in their discretion. In addition, as described below under Director Election Standard,” each of the nominees has tendered his or her resignation as a director in accordance with our Corporate Governance Guidelines to be effective if he or she fails to receive the required vote for election to the Board and the Board accepts the resignation.

 

As described under Director Nomination Process and Board Diversity the Board has identified certain minimum qualifications for its directors, including having a demonstrated breadth and depth of management and/or leadership experience, preferably in a senior leadership role, such as chief executive officer, president or partner, in a large or recognized organization or governmental entity. The Board believes that this particular qualification provides our directors with substantial experience relevant to serving as a director of our Company, including in areas such as financial management, risk assessment and management, strategic planning, human resources, management succession planning, business development, community affairs, corporate governance, governmental relations, and business operations. The Board believes that each of our nominees satisfies our director qualification standards and during the course of their business and professional careers as a chief executive officer or other senior leader has acquired extensive executive management experience in these and other areas. In addition, the GNC and the Board believe that each nominee brings to the Board his or her own unique diverse background and particular expertise, knowledge, and experience that provide the Board as a whole with the necessary and appropriate mix of skills, characteristics, and attributes that enable the Board to work together in a professional and collegial atmosphere and that are required for the Board to fulfill its oversight responsibility to the Company’s stockholders.

 

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The following provides information about the nominees, including their age and the year in which they first became a director of the Company, their business experience for at least the past five years, the names of other publicly-held companies (other than the Company) where they currently serve as a director or served as a director during the past five years, and additional information about the specific experience, qualifications, attributes or skills that led to the Board’s conclusion that each nominee should serve as a director for the Company.

 

LOGO

John D. Baker II, 64

Director since 2009

  

Business Experience:    Mr. Baker has served as Executive Chairman and a director of Patriot Transportation Holding, Inc., Jacksonville, Florida (motor carrier and real estate company) since October 2010. He served as President and Chief Executive Officer of Patriot from February 2008 until October 2010. He served as President from May 1989, and Chief Executive Officer from February 1997 of Florida Rock Industries, Inc., Jacksonville, Florida (construction materials) until November 2007. Mr. Baker also currently serves as Chairman of Panadero Aggregates Holdings LLC, a construction aggregates company located in Jacksonville, Florida.

 

Other Public Company Directorships:    Patriot Transportation Holding, Inc. and Texas Industries, Inc.; and a former director of Duke Energy Corporation, Florida Rock Industries, Inc., Progress Energy Inc., Vulcan Materials Company, and Wachovia Corporation

 

Additional Information:    As the CEO or chairman of two public companies during the past 16 years, including a company involved in real estate activities, Mr. Baker brings leadership and executive management experience to the Board. Mr. Baker has led or founded several public and private companies doing business in the Southeast, including recently as the lead investor and senior advisor for a start-up private equity firm, and his entrepreneurial skills and deep knowledge of the business climate in the Southeast provide unique insight into the operating environment of some of the Company’s largest banking markets. Mr. Baker has extensive financial management expertise that he gained as a CEO or chairman, and as a past member of the audit committees of two other public companies and a current member of the Company’s Audit and Examination and Credit Committees. Mr. Baker has a law degree from the University of Florida School of Law, and his experience as a lawyer and former member of the board of a large public utility company also contribute important risk management and regulatory oversight skills to the Board.

 

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LOGO

Elaine L. Chao, 59

Director since 2011

  

Business Experience:    Ms. Chao served as the 24th U.S. Secretary of Labor from January 2001 until January 2009. She has been a Distinguished Fellow at the Heritage Foundation, Washington, D.C. (educational and research organization) since January 2009 and from August 1996 until January 2001. She was President and Chief Executive Officer of United Way of America from November 1992 until August 1996. Ms. Chao’s previous government experience also includes serving as Director of the Peace Corps from December 1991 until November 1992 and Deputy Secretary of the U.S. Department of Transportation from April 1989 until December 1991.

 

Other Public Company Directorships:    Dole Food Company, Inc., News Corporation, and Protective Life Corporation

 

Additional Information:    As the first Asian Pacific American woman in U.S. history to be appointed to a President’s cabinet and a leader of large high-profile organizations operating in complex regulatory and public policy environments, Ms. Chao has extensive leadership, executive management, and governmental experience, which provide the Board with important expertise as it oversees the Company’s interaction with a wide variety of outside groups in a rapidly changing external environment. Ms. Chao’s skills in building constructive working relationships with diverse stakeholders also provide useful insight for the Company in various social responsibility and community affairs areas as it strives to enhance its relationships in the communities where it does business. Her experience as Secretary of Labor provides the Board with a valuable perspective on workforce issues important for the Company and its over 265,000 team members, and her previous work at two large financial services companies contributes relevant industry experience to the Board. As a current and former board member of a number of prominent public companies, including as the current chair of the governance committee of Dole Food Company and a member of the nominating and corporate governance committee of News Corporation, she also brings additional corporate governance experience to the Board. Ms. Chao has a Master of Business Administration from Harvard Business School.

LOGO

John S. Chen, 57

Director since 2006

   Business Experience:    Mr. Chen served as Chairman and Chief Executive Officer of Sybase, Inc., Dublin, California (computer software) from July 2010 until he retired in November 2012. Sybase is a wholly-owned subsidiary of SAP AG, Walldorf, Germany. He also served as Chairman, Chief Executive Officer, President, and as a director of Sybase from November 1998 until July 2010 when Sybase was acquired by SAP AG. Mr. Chen currently serves as a Senior Advisor of Silver Lake, Menlo Park, California (a private investment firm).

 

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Other Public Company Directorships:    The Walt Disney Company; and a former director of Sybase, Inc.

 

Additional Information:    Mr. Chen has leadership and executive management experience gained from his 14 years as the CEO of Sybase, one of three highly successful technology companies that he has led during his business career. Mr. Chen also served as president of the Open Enterprise Computing Division of Siemens Nixdorf, and president and chief operating officer of Pyramid Technology Corporation. Mr. Chen’s experience and perspective on information technology, information security, and software matters are particularly important to the Company, which uses numerous complex information technology applications and systems and frequently is involved in system integrations. Mr. Chen also brings to the Board finance experience and, as a result of his work with Sybase and several public sector organizations, an important focus on international relations and business and community affairs. His experience serving on the board of a large well-known entertainment company also provides valuable insight into the importance of developing and maintaining an internationally recognized brand, since the Company’s brand and reputation are recognized as one of the most valuable in the financial services business. Mr. Chen holds a Master of Science from California Institute of Technology.

LOGO

Lloyd H. Dean, 62

Director since 2005

  

Business Experience:    Mr. Dean has served as President, Chief Executive Officer, and a director of Dignity Health, San Francisco, California (health care) since April 2000.

 

Other Public Company Directorships:    Cytori Therapeutics, Inc.

 

Additional Information:    As the president and CEO of Dignity Health, a large multi-state healthcare organization that is the fifth largest hospital provider in the nation, and as a former executive vice president and chief operating officer of Advocate Health Care and officer of The Upjohn Company, Mr. Dean brings over 21 years of leadership, executive management, and business strategy experience to the Board. Similar to the Company, Dignity Health is subject to significant regulatory oversight, which provides Mr. Dean with additional insight in analyzing and advising on complex regulatory issues affecting the Company. The Board also benefits from Mr. Dean’s substantial finance, systems operations, service quality, human resources, and community affairs expertise, which he gained as a result of his responsibilities with Dignity Health, and from his extensive banking and related financial management expertise acquired as a former member of the Company’s Audit and Examination Committee and Credit Committee. Mr. Dean’s current service as the non-executive chairman of Cytori Therapeutics provides an additional corporate

 

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   governance perspective to the Board and its Human Resources and Governance and Nominating Committees where he serves as a member. Mr. Dean holds a Master’s Degree in Education from Western Michigan University and also is a graduate of Pennsylvania State University’s Executive Management Program.

LOGO

Susan E. Engel, 66

Director since 1998

  

Business Experience:    Ms. Engel serves as Chief Executive Officer of Portero, Inc., New York, New York (an online retailer of luxury pre-owned and vintage personal accessories) since July 2009. She served as Chairwoman, Chief Executive Officer, and a director of Lenox Group Inc., Eden Prairie, Minnesota (a tabletop, collectibles and giftware marketer, manufacturer and wholesaler) from November 1996 until she retired in January 2007.

 

Other Public Company Directorships:    SUPERVALU INC.

 

Additional Information:    Ms. Engel has extensive executive management, leadership, and sales and marketing experience, which she has acquired as the CEO of several public and private companies over the past 20 years. In addition to her current executive position with Portero and her previous leadership positions with Lenox Group, Ms. Engel served as the president and chief executive officer of Champion Products, Inc., the athletic apparel division of Sara Lee Corporation for approximately three years and was a consultant with Booz Allen Hamilton, a large management consulting firm, for over 14 years. She has served on several public and private boards, and provides entrepreneurial, retail, and online sales experience to the Board, which is important to our many consumer businesses. Ms. Engel has extensive knowledge and experience regarding the Company’s businesses, which she gained as a result of over 14 years of service on the Company’s Board, including as a director of the former Norwest, and she has been a member of the Company’s Credit and Finance Committees for the past 14 years and its Human Resources Committee for over 11 years. Ms. Engel has a Master of Business Administration from Harvard Business School.

LOGO

Enrique Hernandez, Jr., 57

Director since 2003

  

Business Experience:    Mr. Hernandez has served as Chairman, President, Chief Executive Officer, and a director of Inter-Con Security Systems, Inc., Pasadena, California (security services) since 1986.

 

Other Public Company Directorships:    Chevron Corporation, McDonald’s Corporation, and Nordstrom, Inc. (Chairman of the Board).

 

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   Additional Information:    Mr. Hernandez brings leadership and executive management experience to the Board as the chairman, president and CEO of Inter-Con Security Systems, Inc., a global security services provider, and as the non-executive chairman of the board of Nordstrom, Inc., a large publicly traded retail company. The Board benefits from the valuable corporate governance and board leadership experience and expertise that Mr. Hernandez has acquired, including as chairman of Nordstrom, particularly in areas such as business strategy, risk assessment and succession planning. Mr. Hernandez also has extensive experience in the banking and financial services industry, as well as banking and related financial management expertise as a former member of the boards and audit committees of two other large financial institutions, Great Western Financial Corporation from 1993 to 1997 and Washington Mutual, Inc. from 1997 to 2002. Mr. Hernandez has served as chair of the audit committees of Nordstrom and McDonald’s, currently serves on the Company’s Audit and Examination Committee, and chairs the Finance Committee and Risk Committee, all of which have further enhanced his finance experience and contributions to the Board. Mr. Hernandez has a law degree from Harvard Law School and practiced as a litigation attorney for four years with a large law firm in California, which provides him with additional insight on risk management and litigation issues relevant to the Company’s operations.

LOGO

Donald M. James, 64

Director since 2009

  

Business Experience:    Mr. James has served as Chairman, Chief Executive Officer, and a director of Vulcan Materials Company, Birmingham, Alabama (construction materials) since May 1997.

 

Other Public Company Directorships:    Vulcan Materials Company and Southern Company; and a former director of Wachovia Corporation

 

Additional Information:    Mr. James brings extensive leadership and executive management experience to the Board as the chairman and CEO of Vulcan Materials Company where he also served in various senior management positions since 1992, including as president and chief operating officer. Before joining Vulcan, Mr. James practiced law as a partner in a large law firm in Alabama and was chairman of the firm’s litigation practice group, which also provides him with additional perspective in dealing with complex legal, regulatory, and risk matters affecting the Company. As a former board member of Wachovia, South Trust Corporation (which was acquired by Wachovia), and Protective Life Corporation, Mr. James has substantial knowledge and experience in the banking and financial services industry, and his prior service as the presiding director of the Southern Company, a large public utility company, also brings important corporate governance, regulatory oversight, succession planning, and business strategy experience to the Board. Mr. James holds a Master of Business Administration from the University of Alabama and a law degree from the University of Virginia.

 

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LOGO

Cynthia H. Milligan, 66

Director since 1992

  

Business Experience:    Ms. Milligan served as Dean of the College of Business Administration at the University of Nebraska-Lincoln, Lincoln, Nebraska (higher education) from June 1998 to May 2009, when she was named Dean Emeritus of the College of Business Administration.

 

Other Public Company Directorships:    Calvert Funds, Kellogg Company, and Raven Industries, Inc.

 

Additional Information:    Ms. Milligan has extensive experience in the financial services industry, including as a bank regulator and lawyer, which provides valuable insight to the Board on banking, regulatory, and risk assessment and management issues. Ms. Milligan served as the Director of Banking and Finance for the State of Nebraska from 1987 until 1991, responsible for supervising several hundred banks and other financial institutions, and she also served as a Director, Omaha Branch, of the Kansas City Federal Reserve for approximately six years. In addition, she was president of her own consulting firm for financial institutions for approximately seven years and acquired significant banking and related financial management expertise in this role, as well as during her service as a bank regulator and as Dean of the College of Business Administration for the University of Nebraska-Lincoln. She has substantial knowledge and experience about the Company’s businesses and has served on many of the Board’s committees, including its Audit and Examination Committee for over 17 years and currently as chair of the Credit Committee and member of the Risk Committee. Ms. Milligan has a law degree from George Washington University National Law Center and was a senior partner at a law firm in Nebraska, as well as an Adjunct Professor of Law in taxation at Georgetown University Law Center and in banking at the University of Nebraska College of Law.

LOGO

Federico F. Peña, 66

Director since 2011

  

Business Experience:    Mr. Peña has served as a Senior Advisor of Vestar Capital Partners, Denver, Colorado (private equity firm) since January 2009 and previously served as a Managing Director of Vestar from January 2000 to January 2009. He served as the U.S. Secretary of Energy from March 1997 until June 1998 and as the U.S. Secretary of Transportation from January 1993 until February 1997.

 

Other Public Company Directorships:    Sonic Corp.

 

Additional Information:    As the former U.S. Secretary of Energy and U.S. Secretary of Transportation, as well as Mayor of the City and County of Denver, Colorado for eight years and member of the Colorado House of Representatives for four years, Mr. Peña brings substantial leadership, executive management, regulatory, public policy, and community affairs expertise to the Board, which provide invaluable insight as the Company operates in the rapidly changing regulatory, political, and social environment for financial services companies.

 

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   Mr. Peña’s service with Vestar, including his work analyzing complex financial transactions and advising senior management teams, as well as his experience founding and leading his own investment management firm, contribute important financial management, investment, business strategy, and entrepreneurial skills to the Board, which are useful in its oversight of the Company’s capital markets and investment advisory businesses. He holds a law degree from the University of Texas, which enhances his understanding of legal and regulatory issues affecting the Company.

LOGO

Howard V. Richardson, 62

Director since 2013

  

Business Experience:    Mr. Richardson served as a partner of PricewaterhouseCoopers LLP, New York, New York (accounting, auditing, and consulting firm) from 1988 until June 2011. He joined PricewaterhouseCoopers in June 1976 and held a variety of positions with the firm, including U.S. Financial Services and Banking leader from 1996 to 2000 and Global Banking/Capital Markets leader from 1998 to 2002.

 

Other Public Company Directorships:    None

 

Additional Information:    Mr. Richardson brings extensive accounting, financial reporting, risk management, bank regulatory, and financial services experience to the Board. He served PricewaterhouseCoopers for over 35 years in a wide range of leadership, audit and business advisory positions, and was the lead engagement partner or advisory partner for some of PricewaterhouseCoopers’ largest financial services clients, including large bank holding companies, investment management firms, broker-dealers, and insurance companies. During his career at PricewaterhouseCoopers, Mr. Richardson worked closely with the senior management teams, boards of directors, and audit committees of large U.S. and international financial services firms, and his work at PricewaterhouseCoopers provides him with a unique perspective on the complex issues facing large financial services firms such as the Company. Mr. Richardson is a member of the American Institute of Certified Public Accountants and holds a Master of Science from Boston University (London Program). He is also a graduate of Tuck’s Executive Management Program at Dartmouth College’s Graduate School of Business.

LOGO

Judith M. Runstad, 68

Director since 1998

  

Business Experience:    Ms. Runstad is a former partner of, and has been of counsel since January 1997 to the law firm of Foster Pepper PLLC, Seattle, Washington. She is a former Chairwoman of the Board of the Federal Reserve Bank of San Francisco.

 

Other Public Company Directorships:    Former director of Potlatch Corporation and SAFECO Corporation

 

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   Additional Information:    As a former director and Chairwoman of the Board of the Federal Reserve Bank of San Francisco, as well as a former director and Chairwoman of the Federal Reserve’s Seattle branch, Ms. Runstad has substantial banking and finance experience, as well as strong leadership and corporate governance skills. She has been practicing law in the areas of real estate development and land use and environmental law for over 38 years with a large law firm, and her legal background and experience provide her with additional insight in dealing with complex legal, regulatory, and risk matters affecting the Company, as well as real estate-related issues. Ms. Runstad serves as a member of the board of Wright Runstad & Company, a privately held commercial real estate developer/owner. Ms. Runstad has a broad understanding of the Company’s businesses, which she has acquired during the past 14 years as a director, and she has been a member of the Company’s Finance Committee for over 13 years and was a past member of the Company’s Audit and Examination Committee for eight years. Ms. Runstad’s participation in a variety of civic activities in the Northwest, where the Company has significant business operations, also contributes important community affairs experience to the Board. Ms. Runstad received her law degree from the University of Washington.

LOGO

Stephen W. Sanger, 66

Director since 2003

  

Business Experience:    Mr. Sanger served as Chairman of General Mills, Inc., Minneapolis, Minnesota (packaged food producer and distributor) from May 1995, and as a director since 1992, until he retired in May 2008. He also served as Chief Executive Officer of General Mills from May 1995 to September 2007.

 

Other Public Company Directorships:    Pfizer Inc. and Target Corporation; and a former director of General Mills, Inc.

 

Additional Information:    Mr. Sanger brings leadership, executive management, and sales and marketing experience to the Board, as well as valuable experience in corporate strategy and mergers and acquisitions. Mr. Sanger joined General Mills in 1974 and held various management positions at General Mills before becoming chairman and CEO in 1995. Mr. Sanger led General Mills through the complex acquisition and integration of Pillsbury, and his extensive experience gained from leading a company responsible for developing and marketing some of the world’s best known consumer brands is beneficial to the Company and the Board. He has served on the audit, compensation, and governance committees of several large public companies, including the audit and governance committees of Pfizer and the compensation and governance committees of Target, where he enhanced his human resources and corporate governance skills. His service on the Company’s Human Resources Committee for over eight years, including five years during which he served as the chair of the

 

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   committee, and as a member and current Chair of the Company’s Governance and Nominating Committee, provides valuable experience for his current role as Lead Director. Mr. Sanger holds a Master of Business Administration from the University of Michigan.

LOGO

John G. Stumpf, 59

Director since 2006

  

Business Experience:    Mr. Stumpf has served as our Chairman since December 2009, Chief Executive Officer since June 2007, and as our President since August 2005. He also served as our Chief Operating Officer from August 2005 to June 2007, and as Group Executive Vice President, Community Banking from July 2002 to August 2005.

 

Other Public Company Directorships:    Chevron Corporation and Target Corporation

 

Additional Information:    Mr. Stumpf has been employed with the Company for over 31 years in a variety of management and senior management positions and he brings to the Board tremendous experience and knowledge regarding the financial services industry and the Company’s businesses, as well as a complete understanding of the Company’s vision and strategy. Mr. Stumpf joined the former Norwest in 1982 and held a number of senior management positions with the former Norwest, including regional president of its Colorado/Arizona operations and its Texas operations, and he led the former Norwest’s acquisition of over 30 Texas banks. Following the former Norwest’s merger with the former Wells Fargo in 1998, Mr. Stumpf served as head of the Company’s southwestern and western banking groups, led the integration of the Company’s acquisition of First Security Corporation, and served as Group EVP of Community Banking. As CEO, he led the acquisition and integration of Wachovia, the largest banking merger and integration in U.S. history. Mr. Stumpf has extensive leadership experience, and his service on the board of directors for The Clearing House and the Financial Services Roundtable provides additional insight to the Board on key issues facing the Company and the financial services industry. He has a Master of Business Administration from the University of Minnesota.

LOGO

Susan G. Swenson, 64

Director since 1994

   Business Experience:    Ms. Swenson served as President and Chief Executive Officer of Sage Software-North America, the North American operations of The Sage Group PLC located in the United Kingdom (business management software and services supplier) from March 2008 until April 2011. Ms. Swenson held positions as the Chief Operating Officer of Atrinsic, Inc. (formerly known as New Motion, Inc.) from August 2007 to March 2008, Amp’d Mobile, Inc. from October 2006 to July 2007, and T-Mobile USA from February 2004 to October 2005, and as President and Chief Operating Officer and a director of Leap Wireless International, Inc. from July 1999 to January 2004.

 

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Other Public Company Directorships:    Harmonic Inc., Novatel Wireless, Inc., and Spirent Communications plc, and a former director of Eltek Ltd.

 

Additional Information:    Ms. Swenson brings extensive leadership, executive management, and information technology experience to the Board, as well as substantial knowledge and experience regarding the Company, which she acquired during her 18 years as a director. Ms. Swenson has over 30 years’ experience in the telecommunications industry, including as the CEO or COO of several public and private companies, and was recently appointed by the U.S. Commerce Secretary to serve as one of the initial board members of the First Responder Network Authority, an independent U.S. governmental entity created to establish a nationwide, public safety broadband network. Ms. Swenson’s experience and management responsibilities during her business career has included information technology, engineering, software research and development, marketing and sales, business operations and customer care and loyalty, each of which is important to the Company, particularly in its retail, online, and mobile banking businesses. She has served on several public and private boards, including as chair of the audit committee for Palm, Inc. from 1999 to 2004. She has extensive financial management expertise, and has been a member of the Company’s Audit and Examination Committee since 1996.

 

Board and Committee Meetings; Annual Meeting Attendance

 

Directors are expected to attend all Board meetings and meetings of committees on which they serve. Directors are also expected to attend each annual stockholders meeting. Fourteen of the 15 nominees for director in 2012 attended the Company’s annual stockholders meeting that year.

 

The Board held nine meetings during 2012. Director attendance at meetings of the Board and its committees averaged 96% during 2012. Each director attended at least 75% of the total number of 2012 meetings of the Board and committees on which he or she served. The Board met in executive session without management present during seven of its 2012 meetings. During 2012, the Lead Director, Stephen W. Sanger, chaired each of the executive sessions of the non-management and independent directors as part of his duties as Lead Director. For more information on the duties of the Lead Director, see “Board Leadership Structure and Lead Director” below.

 

Committees of the Board

 

The Board has established seven standing committees: Audit and Examination, Corporate Responsibility, Credit, Finance, Governance and Nominating, Human Resources, and Risk. The Board’s committees act on behalf of the Board and report on their activities to the entire Board. The Board appoints the members and chair of each committee based on the recommendation of the Governance and Nominating Committee.

 

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The following table provides current membership information and the number of meetings held in 2012 for each of the Board’s standing committees.

 

Name

  Audit and
Examination
Committee
  Corporate
Responsibility
Committee
  Credit
Committee
  Finance
Committee
  Governance and
Nominating
Committee
  Human
Resources
Committee
  Risk
Committee

John D. Baker II

  ü   ü   ü        

Elaine L. Chao

      ü   ü      

John S. Chen

            ü  

Lloyd H. Dean

    ü       ü   ü*   ü

Susan E. Engel

      ü   ü     ü  

Enrique Hernandez, Jr.

  ü   ü     ü*       ü*

Donald M. James

        ü     ü  

Cynthia H. Milligan

    ü   ü*     ü     ü

Nicholas G. Moore

  ü*     ü         ü

Federico F. Peña

  ü         ü    

Philip J. Quigley

  ü     ü     ü    

Howard V. Richardson**

  ü            

Judith M. Runstad

    ü*   ü   ü       ü

Stephen W. Sanger

          ü*   ü   ü

Susan G. Swenson

  ü               ü        

Number of Meetings in 2012

  9   3   4   4   3   5   4

 

*   Committee Chair

 

**   Effective April 1, 2013, Mr. Richardson will become Chair of the AEC and a member of the Risk Committee.

 

The Board has adopted a charter for each committee that addresses its purpose, authority, and responsibilities and contains other provisions relating to, among other matters, membership and meetings. In its discretion each committee may form and delegate all or a portion of its authority to subcommittees of one or more of its members. As required by its charter, each committee periodically reviews and assesses its charter’s adequacy and reviews its performance, and also is responsible for overseeing reputation risk related to its responsibilities. Committees may recommend charter amendments at any time, and the Board must approve any recommended charter amendments. Stockholders and other interested persons may view a copy of each committee’s charter on our website at https://www.wellsfargo.com/about/corporate/corporate_governance.

 

Audit and Examination Committee.    The Audit and Examination Committee (AEC), among other things:

 

   

Assists the Board in fulfilling its responsibilities to oversee the integrity of our financial statements and the adequacy and reliability of disclosures to our stockholders, including policies and management activities related to accounting and financial reporting, internal controls, auditing, compliance and operational risk, legal and regulatory matters;

 

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Selects and evaluates our outside auditors, including the qualifications and independence of the outside auditors, approves all audit engagement fees and terms and all non-audit engagements of the outside auditors, approves the appointment and compensation of the Company’s Chief Auditor, and oversees the performance of the Chief Auditor and the internal audit function;

 

   

Prepares the AEC report included in our annual proxy statement in accordance with SEC rules, and recommends to the Board whether to include the audited financial statements in our Annual Report on Form 10-K;

 

   

Reviews regulatory examination reports and other communications from regulators; and

 

   

Performs the audit committee and fiduciary audit committee functions on behalf of our bank subsidiaries in accordance with federal banking regulations.

 

Each member of the AEC is independent, as independence for audit committee members is defined by NYSE and SEC rules, as discussed below under “Director Independence.” No AEC member may serve on the audit committee of more than two other public companies. The Board has determined, in its business judgment, that each current member of the AEC (John D. Baker II, Enrique Hernandez, Jr., Nicholas G. Moore, Federico F. Peña, Philip J. Quigley, Howard V. Richardson, and Susan G. Swenson) is financially literate as required by NYSE rules, and that each member qualifies as an “audit committee financial expert” as defined by SEC regulations.

 

Corporate Responsibility Committee.    The Corporate Responsibility Committee (CRC), among other things:

 

   

Oversees the Company’s policies, programs, and strategies regarding social responsibility matters of significance to the Company and the public at large, including the Company’s community development and reinvestment activities and performance, fair and responsible lending, government relations, support of charitable organizations, and policies and programs related to environmental sustainability and human rights;

 

   

Monitors the Company’s reputation and relationships with external stakeholders (including customers) regarding significant social responsibility matters; and

 

   

Advises the Board and management on strategies that affect the Company’s role and reputation as a socially responsible organization.

 

Credit Committee.    The Credit Committee, among other things:

 

   

Monitors and reviews the performance and quality of, and the trends affecting our credit portfolio;

 

   

Oversees the effectiveness and administration of credit-related policies;

 

   

Reviews the adequacy of the allowance for credit losses; and

 

   

Reviews and approves credit-related activities that are required by law or regulation to be approved by the Board.

 

Finance Committee.    The Finance Committee, among other things:

 

   

Oversees the administration and effectiveness of financial risk management policies and processes used to assess and manage market risk, interest rate risk, liquidity risk and investment risk;

 

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Oversees the administration and effectiveness of the Company’s capital management and stress testing policies, including reviewing and approving our capital plan, capital adequacy assessment and forecasting processes, and compliance with regulatory capital guidance; and

 

   

Reviews financial strategies and performance, and recommends to the Board the declaration of common stock dividends and securities issuances.

 

Governance and Nominating Committee.    The Governance and Nominating Committee (GNC), among other things:

 

   

Assists the Board by identifying individuals qualified to become Board members and recommends to the Board nominees for director and committee membership;

 

   

Annually reviews and assesses the adequacy of our Corporate Governance Guidelines and recommends any changes to the Board;

 

   

Oversees an annual review of the Board’s performance;

 

   

Recommends to the Board a determination of each non-employee director’s “independence” under applicable rules and guidelines;

 

   

Reviews director compensation and recommends any changes for approval by the Board; and

 

   

Oversees the Company’s engagement with stockholders and other interested parties concerning governance matters and works with the Board’s other committees regarding such engagement on matters subject to the oversight of such other committees.

 

Each member of the GNC is independent, as independence is defined by NYSE rules, as discussed below under “Director Independence.”

 

Human Resources Committee.    The Human Resources Committee (HRC), among other things:

 

   

Discharges the Board’s responsibilities relating to the Company’s overall compensation strategy and the compensation of our executive officers, including overseeing implementation of risk-balancing and risk management methodologies for incentive compensation plans and programs for senior executives and employees in positions to expose the Company to material risk;

 

   

Reviews and approves benefit and compensation plans and arrangements applicable to executive officers of the Company;

 

   

Reviews and approves goals and objectives for CEO compensation and evaluates the CEO’s performance and compensation in light of these goals; approves and recommends the CEO’s compensation to our Board for approval; and approves compensation for our other executive officers;

 

   

Oversees talent management and results of succession planning and diversity initiatives;

 

   

Oversees actions taken by the Company regarding stockholder approval of executive compensation matters, including advisory votes on executive compensation; and

 

   

Has the sole authority to retain or obtain the advice of and terminate any compensation consultant, independent legal counsel or other advisor to the HRC, and evaluates the independence of its advisors in accordance with NYSE rules.

 

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Each member of the HRC must be a “non-employee director” under Rule 16b-3 of the Exchange Act, an “outside director” for purposes of Section 162(m) of the Internal Revenue Code, and an independent director under NYSE rules. The Board has determined that each current HRC member is independent under these rules, as discussed below under “Director Independence.”

 

Risk Committee.    The Risk Committee, among other things:

 

   

Oversees the Company’s enterprise-wide risk management framework, including the strategies, policies, procedures, and systems, established by management to identify, assess, measure, and manage the major risks facing the Company, which may include an overview of the Company’s credit risk, operational risk, compliance risk, interest rate risk, liquidity risk, investment risk, funding risk, market risk, reputation risk, and emerging and other risks, as well as management’s capital management, planning and assessment processes;

 

   

Reviews and discusses management’s assessment of the Company’s aggregate enterprise-wide risk profile, and recommends to the Board the articulation and establishment of the Company’s overall risk tolerance and risk appetite;

 

   

Assists the Board and its other committees that oversee specific risk-related issues and serves as a resource to management by overseeing risk across the entire Company and across all risk types; and

 

   

Approves the appointment and compensation of the Company’s Chief Risk Officer, and oversees the performance of the Chief Risk Officer and the internal corporate risk function.

 

Each member of the Risk Committee is independent, as independence is defined by NYSE rules, as discussed below under “Director Independence.”

 

HRC and GNC Use of Compensation Consultant

 

The HRC and GNC, similar to other Board committees, are authorized to retain and obtain advice of legal, accounting, or other advisors at our expense without prior permission of management or the Board. The HRC and GNC use a consultant to assist in the evaluation of executive compensation and non-employee director compensation, respectively. Under its charter, the HRC has sole authority to retain or obtain the advice of and terminate any compensation consultant, independent legal counsel or other adviser to the HRC, and approve their fees and other retention terms. The HRC and GNC charters may be viewed on our website at https://www.wellsfargo.com/about/corporate/corporate_governance.

 

The HRC and GNC retained Cook & Co., a nationally recognized executive compensation consulting firm, to provide independent advice on executive and non-employee director compensation matters for 2012. Cook & Co.’s business is limited to providing independent executive compensation consulting services to its clients. Cook & Co. does not provide any other management or human resources-related services to our Company. In addition, it is 100% owned by its senior consultants and has no outside equity or reciprocal financial relationships.

 

The HRC’s and GNC’s agreement with Cook & Co. provides that Cook & Co. works directly on behalf of the HRC and GNC, as the case may be, and prohibits Cook & Co. from performing other services for the Company without the prior consent of the Chair of the HRC or GNC. To help ensure the independence of any consultant retained by the HRC, the HRC charter requires the HRC to pre-approve all services performed for the Company by any compensation consultant to the HRC other

 

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than services performed for the GNC for non-employee director compensation matters. The HRC pre-approved the additional survey services described below that Cook & Co. provided to the Company during 2012. In November 2012, the HRC assessed the independence of Cook & Co. and George Paulin and concluded that no conflict of interest exists.

 

Cook & Co. compiles compensation data for the financial services companies the HRC considers our Labor Market Peer Group from time to time, and reviews with the HRC the Company’s executive compensation programs generally and in comparison to those of our Labor Market Peer Group. Cook & Co. also advises the HRC on the reasonableness of our compensation levels compared to our Labor Market Peer Group, and the appropriateness of our compensation program structure in supporting the Company’s business objectives. Cook & Co. provides services to the GNC for non-employee director compensation similar to those it provides to the HRC for executive compensation. The HRC annually reviews the services performed by and the fees paid to Cook & Co. The total amount of fees the Company paid Cook & Co. in 2012 was $146,815, which included the fees paid for services provided as the independent compensation consultant to the HRC and GNC, reimbursement of Cook & Co.’s reasonable travel and business expenses, and a fee of less than $5,000 for a survey of long-term incentives which is used for evaluating the competitiveness of long-term incentive opportunities for other positions throughout the Company.

 

Compensation Committee Interlocks and Insider Participation

 

John S. Chen, Lloyd H. Dean, Susan E. Engel, Donald M. James, and Stephen W. Sanger served as members of the HRC in 2012. Mackey J. McDonald also served on the HRC prior to his retirement as a director in April 2012. During 2012, no member of the HRC was an employee, officer, or former officer of the Company. None of our executive officers served in 2012 on the board of directors or compensation committee (or other committee serving an equivalent function) of any entity that had an executive officer serving as a member of our Board or the HRC. As described under “Related Person Transactions,” all HRC members had banking or financial services transactions in the ordinary course of business with our banking and other subsidiaries.

 

Other Matters Relating to Directors

 

Susan E. Engel, one of our directors, served as chairwoman and chief executive officer of Lenox Group Inc., a tabletop, giftware and collectibles company, from November 1996 until she retired in January 2007. In November 2008 Lenox Group filed a voluntary petition for relief under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York. Susan G. Swenson, one of our directors, served as a director and as president and chief operating officer of Leap Wireless International, Inc., a wireless communications provider, from July 1999 to January 2004. In April 2003 Leap Wireless filed a voluntary petition for relief under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of California, and in August 2004 Leap Wireless completed its financial restructuring and emerged from Chapter 11. She also served as chief operating officer of Amp’d Mobile, Inc., a mobile technology provider, from October 2006 until July 2007. In June 2007 Amp’d Mobile filed a voluntary petition for relief under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware, and in July 2007 Amp’d Mobile ceased operations and thereafter sold its assets.

 

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Director Compensation

 

The table below provides information on 2012 compensation for our non-employee directors. Mr. Stumpf is an employee director and does not receive separate compensation for his Board service. The Company also reimburses directors for expenses incurred in their Board service, including the cost of attending Board and committee meetings. Additional information on our director compensation program follows the table.

 

2012 Director Compensation Table

 

Name(1)

  Fees
Earned
or Paid
in Cash
($)(2)
    Stock
Awards
($)(3)
    Option
Awards
($)(4)
    Non-Equity
Incentive Plan
Compensation
($)
    Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings
    All
Other
Compen-
sation
($)
    Total
($)
 
(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)  

John D. Baker II

    147,000        150,006        —          —          —          —          297,006   

Elaine L. Chao

    103,000        150,006        —          —          —          —          253,006   

John S. Chen

    101,000        150,006        —          —          —          —          251,006   

Lloyd H. Dean

    150,000        150,006        —          —          —          —          300,006   

Susan E. Engel

    141,000        150,006        29,012        —          —          —          320,018   

Enrique Hernandez, Jr.

    179,000        150,006        21,397        —          —          —          350,403   

Donald M. James

    107,000        150,006        —          —          —          —          257,006   

Mackey J. McDonald(5)

    39,000        —          —          —          —          —          39,000   

Cynthia H. Milligan

    146,000        150,006        37,250        —          —          —          333,256   

Nicholas G. Moore

    155,000        150,006        —          —          —          —          305,006   

Federico F. Peña

    111,000        150,006        —          —          —          —          261,006   

Philip J. Quigley

    123,000        150,006        12,551        —          —          —          285,557   

Judith M. Runstad

    170,000        150,006        32,187        —          —          —          352,193   

Stephen W. Sanger

    172,000        150,006        23,656        —          —          —          345,662   

Susan G. Swenson

    117,000        150,006        13,871        —          —          —          280,877   

 

(1)   Mr. Richardson was appointed to our Board effective January 1, 2013 and did not receive any compensation during 2012, therefore, he is not included in the table above.

 

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(2)   Includes fees earned in 2012 but paid in 2013 and fees earned in 2012 but deferred at the election of the director. The following table shows the number of stock units credited to our non-employee directors under our deferral program for deferrals of 2012 cash compensation and the grant date fair value of those stock units based on the closing price of our common stock on the date of deferral:

 

Name

   Stock Units
(#)
     Grant Date
Fair  Value

($)
 

John D. Baker II

     1,135.0322         38,750   
     1,158.7919         38,750   
     943.8040         32,750   
     1,075.1902         36,750   

Donald M. James

     842.1207         28,750   
     799.9402         26,750   
     713.2565         24,750   
     782.6214         26,750   

Nicholas G. Moore

     1,178.9690         40,250   
     1,203.6483         40,250   
     1,044.6686         36,250   
     1,119.0755         38,250   

Stephen W. Sanger

     1,362.0387         46,500   
     1,270.9330         42,500   
     1,109.5101         38,500   
     1,301.9310         44,500   

 

(3)   We granted 4,536 shares of our common stock to each non-employee director elected at the 2012 annual meeting of stockholders on April 24, 2012. The grant date fair value of each award is based on the number of shares granted and the NYSE closing price of our common stock on the grant date.

 

(4)   Reflects the grant date fair value of “reload” options to purchase our common stock automatically granted to Mses. Engel, Milligan, Runstad, and Swenson and Messrs. Hernandez, Quigley, and Sanger upon exercise in 2012 of options granted to them prior to September 28, 2004 that included the reload feature, as shown in the table below:

 

Name

   No. of
Options
     Fair Value
Per Option
Share
     Expected
Option Term
     Annual
Price
Volatility
    Annual
Dividend
Rate
     Risk-Free
Interest Rate
 

Ms. Engel

     4,770       $ 2.59         0.5         29.71   $ 0.88         0.14
     8,499         1.96         0.5         22.45     0.88         0.15

Mr. Hernandez

     6,561         1.96         0.5         22.45     0.88         0.15
     5,270         1.62         0.5         18.87     0.88         0.12

Ms. Milligan

     4,846         2.59         0.5         29.71     0.88         0.14
     12,602         1.96         0.5         22.45     0.88         0.15

Mr. Quigley

     4,846         2.59         0.5         29.71     0.88         0.14

Ms. Runstad

     4,770         2.59         0.5         29.71     0.88         0.14
     12,243         1.62         0.5         18.87     0.88         0.12

Mr. Sanger

     11,653         2.03         0.5         23.79     0.88         0.14

Ms. Swenson

     6,833         2.03         0.5         23.79     0.88         0.14

 

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For more information about the valuation model used to calculate the grant date fair value of stock options, refer to “Note 19 (Common Stock and Stock Plans)” to our 2012 financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC.

 

The table below shows for each non-employee director, the aggregate number of shares of our common stock underlying unexercised options at December 31, 2012. All options were fully exercisable at December 31, 2012.

 

Name

   Number of
Securities Underlying
Unexercised Options
 

John D. Baker II

     22,570   

Elaine L. Chao

     —     

John S. Chen

     41,289   

Lloyd H. Dean

     50,704   

Susan E. Engel

     65,665   

Enrique Hernandez, Jr.

     64,013   

Donald M. James

     23,101   

Mackey J. McDonald

     22,570   

Cynthia H. Milligan

     64,784   

Nicholas G. Moore

     45,602   

Federico F. Peña

     —     

Philip J. Quigley

     68,892   

Judith M. Runstad

     64,425   

Stephen W. Sanger

     63,835   

Susan G. Swenson

     65,889   

 

(5)   Mr. McDonald retired as a director effective at the 2012 annual meeting of stockholders.

 

Cash Compensation.    The following table shows the components of cash compensation paid to non-employee directors in 2012. Directors who join the Board during the year receive a prorated annual cash retainer.

 

Component

   Amount ($)  

Annual Cash Retainer

     75,000   

Annual Lead Director Fee

     30,000   

Annual AEC Chair Fee

     30,000   

Annual Corporate Responsibility Committee Chair Fee

     25,000   

Annual Credit Committee Chair Fee

     25,000   

Annual Finance Committee Chair Fee

     25,000   

Annual GNC Chair Fee

     25,000   

Annual HRC Chair Fee

     25,000   

Annual Risk Committee Chair Fee

     25,000   

Regular or Special Board or Committee Meeting Fee

     2,000   

 

Equity Compensation.    For 2012, each non-employee director elected to the Board at the Company’s annual meeting of stockholders received on that date an award of Company common stock

 

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having a value of $150,000, rounded up to the nearest whole share. Each non-employee director who joins the Board as of any other date receives, as of such other date, an award of Company common stock having a value of $150,000 prorated to reflect the number of months (rounded up to the next whole month) until the next annual meeting of stockholders, rounded up to the nearest whole share. The value of the annual stock award was increased to $150,000 effective January 1, 2012.

 

The Company ceased granting options to non-employee directors effective January 1, 2011. Directors who exercise options granted before September 28, 2004 by delivering shares of previously owned common stock or shares purchased in the open market will receive a reload option to purchase the same number of whole shares of common stock, at the NYSE closing price per share of our common stock on the date the reload option is granted, as were delivered to pay the option exercise price. A reload option is exercisable immediately through the remaining term of the original option. No reload stock options will be granted with respect to an option granted on or after September 28, 2004.

 

Deferral Program.    A non-employee director may defer all or part of his or her cash compensation and stock awards. Cash compensation may be deferred into either an interest-bearing account or common stock units with dividends reinvested. The interest rate paid in 2012 on interest-bearing accounts was 2.78%. Stock awards may be deferred only into common stock units with dividends reinvested. Deferred amounts are paid either in a lump sum or installments as elected by the director.

 

Stock Ownership Policy.    The Board has adopted a director stock ownership policy that each non-employee director, within five years after joining the Board, own shares of our common stock having a value equal to five times the annual cash retainer, and maintain at least that ownership level while a member of the Board and for one year after service as a director ends. Each director who has been on the Board for five years or more exceeded this ownership level as of December 31, 2012, and each director who has served less than five years is on track to meet this ownership level.

 

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CORPORATE GOVERNANCE

 

The Board is committed to sound and effective corporate governance principles and practices. The Board has adopted Corporate Governance Guidelines to provide the framework for the governance of the Board and the Company. These Guidelines set forth, among other matters, Board membership criteria, director retirement and resignation policies, our Director Independence Standards, information about the committees of the Board, and information about other policies and procedures of the Board, including management succession planning, the Board’s leadership structure and the responsibilities of the Lead Director.

 

The Board has also adopted a Director Code of Ethics, which states our policy and standards for ethical conduct by our directors and our expectation that directors will act in a manner that serves the best interests of the Company. We have also had in effect for over 100 years a code of ethics for all team members, and we expect all of our team members to adhere to the highest possible standards of ethics and business conduct with other team members, customers, stockholders, and the communities we serve and to comply with all applicable laws, rules, and regulations that govern our businesses.

 

Stockholders and other interested persons may view our Corporate Governance Guidelines and our Codes of Ethics on our website at https://www.wellsfargo.com/about/corporate/corporate_governance.

 

As part of our commitment to effective corporate governance practices, in 2010 we initiated our investor outreach program to help us better understand the views of our investors on key corporate governance topics. In 2012, our Lead Director and management participated in meetings with many of our largest institutional stockholders to discuss and obtain feedback on corporate governance, executive compensation, and other related issues important to our stockholders. During 2012, we also met with other investors and organizations interested in our corporate governance practices and policies. We value our dialogue with our investors and believe our annual outreach efforts, which are in addition to other communication channels available to our stockholders and interested parties, help ensure our corporate governance practices continue to evolve and reflect the insights and perspectives of our many stakeholders.

 

Director Election Standard

 

Our By-Laws provide that directors will be elected using a majority vote standard in an uncontested director election (i.e., an election where the only nominees are those recommended by the Board, such as at this meeting). Under this standard, a nominee for director will be elected to the Board if the votes cast for the nominee exceed the votes cast against the nominee. However, directors will be elected by a plurality of the votes cast in a contested election.

 

Our Corporate Governance Guidelines provide that the Board will nominate for election and appoint to fill Board vacancies only those candidates who have tendered or agreed to tender an advance, irrevocable resignation that would become effective upon their failure to receive the required vote for election and Board acceptance of the tendered resignation. Each director nominee named in this proxy statement has tendered an irrevocable resignation as a director in accordance with our Corporate Governance Guidelines, which resignation will become effective if he or she fails to receive the required vote for election at the annual meeting and the Board accepts his or her resignation.

 

Our Corporate Governance Guidelines also provide that the GNC will consider the tendered resignation of a director who fails to receive the required number of votes for election, as well as any

 

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other offer to resign that is conditioned upon Board acceptance, and recommend to the Board whether or not to accept such resignation. The GNC, in deciding what action to recommend, and the Board, in deciding what action to take, may consider any factors they deem relevant. The director whose resignation is under consideration will abstain from participating in any decision of the GNC or the Board regarding such resignation. If the Board does not accept the resignation, the director will continue to serve until his or her successor is elected and qualified. The Board will publicly disclose its decision on the resignation within 90 days after certification of the voting results.

 

Director Independence

 

Our Corporate Governance Guidelines provide that a significant majority of the directors on the Board, and all members of the AEC, GNC, HRC, and Risk Committee must be independent under applicable independence standards. Each year the Board affirmatively determines the independence of each director and each nominee for election as a director. Under NYSE rules, in order for a director to be considered independent, the Board must determine that the director has no direct or indirect material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). To assist the Board in making its independence determinations, the Board adopted the Director Independence Standards appended to our Corporate Governance Guidelines, which are available on our website at https://www.wellsfargo.com/about/ corporate/corporate_governance. These Director Independence Standards consist of the NYSE’s “bright line” standards of independence and the Board’s categorical standards of independence.

 

Based on the Director Independence Standards and the NYSE rules, including applicable SEC rules, the Board considered information in January 2013 regarding banking and financial services, commercial, charitable, familial, and other relationships between each director, his or her respective immediate family members, and/or certain entities affiliated with such directors and immediate family members, on the one hand, and the Company, on the other, to determine the director’s independence from management of the Company. After reviewing the information presented to it and considering the recommendation of the GNC, the Board determined that, except for John G. Stumpf, who is a Wells Fargo employee, all current directors and director nominees (John D. Baker II, Elaine L. Chao, John S. Chen, Lloyd H. Dean, Susan E. Engel, Enrique Hernandez, Jr., Donald M. James, Cynthia H. Milligan, Nicholas G. Moore, Federico F. Peña, Philip J. Quigley, Howard V. Richardson, Judith M. Runstad, Stephen W. Sanger, and Susan G. Swenson) are independent under the Director Independence Standards and NYSE rules, including applicable SEC rules. The Board determined, therefore, that 13 of the Board’s 14 director nominees are independent. Mackey J. McDonald, a former director, was an independent director prior to his retirement from the Board in April 2012.

 

In connection with making its independence determinations, in addition to those relationships with some of our directors described under “Related Person Transactions,” the Board considered under the Director Independence Standards the following relationships and transactions in which the Board determined that neither the director nor, to the extent applicable, his or her immediate family member had a direct or indirect material interest:

 

   

The Company’s banking and other subsidiaries had ordinary course banking and financial services relationships in 2012 with all of our directors, as well as some of their immediate family members and/or certain entities affiliated with such directors and their immediate family members, all of which were on substantially the same terms as those available at the time for comparable transactions with persons not affiliated with the Company and complied with applicable banking laws;

 

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A family member of Mr. Moore (the spouse of a sibling) provided data analytical services for Wells Fargo Home Lending from June 2011 until April 2012 through the family member’s employment with a third-party placement firm that entered into a contract with the Company to provide the family member’s services (the family member did not receive any direct compensation from the Company);

 

   

The Company or a Company-sponsored charitable foundation made charitable contributions of less than $150,000 in 2012 to a tax-exempt organization where Mr. Dean is employed as an executive officer, and made charitable contributions of less than $100,000 to a tax-exempt organization where Mr. McDonald served as a trustee chair; and

 

   

Mr. McDonald’s son-in-law was employed with the Company’s independent registered public accounting firm until May 2011 as a staff member in the firm’s valuation practice. The family member was not a partner of the firm and did not personally perform any audit or other services for the Company during the time he worked at our external auditors.

 

The Board determined that each of the foregoing relationships, as well as those relationships with some of our directors described under “Related Person Transactions,” satisfied the NYSE “bright line” independence standards and was immaterial under the Board’s Director Independence Standards, including the categorical standards of independence.

 

Board Leadership Structure and Lead Director

 

As noted in the Corporate Governance Guidelines, the Board does not have a fixed policy regarding the separation of the offices of Chairman and Chief Executive Officer and believes that it should maintain the flexibility to select the Chairman and its Board leadership structure, from time to time, based on the criteria that it deems to be in the best interests of the Company and its stockholders. At this time, the offices of the Chairman of the Board and the Chief Executive Officer are combined, with Mr. Stumpf serving as Chairman and CEO. The Board believes that combining the Chairman and CEO positions is the right corporate governance structure for the Company at this time because it most effectively utilizes Mr. Stumpf’s extensive experience and knowledge regarding the Company and provides for the most efficient leadership of our Board and Company. The Company is a large, complex financial institution, and Mr. Stumpf, with over 31 years of experience at Wells Fargo, has the knowledge, expertise, and experience to understand and clearly articulate to the Board the opportunities and risks facing the Company, as well as the leadership and management skills to promote and execute the Company’s values and strategy. The Board believes that Mr. Stumpf, rather than an outside director, is in the best position, as Chairman and CEO, to lead Board discussions regarding the Company’s business and strategy and to help the Board respond quickly and effectively to the many business, market, and regulatory reform challenges affecting the Company and the rapidly changing financial services industry. Mr. Stumpf’s service as Chairman also provides clarity of leadership for the Company and more effectively allows the Company to present its vision and strategy in a unified voice.

 

Although the Board believes that it is more effective to have one person serve as the Company’s Chairman and CEO at this time, it also recognizes the importance of strong independent leadership on the Board. Accordingly, in addition to maintaining a significant majority of independent directors (13 of the 14 director nominees are independent under NYSE rules and the Director Independence Standards) and independent Board committees, since 2009 the Board has appointed a Lead Director who performs the duties and responsibilities described below. Our Corporate Governance Guidelines provide that each year a majority of the independent directors will appoint a Lead Director, and in

 

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January 2013, the independent directors appointed Stephen W. Sanger to continue to serve as Lead Director. The duties and responsibilities of the Lead Director are described in the Corporate Governance Guidelines and include the following:

 

   

Following consultation with the Chairman and CEO and other directors, approving Board meeting agendas and schedules, assuring that there is sufficient time for discussion of all agenda items;

 

   

Calling special meetings or executive sessions of the Board and calling and presiding at executive sessions or meetings of non-management or independent directors and, as appropriate, providing feedback to the Chairman and CEO and otherwise serving as a liaison between the independent directors and the Chairman;

 

   

Working with committee chairs to ensure coordinated coverage of Board responsibilities;

 

   

Facilitating communication between the Board and senior management, including advising the Chairman and CEO of the Board’s informational needs and approving the types and forms of information sent to the Board;

 

   

Serving as an additional point of contact for Board members and stockholders and being available for consultation and direct communication with major stockholders;

 

   

Acting as a “sounding board” and advisor to the Chairman and CEO;

 

   

Contributing to the performance review of the Chairman and CEO; and

 

   

Staying informed about the strategy and performance of the Company and reinforcing that expectation for all Board members.

 

The Board believes that its Lead Director structure including the duties and responsibilities described above provides the same independent leadership, oversight, and benefits for the Company and the Board that would be provided by an independent Chairman. Mr. Sanger is actively engaged as Lead Director and works closely with the Chairman and CEO on Board matters. Mr. Sanger frequently interacts with Mr. Stumpf and other members of management to provide his perspective on important issues facing the Company, as well as discusses Board agenda items and priorities. In addition to the GNC, which he chairs, and the HRC and the Risk Committee, where he currently serves as a member, Mr. Sanger typically attends the meetings of the Board’s other committees and also frequently communicates with the chairs of those committees and with the other independent directors both inside and outside of the Board’s normal meeting schedule to discuss Board and Company issues as they arise.

 

Although led by the Chair of the HRC, the Lead Director also has a role in the performance evaluation of the Chairman and CEO, which is a multi-step process involving, among other things, individual director feedback and Board discussions regarding Mr. Stumpf’s performance and discussions led by Mr. Stumpf regarding his assessment of his performance. Mr. Sanger’s participation in the Chairman and CEO performance evaluation process helps him evaluate whether the combined Chairman and CEO position is working effectively and whether it continues to be the right governance structure for the Board and the Company. In addition, as noted above, Mr. Sanger participates in the Company’s investor outreach program, and as part of our outreach efforts Mr. Sanger gains valuable insight into the views of our investors regarding the Company’s corporate governance practices, including its Lead Director structure. The Board believes that these and the other activities of the Lead Director serve to enhance the independent leadership of the Board and help ensure that the Board is in position to consider the continued appropriateness of having the same person serve as Chairman and CEO.

 

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The Board’s Role in Risk Oversight

 

The Board performs its risk oversight function primarily through its seven standing committees, including its Risk Committee, all of which report to the whole Board and are comprised solely of independent directors. In addition, the whole Board periodically receives reports and information about the Company’s enterprise risk management activities directly from management, including the Company’s Chief Risk Officer.

 

As described under “Committees of the Board,” each of the Board’s committees is responsible for oversight of specific risks as outlined in each of their charters. For example, the Credit Committee’s risk oversight responsibilities include oversight of the annual credit quality plan and lending policies, credit trends, the allowance for credit loss policy, and high risk portfolios and concentrations. The risk oversight responsibilities of the Finance Committee include oversight of market, interest rate, and liquidity and funding risks, as well as equity exposure and fixed income investments. In addition to overseeing matters relating to the Company’s internal controls over financial reporting and financial statements, as well as risk assessment and management policies, the AEC’s risk oversight responsibilities include legal and regulatory compliance risk, operational risks covered by certain corporate risk management programs, and the Company’s operational risk profile. The HRC oversees risks relating to compensation practices, and the CRC and GNC also oversee various specific risks, including, in the case of the CRC, risks associated with social responsibility issues and, in the case of the GNC, risks relating to compliance with corporate governance matters. Each of these committees also is responsible for overseeing reputation risk related to its specific responsibilities and duties set forth in its charter.

 

The Risk Committee provides oversight of the Company’s overall enterprise-wide risk management framework. The Risk Committee does not duplicate the risk oversight efforts of the Board’s other committees, but rather helps ensure end-to-end ownership of oversight of all risk issues in one Board committee and enhances the Board’s and management’s understanding of the Company’s aggregate enterprise-wide risk profile. The Risk Committee assists the Board and its other committees that oversee the specific risk-related issues described above by, among other things, overseeing risk across the entire Company and across all risk types and by reviewing and approving the articulation and establishment of the Company’s overall risk tolerance and risk appetite. To facilitate discussion and communication about enterprise-wide risk matters and avoid unnecessary duplication, the Risk Committee’s members consist of the chairs of each of the Board’s other committees, and all of these directors are members of more than one committee, which also helps foster cross-committee communication regarding risk issues. In addition, the Lead Director, who is a member of the Risk Committee, works with the other committee chairs to ensure coordinated coverage of Board responsibilities and frequently communicates with Board members, including the Chairman and CEO, regarding risk and other matters.

 

The Board and its committees work closely with management in overseeing risk. Each Board committee receives reports and information regarding risk issues directly from management and, in some cases, management committees have been established to inform the risk framework and provide governance and advice regarding risk management functions. These management committees include the Company’s Operating Committee, which consists of the Company’s senior executives who report to the CEO and who meet weekly, to discuss, among other things, strategic, operational and risk issues at the enterprise level, and the Enterprise Risk Management Committee, which is chaired by the Company’s Chief Risk Officer and includes other senior executives responsible for managing risk

 

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across the Company. Management’s corporate risk organization is headed by the Company’s Chief Risk Officer who, among other things, oversees the Company’s credit, market and operational risks. The Chief Risk Officer is appointed by and reports to the Board’s Risk Committee. The Chief Risk Officer and the Chief Credit, Market and Operational Risk Officers, who report to the Chief Risk Officer, work closely with the Board’s Risk, Credit, and Audit and Examination Committees, frequently provide reports to these and other Board committees, and update the committee chairs and other Board members on risk issues outside of regular committee meetings, as appropriate. The full Board receives reports at each of its meetings from the committee chairs about committee activities, including risk oversight matters, and receives a quarterly report from the Enterprise Risk Management Committee regarding current or emerging risk issues.

 

The Board believes that its Board leadership structure has the effect of enhancing the Board’s risk oversight function because of the Lead Director’s and Chairman’s direct involvement in risk oversight matters and their strong efforts to promote open communication regarding risk issues among Board members and the Board’s committees. The Board also believes that Mr. Stumpf’s knowledge of the Company’s businesses and risks significantly contributes to the Board’s understanding and appreciation of risk issues.

 

Risk Management and Compensation Practices

 

Wells Fargo employs strong and effective corporate governance which includes active oversight and monitoring by the HRC over our incentive compensation practices. The HRC oversees the Company’s incentive compensation practices, including reviewing and monitoring risk-balancing and implementation and effectiveness of risk management methodologies for incentive compensation plans and programs for senior executives and employees the Company identifies whose activities, individually or as a group, may expose the Company to material risk (we refer to this group as “Covered Employees”).

 

Many of the compensation risk management policies that apply to the Company’s named executives discussed in the CD&A (see “Compensation Program Governance—Risk Management”) and other senior executives apply equally to our Covered Employees, including:

 

   

an emphasis on overall Company performance in compensation decisions;

 

   

incentives that balance individual short-term performance goals with the long-term strength and stability of the Company, including longer performance periods and/or performance-based deferrals;

 

   

robust compliance, internal control, disclosure review, and reporting programs;

 

   

strong compensation recoupment or clawback policies which can result in awards being cancelled or prior payments being recovered in appropriate circumstances so that incentive compensation awards encourage the creation of long-term, sustainable performance, while at the same time discourage unnecessary or excessive risk-taking that would impact the Company’s performance;

 

   

our Code of Ethics prohibition on, and right to discipline employees for, manipulating business goals or any form of gaming to enhance incentive compensation;

 

   

a prohibition on derivative and hedging transactions in Company stock; and

 

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stock ownership policy under which all executive officers are required to retain 50% of their after-tax profit shares acquired upon exercise of options or vesting of stock awards for a period of one year following retirement, subject to a maximum limit of ten times the executive’s salary, and all other employees are expected to retain that number of shares subject to the same limit while employed by the Company.

 

The HRC has continued its expanded use of long-term Performance Share awards for a broader group of management and has reaffirmed for 2012 our approach of deferring a portion of annual incentive compensation for the Company’s highest earners in the form of long-term awards whose vesting terms take into account longer risk-emergence periods. In addition to the risk-balancing performance measure added to Performance Share awards beginning in 2012 to reduce those awards in the event of poor absolute financial performance, the HRC also approved an additional risk-balancing adjustment provision for these awards and all deferred awards granted as part of 2012 annual incentive compensation that gives full discretion to cancel all or a portion of those awards if, among other things, the participant takes imprudent risk either intentionally, out of gross negligence or improperly that results in financial, reputational or other harm to the Company or the Company or applicable business line suffers a material downturn in its financial performance or suffers a material failure of risk management. The HRC also has applied the Company’s risk management framework when evaluating the individual performance of our named executives to confirm that performance was achieved without taking unnecessary or excessive risk.

 

During 2010, the HRC-chartered our Incentive Compensation Steering Committee (ICSC) to lead Wells Fargo’s enterprise efforts to enhance our incentive compensation practices and better align incentive compensation with risk and the expectations and guidance of our regulators and other stakeholders. The ICSC consists of the Company’s senior risk, compliance and human resources executives. The ICSC continues to oversee the further development and implementation of our Incentive Compensation Risk Management (ICRM) program, which is the key tenet of our work to manage risk in incentive compensation arrangements throughout the Company. The ICRM program is designed and managed by Corporate Human Resources, with input from an advisory council of senior managers from our corporate functions and business lines, including control functions, on development and management of the ICRM program. In accordance with our IRCM Policy that was approved by the HRC in July 2011 and last amended in November 2012, the ICRM coordinates annually an enterprise-wide assessment of business line and corporate staff incentive compensation plans. In conjunction with this annual review process, our corporate and line of business risk officers provide independent reviews of incentive compensation arrangements and risk-balancing features and are accountable to our Chief Risk Officer. The HRC meets with our Chief Risk Officer annually to review and assess any risks posed by our incentive compensation programs and the appropriateness of risk-balancing features of those programs. The ICSC and HRC have reviewed the Company’s continued progress to implement effective incentive compensation risk management practices through the ICRM program, including the outcome of an enterprise-wide assessment of business line and corporate staff incentive compensation plans. The HRC will continue to monitor our progress so that our compensation programs and practices appropriately balance risk-taking consistent with applicable regulatory guidance.

 

In light of the policies and actions outlined or referred to above, the Company and the Board have not identified any risks arising from the Company’s compensation policies and practices for named executives and Covered Employees that are reasonably likely to have a material adverse effect on the Company.

 

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Communications with Directors

 

Stockholders and other interested parties who wish to communicate with the Board, including the Lead Director or the non-management or independent directors as a group, may send either (i) an email to BoardCommunications@wellsfargo.com or (ii) a letter to Wells Fargo & Company, P.O. Box 63750, San Francisco, CA 94163. Additional information regarding communication with our directors and the Board’s process for reviewing communications sent to the Board or its members is provided on our website at https://www.wellsfargo.com/about/corporate/corporate_governance.

 

Director Nomination Process and Board Diversity

 

The GNC is responsible for managing the director nomination process, which includes identifying, evaluating, and recommending for nomination candidates for election as new directors and incumbent directors. The goal of the GNC’s nominating process is to assist the Board in attracting and retaining competent individuals with the requisite management, financial, and other expertise who will act as directors in the best interests of the Company and its stockholders. The GNC regularly reviews the composition of the Board in light of its understanding of the backgrounds, industry, professional experience, personal qualities and attributes, and various geographic and demographic communities represented by current members. The GNC also reviews Board self-evaluations and information with respect to the business and professional expertise represented by current directors in order to identify any specific skills desirable for future Board members. It also monitors the expected service dates of Board members and administers the director retirement policy which provides for the retirement of a director who has a significant change in their principal occupation or professional responsibilities or who reaches age 70, unless the Board determines that the director continues to be involved in activities, positions or relationships which are compatible with continued service on the Board, or, for a director who reaches age 70, due to special or unique circumstances, it is in the best interests of the Company and its stockholders that the director continue to serve on the Board. The Board has determined, based on the recommendations of the GNC, that of those current nominees affected by the retirement policy, all of them continue to be involved in activities, positions, or relationships compatible with continued service on the Board.

 

The GNC identifies potential candidates for first-time nomination as a director primarily through recommendations it receives from our current Board members, our Chairman and CEO, and our contacts in the communities we serve. In 2012, Mr. Richardson was identified and recommended to the GNC by one of our independent directors. The GNC also has the authority to conduct a formal search using an outside search firm selected and engaged by the GNC to identify potential candidates. When the GNC has identified a potential new director nominee, it obtains publicly available information on the background of the potential nominee to make an initial assessment of the candidate in light of the following factors:

 

   

Whether the individual meets the Board-approved minimum qualifications for director nominees described below;

 

   

Whether there are any apparent conflicts of interest in the individual’s serving on our Board; and

 

   

Whether the individual would be considered independent under our Director Independence Standards, which are described above under “Director Independence.”

 

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The Board requires that all nominees for service as a director have the following minimum qualifications:

 

   

A demonstrated breadth and depth of management and/or leadership experience, preferably in a senior leadership role (e.g., chief executive officer, managing partner, president) in a large or recognized organization or governmental entity;

 

   

Financial literacy or other professional or business experience relevant to an understanding of our businesses; and

 

   

A demonstrated ability to think and act independently, as well as the ability to work constructively in a collegial environment.

 

Candidates also must be individuals of the highest character and integrity. The GNC determines, in its sole discretion after considering all factors it considers appropriate, whether a potential nominee meets these minimum qualifications and also considers the composition of the entire Board in view of the above qualifications and the other factors described below. If a candidate passes this initial review, the GNC arranges an introductory meeting with the candidate and our Chairman and CEO, and the GNC Chair and/or other directors to determine the candidate’s interest in serving on our Board. If the candidate is interested in serving on our Board, members of the GNC, together with several members of the Board, our CEO, and, if appropriate, other key executives of the Company, then conduct an interview with the candidate. If the Board and the candidate are both still interested in proceeding, the candidate provides us additional information for use in determining whether the candidate satisfies the applicable requirements of our Corporate Governance Guidelines, Director Code of Ethics, and any other rule, regulation, or policy applicable to members of the Board and its committees and for making any required disclosures in our proxy statement. Assuming a satisfactory conclusion to the process outlined above, the GNC then presents the candidate’s name for approval by the Board or for nomination for approval by the stockholders at the next stockholders meeting, as applicable.

 

Although the GNC does not have a separate policy specifically governing diversity, as described in the Corporate Governance Guidelines the GNC will consider, in identifying first-time candidates or nominees for director, or in evaluating individuals recommended by stockholders, the current composition of the Board in light of the diverse communities and geographies we serve and the interplay of the candidate’s or nominee’s experience, education, skills, background, gender, race, ethnicity and other qualities and attributes with those of the other Board members. The GNC incorporates this broad view of diversity into its director nomination process by taking into account all of the above factors when evaluating and recommending director nominees to serve on the Board to ensure that the Board’s composition as a whole appropriately reflects the current and anticipated needs of the Board and the Company. In implementing its practice of considering diversity, the GNC may place more emphasis on attracting or retaining director nominees with certain specific skills or experience, such as industry, regulatory, public policy, accounting, or financial expertise, depending on the circumstances and the composition of the Board at the time. Gender, race and ethnic diversity also have been, and will continue to be, a priority for the GNC and the Board in its director nomination process because the GNC and the Board believe that it is essential that the composition of the Board appropriately reflects the diversity of the Company’s team members and the customers and communities they serve. The GNC believes that it has been successful in its past efforts to increase gender, race, and ethnic diversity on the Board, and of the 14 director nominees for election at the 2013 annual meeting, nine nominees (64 percent) are women, Asian, African-American and/or Hispanic. The GNC and the Board believe that the 14 nominees bring to the Board a variety of different backgrounds, skills, professional and industry experience, and other personal qualities, attributes, and

 

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viewpoints that contribute to the overall diversity of the Board. The GNC and the Board will continue to monitor the effectiveness of its practice of considering diversity through assessing the results of any new director search efforts and the GNC’s and Board’s self-evaluation process in which directors discuss and evaluate the composition and functioning of the Board and its committees.

 

The GNC will consider an individual recommended by one of our stockholders for nomination as a new director. In order for the GNC to consider a stockholder-proposed nominee for election as a director, the stockholder must submit the name of the proposed nominee, in writing, to our Corporate Secretary at: Wells Fargo & Company, MAC #D1053-300, 301 South College Street, 30th Floor, Charlotte, North Carolina 28202. All such submissions must include the following information:

 

   

The stockholder’s name and address and proof of the number of shares of our common stock he or she beneficially owns;

 

   

The name of the proposed nominee and the number of shares of our common stock he or she beneficially owns;

 

   

Sufficient information about the nominee’s experience and qualifications for the GNC to make a determination whether the individual would meet the minimum qualifications for directors; and

 

   

Such individual’s written consent to serve as a director of the Company, if elected.

 

Our Corporate Secretary will present all stockholder-proposed nominees to the GNC for its consideration. The GNC has the right to request, and the stockholder will be required to provide, any additional information with respect to the stockholder nominee as the GNC may deem appropriate or desirable to evaluate the proposed nominee in accordance with the nomination process described above.

 

Succession Planning and Management Development

 

A primary responsibility of the Board is identifying and developing executive talent at the Company, especially the senior leaders of the Company and the CEO. Continuity of excellent leadership at all levels of the Company is part of the Board’s mandate for delivering superior performance to stockholders. Toward that goal, the executive talent development and succession planning process is integrated in the Board’s annual activities. Our Corporate Governance Guidelines require that our CEO and management annually report to the HRC and the Board on succession planning (including plans in the event of an emergency) and management development. The Corporate Governance Guidelines also require that the CEO and management provide the HRC and the Board with an assessment of persons considered potential successors to certain senior management positions at least once each year. The Board has assigned to the HRC, as set forth in its charter, the responsibility to oversee the Company’s talent management and succession planning process, including CEO succession planning.

 

Management and the Board take succession planning very seriously and while the Corporate Governance Guidelines require an annual review, the process for management development and succession planning occurs much more frequently and involves regular interaction between management, the HRC and the Board. Management regularly identifies high potential executives for additional responsibilities, new positions, promotions or similar assignments to expose them to diverse

 

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operations within the Company, with the goal of developing well-rounded, experienced, and discerning senior leaders. Identified individuals are often positioned to interact more frequently with the Board so that directors may gain familiarity with these executives.

 

As part of the annual Board review, the CEO and human resources executives collaborate with the HRC to prepare succession and management development plans. The HRC often requires additional information or planning from management in evaluating the succession and management development plans. The HRC reports to the full Board on its findings and the Board deliberates in executive session on the CEO succession plan.

 

INFORMATION ABOUT RELATED PERSONS

 

Related Person Transactions

 

Lending and Other Ordinary Course Financial Services Transactions.    During 2012 all of our executive officers, all of our directors (including all HRC members), each of the persons we know of that beneficially owned more than 5% of our common stock on December 31, 2012, and some of their respective immediate family members and/or affiliated entities had loans, other extensions of credit and/or other banking or financial services transactions (such as deposit, trust, retail and institutional brokerage, investment advisory, investment banking, capital markets, custody, transfer agent, insurance or similar services) in the ordinary course of business with our banking and other subsidiaries. Except for the relocation loans to two of our executive officers as described below, all of these lending, banking, and financial services transactions were on substantially the same terms, including interest rates, collateral, and repayment, as those available at the time for comparable transactions with persons not related to the Company, and did not involve more than the normal risk of collectability or present other unfavorable features.

 

Relocation Program.    Under our Relocation Program, as in effect prior to the July 30, 2002 revisions described below, executive officers who relocated at our request were eligible to receive a first mortgage loan (subject to applicable lending guidelines) from Wells Fargo Home Lending on the same terms as those available to our team members, which terms included waiver of the loan origination fee. Executive officers who relocated to a designated high cost area were eligible to receive from the Company a mortgage interest subsidy on the first mortgage loan of up to 25% of the executive’s annual base salary, payable over a period of not less than the first three years of the first mortgage loan, and a 30-year, interest-free second mortgage down payment loan in an amount up to 100% of his or her annual base salary to purchase a new primary residence. The down payment loan must be repaid in full if the executive terminates employment with the Company or retires, or if the executive sells the home. Our Relocation Program was revised effective as of July 30, 2002 to eliminate these loan benefits for executive officers. Under the revised Relocation Program, any executive officer who received the mortgage interest subsidy and interest-free down payment loan benefit described above was allowed to continue to receive those benefits, but is not allowed to amend the terms of the loan to which these benefits relate.

 

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We currently have interest-free loans outstanding under this Relocation Program to two of our executive officers. The following table provides information about these loans as of December 31, 2012:

 

Executive Officer

  Original
Loan
Amount
    Highest
Principal
Balance
During
2012
    12/31/12
Balance
    Principal
and
Interest
Paid
During
2012
    Interest
Rate
   

Purpose

Richard D. Levy

Executive Vice President

and Controller

  $ 325,000      $ 325,000      $ 325,000      $ 0        0   Loan made before July 30, 2002 in connection with his relocation from New Jersey to California following his employment by the Company.

James M. Strother

Senior Executive Vice

President and General

Counsel

    310,000        310,000        310,000        0        0      Loan made in connection with his relocation from Iowa to California after he assumed a new position with the Company and before he became an executive officer.

 

Transactions with Entities Affiliated with Directors.    Enrique Hernandez, Jr., one of our directors, is chairman, president, chief executive officer, and a majority owner of Inter-Con Security Systems, Inc. In 2012, Inter-Con provided guard services to certain of the Company’s retail banking stores and commercial properties under an agreement we first entered into in 2005. Annual payments to Inter-Con under this contract did not exceed 1% of Inter-Con’s 2010, 2011, or 2012 consolidated gross revenues, and each year since 2006 the Board has determined that our relationship with Inter-Con does not impair Mr. Hernandez’s independence under our Director Independence Standards. In 2012, we paid Inter-Con approximately $1.8 million for services under this contract. We believe that these services were provided on terms at least as favorable as would have been available from other parties. The Company intends to continue its dealings with Inter-Con in the future on similar terms.

 

Family and Other Relationships.    The Company employs family members of two of our current directors. These family members are adults who do not share the home of the director and the related director does not have an interest in the employment relationship. As of the end of 2012, these individuals were two of more than approximately 265,000 team members. We established the compensation paid to each of these individuals in 2012 in accordance with our employment and compensation practices applicable to team members with equivalent qualifications and responsibilities and holding similar positions. In addition to this compensation, these individuals also received employee benefits generally available to all of our team members.

 

The Company employs Cynthia H. Milligan’s brother, James A. Hardin, as a wealth management advisor. In 2012, James Hardin received compensation of approximately $227,000, including sales commissions. Mr. Hardin is not an executive officer of the Company and does not directly report to an executive officer of the Company. Ms. Milligan was unaware of her brother’s job discussions with the Company, and the Company was unaware of the family relationship with Ms. Milligan until after Mr. Hardin accepted the position.

 

The Company employs Philip J. Quigley’s son, Scott P. Quigley, who manages investments in the Principal Investments group at Wells Fargo Securities. In 2012, Scott Quigley received cash compensation of approximately $983,000, including a bonus payment associated with his performance which helped produce increased revenue for his business unit, which specializes in investing in corporate loans for the Company. He also received $294,000 as a long-term cash award that vests in

 

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equal installments over three years. In addition, on February 28, 2012, we granted him 4,017 RSRs, which will convert to shares of common stock upon vesting and which had a grant date fair value of approximately $126,000 (based on the NYSE closing price per share of our common stock on the grant date of $31.37). Scott Quigley is one of over 10,000 professionals in the Company’s Wholesale Banking group, is not an executive officer of the Company, and does not directly report to an executive officer of the Company. Mr. Quigley was unaware of his son’s job discussions with the Company, and the Company was unaware of the family relationship with Mr. Quigley until after the job offer had been made. Mr. Quigley is retiring as a director at the annual meeting.

 

We regard each of the above team members as a highly educated, trained, and competent team member, and we believe these employment relationships are beneficial to the Company and its stockholders. We also believe that these employment relationships do not have any impact on or impair the independence of the related directors or their ability to represent your best interests. Nevertheless, in 2010, the Board, based on the recommendation of the GNC, agreed as a matter of policy to strongly discourage the Company’s employment of any additional immediate family members of directors.

 

Michael J. Heid, an executive officer, has a son, Matthew Heid, who is employed with a third-party project management firm that entered into a contract with the Company to provide the son’s services to the Company for a real estate project involving the consolidation of some of the Company’s leased facilities. In 2012, the Company paid the project management firm approximately $135,000 under the contract for the son’s services, and the son’s interest in the contract payments was less than $100,000.

 

Related Person Transaction Policy and Procedures

 

The Board has adopted a written policy and procedures for the review and approval or ratification of transactions between the Company and its related persons and/or their respective affiliated entities. We refer to this policy and procedures as our Related Person Policy. “Related persons” under this policy include our directors, director nominees, executive officers, holders of more than 5% of our common stock, and their respective immediate family members. Their “immediate family members” include spouses, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and any person (other than a tenant or employee) who shares the home of a director, director nominee, executive officer, or holder of more than 5% of our common stock.

 

Except as described below, the Related Person Policy requires either the GNC or AEC, depending upon the related person involved, to review and either approve or disapprove all transactions, arrangements or relationships in which:

 

   

The amount involved will, or may be expected to exceed $100,000 in any fiscal year;

 

   

The Company is, or will be a participant; and

 

   

A related person or an entity affiliated with a related person has, or will have a direct or indirect interest (other than solely as a result of being a director or less than 10% owner of an entity).

 

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We refer to these transactions, arrangements, or relationships in the Related Person Policy as “Interested Transactions.” The Board, however, has determined that the GNC or AEC does not need to review or approve certain Interested Transactions even if the amount involved will exceed $100,000, including the following transactions:

 

   

Lending and other financial services transactions with related persons or their affiliated entities that comply with applicable banking laws and are in the ordinary course of business, non-preferential, and do not involve any unfavorable features;

 

   

Employment of a “named executive officer” or of an executive officer if he or she is not an immediate family member of another Company executive officer or director and his or her compensation would be reported in our proxy statement if he or she was a “named executive officer” and the HRC approved (or recommended that the Board approve) such compensation;

 

   

Compensation paid to one of our directors if the compensation is required to be reported in our proxy statement;

 

   

Transactions with another entity at which a related person’s only relationship with that entity is as a non-executive officer or employee, director (other than chairman of the board), limited partner, or holder of less than 10% of that entity’s ownership interests, if such transactions are in the ordinary course of business, non-preferential, and the amount involved does not exceed the greater of $1 million or 2% of such other entity’s consolidated gross revenues;

 

   

Charitable contributions by the Company or a Company-sponsored charitable foundation to tax-exempt organizations at which a related person’s only relationship is as a non-executive officer or employee or a director (other than chairman of the board), if the amount involved (excluding Company matching funds) does not exceed the lesser of $1 million or 2% of such organization’s consolidated gross revenues; and

 

   

Transactions with holders of more than 5% of our common stock and/or such holders’ immediate family members or affiliated entities, if such transactions are in the ordinary course of business of each of the parties, unless such stockholder is one of our executive officers, directors or director nominees, or an immediate family member of one of them.

 

The GNC approves, ratifies, or disapproves those Interested Transactions required to be reviewed by the GNC which involve a director and/or his or her immediate family members or affiliated entities. The AEC approves, ratifies, or disapproves those Interested Transactions required to be reviewed by the AEC which involve our executive officers, holders of more than 5% of our common stock, and/or their respective immediate family members or affiliated entities. Under the Related Person Policy, if it is not feasible to get prior approval of an Interested Transaction, then the GNC or AEC, as applicable, will consider the Interested Transaction for ratification at a future committee meeting. When determining whether to approve or ratify an Interested Transaction, the GNC and AEC will consider all relevant material facts, such as whether the Interested Transaction is in the best interests of the Company, whether the Interested Transaction is on non-preferential terms, and the extent of the related person’s interest in the Interested Transaction. No director is allowed to participate in the review, approval, or ratification of an Interested Transaction if that director, or his or her immediate family members or their affiliated entities are involved. The GNC or AEC annually reviews all ongoing Interested Transactions.

 

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ITEM 2—EXECUTIVE COMPENSATION AND ADVISORY RESOLUTION

TO APPROVE EXECUTIVE COMPENSATION (SAY-ON-PAY)

 

Compensation Committee Report

 

In its capacity as the compensation committee of the Board, the HRC has reviewed and discussed with management the CD&A below. Based on this review and these discussions, the HRC has recommended to the Board that the CD&A be included in this proxy statement and incorporated by reference in our Annual Report on Form 10-K for the year ended December 31, 2012 for filing with the SEC.

 

Members of the Human Resources Committee:

Lloyd H. Dean, Chair

John S. Chen

Susan E. Engel

  

Donald M. James

Stephen W. Sanger

 

Compensation Discussion and Analysis

 

We describe below our executive compensation philosophy and the 2012 pay decisions for our executive officers named in the Summary Compensation Table:

 

John G. Stumpf

    

Chairman, President and CEO

Timothy J. Sloan

    

Senior Executive Vice President and CFO

David M. Carroll

    

Senior Executive Vice President, Wealth, Brokerage and Retirement

David A. Hoyt

    

Senior Executive Vice President, Wholesale Banking

Avid Modjtabai

    

Senior Executive Vice President, Consumer Lending

Carrie L. Tolstedt

    

Senior Executive Vice President, Community Banking

 

2012 Performance and Compensation Overview

 

2012 Company Performance Highlights

 

We had record net income and EPS in 2012 despite an uneven economic recovery and a challenging interest rate environment. We continued to lead the financial services industry in areas key to our customers’ financial success and critical to the economy, including small business, home, and auto lending. At the same time, we remained focused on managing costs by serving our customers more efficiently but without forgoing opportunities to earn more of their business, such as helping more than 2 million customers refinance or purchase a home. We continued to benefit in other ways from our diversified business model, growing loans and deposits and increasing capital even as we returned more of it to our stockholders through higher dividends and additional share repurchases. We also continued to reduce our credit losses, nonperforming assets and liquidating loan portfolio balances, and resolved a number of significant mortgage-related legal matters.

 

Highlights of our 2012 performance include:

 

   

Record net income of $18.9 billion, up 19% from 2011

 

   

Record diluted earnings per share of $3.36, up 19% from 2011

 

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Revenue of $86.1 billion, up 6% from 2011

 

   

Return on assets of 1.41%, up from 1.25% for 2011

 

   

Return on equity of 12.95%, up from 11.93% for 2011

 

   

Efficiency ratio of 58.5%, compared with 61.0% for 2011

 

   

Total 1-year stockholder return of 27%

 

   

Common stock dividends of $0.88 per share, up 83% from 2011

 

   

Tier 1 capital ratio of 11.75%, up from 11.33% at year-end 2011

 

   

Loans of $800 billion, up $30 billion from year-end 2011

 

   

Deposits of more than $1 trillion, up $83 billion from year-end 2011

 

   

Mortgage originations of $524 billion, up almost 50% from 2011

 

   

Credit losses down 20%, and nonperforming assets down 6% from 2011

 

2012 Compensation Highlights

 

In deciding 2012 named executive compensation, the HRC continued to be guided by four compensation principles that have historically governed its pay decisions for named executives:

 

   

Pay for Performance – Link compensation to Company, business line and individual performance so that superior performance results in higher compensation and inferior performance results in lower compensation

 

   

Foster Risk Management Culture – Structure compensation to promote a culture of risk management consistent with the Company’s Vision and Values and that discourages imprudent risk-taking

 

   

Attract and Retain Top Executive Talent – Offer competitive pay to attract, motivate and retain industry executives with the skills and experience to drive superior long-term Company performance

 

   

Encourage Creation of Long-Term Stockholder Value – Use performance-based long-term stock awards with meaningful and lasting share retention requirements to encourage sustained stockholder value creation

 

The HRC maintained the overarching compensation structure for our named executives put in place following the financial crisis. As in 2010 and 2011, the HRC awarded three primary elements of compensation for 2012: base salary, an annual incentive award, and a long-term equity-based incentive award. The HRC maintained the relative balance between annual fixed compensation and annual variable “at-risk” compensation, and continued to weight long-term compensation over annual, and equity compensation over cash. Within this framework, the HRC paid a portion of 2012 annual incentives in Restricted Share Rights (RSRs) that vest over three years and awarded long-term equity compensation in Performance Shares that “cliff” vest at the end of three years based on Company performance during that period. In maintaining this mix and weighting of compensation, the HRC considered feedback from our major stockholders received through our investor outreach program during 2012 and the approval by our stockholders of the advisory “say-on-pay” resolutions to approve executive compensation at each of our last two annual meetings by 96% of the votes cast.

 

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The table below shows each named executive’s 2012 base salary, annual incentive award and target long-term equity incentive grant value as determined by the HRC. The table is not a substitute for, and should be read together with the Summary Compensation Table which presents 2012 named executive compensation in accordance with SEC disclosure rules and includes additional compensation elements and other important information.

 

Named Executive

   Base Salary
($)
    Annual Incentive
Award
($)(1)
     Long-Term Equity
Incentive Award
($)(2)
     Total
($)
 

John G. Stumpf

     2,800,000        4,000,000         12,500,000         19,300,000   

Timothy J. Sloan

     1,700,000 (3)      1,600,000         5,500,000         8,800,000   

David M. Carroll

     1,500,000        1,425,000         5,500,000         8,425,000   

David A. Hoyt

     2,000,000        1,900,000         6,750,000         10,650,000   

Avid Modjtabai

     1,500,000        1,425,000         5,500,000         8,425,000   

Carrie L. Tolstedt

     1,700,000        1,530,000         5,500,000         8,730,000   

 

(1)   A portion of the award was paid in RSRs that vest over three years as described in “—2012 Compensation Actions for Named Executives; 2012 Annual Incentive Compensation.”
(2)   Dollar value of 2012 grant of Performance Shares at “target.” Actual pay delivered or realized will be determined in first quarter 2015 and may range from zero to 150% of the target shares depending on Company performance. See “—2012 Compensation Actions for Named Executives; 2012 Long-Term Incentive Compensation” for additional information.
(3)   Annual rate effective March 11, 2012. See “—2012 Compensation Actions for Named Executives; 2012 and 2013 Annual Base Salaries.”

 

The table below shows the CEO’s and the average of the other named executives’ 2012 base salary, annual incentive award and target long-term equity incentive grant value as a percentage of the total in the table above, as well as the relative percentage of equity compensation to that total.

 

    

Fixed

 

Variable “At-Risk”

   
    

Base Salary

 

Annual Incentive(1)

 

Long-Term Incentive

 

Equity(1)

CEO

  14%   21%   65%   70%

Non-CEO Average

  19%   17%   64%   66%

 

(1)   Includes the portion of the annual incentive award paid in RSRs that vest over three years.

 

2012 Compensation Governance Highlights

 

In making 2012 named executive compensation decisions, the HRC:

 

   

Maintained the relative balance between base salary and annual incentive award opportunity to reduce undue focus on short-term financial performance at the risk of the Company’s long-term interests

 

  Ø  

Capped annual incentive opportunities for the named executives other than the CEO at one times base salary

 

  Ø  

Determined that the benefits to the Company and stockholders of achieving the appropriate compensation balance outweighed the non-deductibility of salaries in excess of IRC Section 162(m) limits

 

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Maintained high proportion of total pay in long-term performance-based equity compensation to align management and stockholder interests in increasing stockholder value over the long-term

 

  Ø  

Granted long-term equity compensation entirely in Performance Shares that vest based on achievement of three-year financial performance criteria relative to peers rather than upon the passage of time

 

  n  

Three-year vesting period further aligns compensation to long-term risk and strong risk management practices, as well as to our Company’s future performance

 

  Ø  

Included second, absolute performance trigger that reduces the target number of Performance Shares by one-third for each year in the three-year performance period the Company incurs a Net Operating Loss (see definition below)

 

  Ø  

To keep equity compensation “at risk” following retirement, provided for payment over time instead of immediately on retirement

 

   

Enhanced strong compensation risk-management practices to discourage imprudent short-term risk taking by requiring executives to bear the long-term risk of their activities

 

  Ø  

Paid a portion of 2012 annual incentive awards in RSRs that vest over three years

 

  n  

Three-year vesting period further aligns compensation to long-term risk and strong risk management practices, as well as to our Company’s future performance

 

  Ø  

For these RSR awards, and other equity awards granted to our named executives beginning in 2013, added an adjustment provision that gives the HRC full discretion to cancel all or a portion of these awards if:

 

  n  

The executive engages in misconduct which has or might reasonably be expected to have a reputational or other harm to the Company or any conduct that constitutes “cause,”

 

  n  

The executive engages in misconduct or commits a material error that causes or might be reasonably expected to cause significant financial or reputational harm to the Company or the executive’s business group,

 

  n  

The executive improperly or with gross negligence, including in a supervisory capacity, fails to identify, escalate, monitor or manage, in a timely manner and as reasonably expected, risks material to the Company or the executive’s business group,

 

  n  

The award was based on materially inaccurate performance metrics, whether or not the executive was responsible for the inaccuracy, or

 

  n  

The Company or the executive’s business group suffers a material downturn in financial performance or suffers a material failure of risk management

 

  Ø  

Evaluated the individual performance of named executives based on their focus on appropriate risk-management practices and outcomes

 

  Ø  

Maintained overarching recoupment policies for recovery of previously awarded incentive compensation if the payments were based on materially inaccurate financial information or performance criteria, whether or not the executive was responsible

 

  Ø  

Maintained a robust stock ownership requirement through one year after retirement

 

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  Ø  

Continued our prohibition on hedging and speculative trading in Company stock

 

The following table illustrates how our compensation principles were reflected in the HRC’s 2012 compensation actions:

 

     Pay for Performance    Risk Management    Attract and Retain
Top Executive Talent
   Encourage Creation
of Long-Term
Stockholder Value

Mix of Base Salary and Annual Incentive Opportunity

   ü    ü    ü    ü

High Proportion of Long-Term Comp-At-Risk in Total Mix of Comp

   ü    ü    ü    ü

Granted Only Performance Share Awards for Long-Term Comp

   ü    ü    ü    ü

Performance-Based Total Comp Mixture

   ü    ü    ü    ü

Compensation-Related Risk Management Policies

      ü       ü

 

Compensation Elements

 

The Company’s executive compensation program provides a mix of direct cash and equity compensation, and offers participation in Company-sponsored plans that are generally available to other employees. The HRC determines the appropriate mix of direct compensation in its discretion guided by the Company’s compensation principles. For 2012, the elements of direct compensation included base salary, an annual incentive award, and long-term equity incentive in the form of Performance Shares. A portion of the 2012 annual incentive award for each named executive was paid in RSRs that vest over three years.

 

Pay Element

  

Description/Objectives

  

Performance Criteria

  

Vesting Period

Annual Compensation         
Base Salary   

•     Paid in cash

•     Reflects the executive’s experience and level of responsibility

•     Decreased focus on short-term risk-taking outweighs limits on tax-deductibility

  

•     Amount reviewed annually by HRC and subject to adjustment based on changes in responsibilities or competitive market conditions

  

N/A

 

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Pay Element

  

Description/Objectives

  

Performance Criteria

  

Vesting Period

Annual Incentive Award   

•     Typically paid in cash or a combination of cash and stock with a portion subject to vesting over time

•     Together with base salary and long-term compensation, intended to be competitive with total compensation for comparable positions and performance at peers

•     Award decision based on Company, business line and individual performance

•     HRC determines final award

  

•     Award opportunity and structure reviewed annually by HRC

•     Performance criteria established annually by the HRC

  

•     Payout determined and awarded after end of fiscal year

•     Portion typically vests over three years

Long-Term Compensation

        
Performance Shares   

•     Convert 1-for-1 into shares of common stock

•     Align management and stockholder interests

•     Emphasize performance-based culture

•     Include dividend equivalents subject to same vesting conditions

•     Strong retention tool

  

•     HRC determines performance criteria

•     2012 grants tied to Company’s RORCE ranking compared with peer group

•     2012 grants may vest from zero to 150% of target shares

•     2012 target shares adjusted downward by  1/3 for each year the Company incurs a Net Operating Loss

  

•     Typically at end of 3-year measurement period

•     Failure to achieve performance targets may reduce award to zero

 

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Pay Element

  

Description/Objectives

  

Performance Criteria

  

Vesting Period

RSRs   

•    Convert 1-for-1 into shares of common stock

•    Align management and stockholder interests

•    Include dividend equivalents subject to same vesting conditions

•    Strong retention tool

  

•    HRC determines vesting criteria; typically time-based

  

•    Typically vest over 3 to 5 years

 

Stock Options
(not granted to named executives since 2009)

  

 

•    Ten-year term

•    Exercise price set at closing stock price on date of grant

  

 

•    Share price appreciation

  

 

•    Typically ratably over 3 years

Plans and Programs         
Deferred Compensation   

•    Voluntary

•    Provides financial planning opportunity

•    Market returns only for Company-originated plans

  

N/A

  

•    Compensation deferred into accounts earning a return based on investment options similar to 401(k) Plan

•    Executive selects the time of payout

Benefit Programs   

•    Company 401(k) Plan with Company match

•    Company Cash Balance Plan (frozen for future contributions July 2009)

•    Company health insurance, life insurance and severance plans

•    Employees pay certain costs for health insurance and life insurance

  

•    Available to all Company employees on the same terms

  

N/A

 

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Pay Element

  

Description/Objectives

  

Performance Criteria

  

Vesting Period

  

•      No employment agreements, severance agreements, or golden parachute agreements

     
Perquisites   

•      De minimis

  

N/A

  

N/A

 

Compensation Program Governance

 

In making compensation decisions for named executives, the HRC operates within a governance structure that assists it in making compensation decisions guided by our compensation principles. The HRC applies its discretion in taking into account all aspects of our compensation framework when making its compensation decisions. Key attributes of this compensation governance framework, in addition to HRC discretion, include:

 

   

Company performance

 

   

Peer Group analysis, as to both compensation and financial performance

 

   

Business line performance

 

   

Individual performance

 

   

Independent compensation consultant advice

 

   

Risk management

 

Company Performance.    At the core of the HRC’s compensation governance is an analysis of the Company’s performance on an absolute basis and relative to peers, reflecting the compensation principles of paying for performance and encouraging the creation of long-term stockholder value. For the applicable fiscal year, the HRC determines threshold performance measures under our Performance Policy, at least one of which must be achieved for annual incentives to be paid to named executives. Failure to achieve a threshold performance goal eliminates any annual incentive pay for the named executives. Upon satisfaction of a threshold performance goal, each named executive may be awarded a maximum amount of incentive compensation of 0.5% of the Company’s net income under the Performance Policy, as adjusted for certain items, or such lesser amount as the HRC determines in its discretion. (If stockholders approve the amendment and restatement of the LTICP under Item 3, this maximum will be reduced to 0.2% of net income.) However, even if one or more threshold performance goals are satisfied, the Company may not pay annual incentive awards to named executives if the Company does not have positive net income. As described below in “—HRC Discretion,” the HRC retains discretion to adjust the actual incentive award downward to zero. The HRC may also review Company performance measures as part of its deliberation on annual incentive compensation, including Company performance relative to the Financial Performance Peer Group.

 

Peer Group Analysis.    Reflecting the compensation principles of paying for performance and attracting and retaining top executive talent, the HRC uses Peer Group data to inform its decisions regarding the compensation of named executives. The HRC periodically reviews and may adjust the Peer Groups as part of its regular review of executive compensation pay and pay practices in connection with future compensation decisions.

 

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Consistent with 2011, for 2012 the HRC used two separate (although overlapping) Peer Groups: (1) the Financial Performance Peer Group, which is a subset of the KBW Bank Sector Index and consists of 11 financial services companies that best match the Company in scope, scale, business model/mix and geography and that the Company most directly competes with for financial capital and customers, and (2) the Labor Market Peer Group, which consists of 10 companies that the Company most directly competes with for executive talent.

 

The HRC used the Financial Performance Peer Group to:

 

   

compare the Company’s relative overall financial performance, including for consideration of annual incentive awards;

 

   

set and measure the RORCE performance goal under our Performance Policy for purposes of Section 162(m) tax deductibility; and

 

   

set and measure the RORCE performance for vesting of long-term Performance Share awards.

 

The HRC used the Labor Market Peer Group to evaluate overall pay levels and compensation mix for named executives and to gauge the competitiveness of the Company’s pay practices.

 

The members of the two Peer Groups are:

 

Financial Performance Peer Group

  

Labor Market Peer Group

Bank of America Corporation

   American Express Company

BB&T Corporation

   Bank of America Corporation

Capital One Corporation

   The Bank of New York Mellon Corporation

Citigroup Inc.

   Citigroup Inc.

Fifth Third Bancorp

   The Goldman Sachs Group, Inc.

JPMorgan Chase & Co.

   JPMorgan Chase & Co.

KeyCorp

   Morgan Stanley

The PNC Financial Services Group, Inc.

   The PNC Financial Services Group, Inc.

Regions Financial Corporation

   State Street Corporation

SunTrust Banks, Inc.

   U.S. Bancorp

U.S. Bancorp

  

 

Financial Performance Peer Group.    For 2012, the HRC compared the Company’s financial performance with the Financial Performance Peer Group based on a number of measures commonly used for analyzing financial services companies, including those relating to:

 

   

income, including earnings per share, revenue, net interest margin, efficiency ratio, operating leverage and pre-tax pre-provision income;

 

   

stockholder returns, including return on average common equity, RORCE, total stockholder return, price-earnings ratio and market capitalization;

 

   

balance sheet size and composition, including average total deposits, retail deposit market share, and average loans;

 

   

credit quality, including non-performing assets ratios; and

 

   

capital ratios, including tier 1 capital ratio.

 

The HRC does not have a pre-established formula to determine which financial measures may be more or less important in evaluating the Company’s performance. In addition, then-current

 

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circumstances may impact the importance of some measures relative to others. For example, credit-related performance measures may be considered more relevant during times of economic stress than during other periods, revenue-related performance measures may be more relevant during times of economic growth, and productivity measures such as efficiency ratio, return on equity or return on assets may be more relevant during periods of slower economic growth. The HRC relies on the combined judgments of its members as to which financial measures to emphasize in evaluating the Company’s performance compared with the Financial Performance Peer Group. The HRC then makes its own judgment about the Company’s overall actual performance, including in comparison with the Financial Performance Peer Group.

 

As explained in more detail below, vesting of the 2012 Performance Shares also will depend on the Company’s long-term RORCE performance compared with members of the Financial Performance Peer Group.

 

Labor Market Peer Group.    In considering the 2012 compensation actions for named executives, as well as to track competitive pay levels and trends generally, the HRC reviewed compensation data for the Labor Market Peer Group. The Labor Market Peer Group companies provide the basis for our competitive compensation comparisons that the HRC considers in establishing the total compensation opportunities for our named executives.

 

Business Line Performance.    Each of Messrs. Carroll and Hoyt and Mses. Modjtabai and Tolstedt has business line performance goals for the businesses they manage. These goals reflect: the projected contribution of their business lines to the Company’s internally derived profit plan that management prepares and reviews annually with the Board; the difficulty of achieving the performance goals in the applicable economic, regulatory or strategic environment; and the quality of the business line results from a risk management perspective. Consideration of business line performance reflects all four compensation principles.

 

In considering annual incentive awards for named executives with business line responsibilities, the HRC evaluates business line financial results for the applicable executive taking into account not only the business line’s performance and its contribution to the Company’s overall performance, but also the quality of those results (e.g., risks taken to achieve the results, both in terms of risk outcomes and forward-looking measures of risk) and the difficulty of achieving those results (e.g., economic, business and regulatory conditions). Success or failure at achieving strategic business line objectives, including business line financial results, is factored into the HRC’s executive compensation decisions for these business line leaders. However, the HRC does not base incentive compensation decisions for these named executives solely on business line performance; the HRC believes they must also have a significant stake in the Company’s overall performance to encourage collaboration among business lines and as a check against unnecessary or excessive risk-taking at the individual business line level. Because of differences in organizational structure and external business segment reporting, our business lines rarely correspond perfectly to the business lines of Peer Group members. Therefore, the HRC does not compare business unit financial performance with the Financial Performance Peer Group. The HRC may consider the effects of acquisitions, divestitures, internal reorganizations or other changes in reporting relationships during the year. Although the HRC considers a business line’s financial results, achievement of specific business line performance goals may not be material in the context of the executive compensation decisions for these named executives. Business line performance goals nonetheless serve valuable additional purposes for the Company, including resource allocation and general strategic business direction.

 

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Individual Performance.    The HRC considers the individual performance of the Company’s named executives, both as part of an annual assessment and in the Board’s year-round interactions with them. The HRC annually reviews the CEO’s achievement of individual qualitative objectives and the CEO’s assessment of each other named executive as part of overall executive compensation decision-making. These objectives include compliance with our policies on information security, regulatory compliance, diversity and inclusion objectives, as well as objectives appropriate for each executive’s position and responsibilities. For 2012, the HRC also evaluated the performance of each of our named executives based on their focus on appropriate risk-management practices and outcomes. The HRC may adjust or eliminate incentive compensation awards, regardless of achieving applicable financial performance goals or individual qualitative objectives, if the HRC determines that a named executive has failed to comply with our Code of Ethics and Business Conduct or with our policies on information security, regulatory compliance, and risk management. Consideration of individual performance reflects all four of the compensation principles.

 

Our CEO assists the HRC in evaluating individual performance for those executive officers who report to him. Our CEO also makes compensation recommendations to the HRC for these executives. The HRC makes its own determinations regarding our CEO’s individual performance and compensation with input from non-management members of the Board who ratify and approve the CEO’s compensation.

 

Independent Compensation Consultant Advice.    To establish a framework for evaluation of the competitiveness of 2012 compensation for our named executives, the HRC reviewed data compiled by Cook & Co., the HRC’s independent compensation consultant. This data included annual salary, annual incentive, long-term equity, and total compensation amounts for Labor Market Peer Group named executive officers. This compensation data was ranked within the Labor Market Peer Group by the aggregate amount of base salary, annual target and actual incentive awards, plus the annualized grant date value of long-term cash and equity compensation. The HRC also reviewed Cook & Co.’s calculations (excluding the Company) of the bottom quartile, average, median, and top-quartile amounts for each of these pay components as well as for total compensation. The HRC used this compensation information, together with any reported changes in Labor Market Peer Group compensation, to help develop a framework for evaluating the competitiveness of 2012 compensation for our named executives. The HRC’s use of the independent compensation consultant reflects the compensation principles of attracting and retaining highly qualified individuals with competitive compensation and paying for performance.

 

Cook & Co. also advises the HRC on the appropriateness of the Company’s executive pay philosophy and compensation principles, Peer Group selection and general executive compensation program design. George Paulin, the CEO of Cook & Co., attends most HRC meetings. Cook & Co. is retained by the HRC and does no other work for the Company or management other than to provide consulting services to the GNC and Board that are directly related to executive and non-employee director compensation.

 

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Risk Management.    The HRC’s compensation governance framework also includes assessments of risks inherent in executive compensation practices, including the interplay between risk-taking and executive compensation. These risk management assessments involve a number of senior executives from the Company’s risk management, human resources, legal, and compliance functions. The Company has taken specific actions as a result of continued risk management assessments to strengthen the governance of executive compensation practices, including:

 

   

reducing the risks of focusing too greatly on short-term performance for named executives’ compensation by reducing target and maximum annual incentive opportunities in relation to salaries and increasing the emphasis on performance-based long-term incentives in total compensation;

 

   

awarding a portion of the annual incentive in equity with a three-year vesting period and that is subject to forfeiture or cancellation at the discretion of the HRC upon the occurrence of specified triggering events;

 

   

continuing to evaluate and further strengthen compensation recoupment (i.e., “clawback”) policies;

 

   

extending the holding requirement for stock compensation until after retirement;

 

   

keeping equity compensation “at risk” by paying over time into retirement instead of paying immediately upon retirement;

 

   

granting long-term incentive compensation in Performance Shares where the pay delivered or realized depends on the Company’s relative RORCE performance rather than granting time-vested stock options or RSRs;

 

   

including a second performance trigger in the Performance Share awards to reduce the target number if the Company incurs a Net Operating Loss;

 

   

evaluating the performance of our named executives’ based on their focus on appropriate risk-management practices and outcomes; and

 

   

reviewing the Company’s incentive and commission plans below the executive level with the HRC as part of the Board’s responsibility for oversight of compensation practices.

 

See also “Corporate Governance—Risk Management and Compensation Practices.

 

Clawback and Recoupment Policies.    Wells Fargo has strong recoupment and clawback policies in place designed so that incentive compensation awards to our named executives encourage the creation of long-term, sustainable performance, while at the same time discourage our executives from taking imprudent or excessive risks that would impact the Company’s performance.

 

   

Under Wells Fargo’s award agreements, equity-based compensation grants to our team members since 2009 have been subject to any recoupment or clawback policy or requirement from time to time maintained by Wells Fargo or required by law.

 

   

In addition, the Company has three separate recoupment or clawback policies in place that are applicable to our executive officers.

 

   

Our Unearned Compensation Recoupment Policy adopted in 2006 allows for clawback of any bonus or incentive compensation paid or awarded to our executive officers in the event of misconduct by the executive that contributes to the Company having to restate all or a significant portion of its financial statements.

 

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In 2009, the Company also adopted an additional clawback policy requiring recoupment or clawback of previously awarded incentive compensation if the payments were based on materially inaccurate financial information, whether or not the executive was responsible. The Company extended this policy in 2010 to cover all of its executive officers and has maintained this clawback policy in support of our compensation principles and incentive compensation risk management practices.

 

   

RSR awards granted as part of 2012 annual incentives, and other equity awards granted to our named executives beginning in 2013, included an adjustment provision that gives the HRC full discretion to cancel all or a portion of these awards if the executive took imprudent risk either intentionally, out of negligence or improperly as discussed in more detail above under “2012 Compensation Governance Highlights.”

 

If the Board or HRC determines to clawback or recoup compensation following a determination that a senior executive has engaged in misconduct, including in a supervisory capacity, that results in significant financial or reputational harm to the Company or in a material financial restatement, the Board or HRC will determine whether and to what extent public disclosure of information regarding such clawback or recoupment, including the amount of compensation and the executive(s) impacted, is appropriate, subject to applicable legal and contractual restrictions, including privacy laws.

 

The ongoing evaluation and enhancement of compensation-related risk management practices reflects the compensation principles of risk management, aligning management interests with stockholders’ interests and paying for performance.

 

HRC Discretion.    The final element in our compensation governance framework is the HRC’s exercise of business judgment and discretion to make compensation decisions for our named executives after taking into account all other aspects of our framework. There are certain situations where the HRC has no discretion to award incentive compensation; for example, if a performance goal required for payment of incentive compensation under our Performance Policy is not met. However, if a threshold performance goal under our Performance Policy is satisfied, the HRC has discretion to decline to make awards or to decrease the maximum amount of an award under the Performance Policy, if in the exercise of its business judgment the HRC determines it to be in the best interests of stockholders. The HRC also has discretion to pay some or all of annual incentive awards in stock instead of cash and/or to provide for vesting and payment of the award over time.

 

The HRC believes that compensation opportunities and its compensation decisions should reflect Company, business line and individual performance, and that our compensation governance framework provides a reliable and structured approach for making pay decisions. The HRC also believes that use of rigid formulas may not always provide the best results for stockholders; therefore, it takes into account all of the factors in our framework when making its compensation decisions. Given the paramount goal of superior Company performance for the benefit of stockholders, the HRC uses its discretion to make award decisions for our named executives. For example, the HRC may use its discretion to make an award to a named executive even if the executive’s business line has not achieved its financial performance goals, if the Company overall has performed at superior levels and the HRC determines an award is appropriate based on its evaluation of individual and other performance factors. Conversely, the HRC may use its discretion to reduce an incentive award to a named executive whose business line has underperformed on its objectives, despite the Company’s overall performance. In determining incentive awards, the HRC may also consider changes in economic conditions or other relevant factors during the fiscal year that may have affected Company or business line performance.

 

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Impact of Prior Say on Pay Votes on Compensation Decisions and Feedback from Our Investor Outreach Program

 

At the Company’s 2012 annual meeting, our stockholders approved, by 96% of the votes cast, the non-binding advisory resolution on the 2011 compensation of named executives submitted to stockholders in accordance with the Dodd-Frank Act. The Company, Board and HRC pay careful attention to communications received from stockholders on executive compensation, including the non-binding advisory “say on pay” vote. The favorable advisory vote, as well as direct feedback on our executive compensation program and disclosures received in 2012 from the Company’s major stockholders and other stakeholders through our investor outreach program, was considered and reflected in the decision to maintain the overarching framework and balance for named executives’ compensation for 2012, but not for specific pay-level decisions. Based on the preference expressed by stockholders at the 2011 annual stockholders’ meeting, the Board has determined to have an annual advisory vote on executive compensation until the next advisory vote on the frequency of our advisory “say on pay” vote is held.

 

2012 Compensation Actions for Named Executives

 

The HRC took the compensation actions described below for the named executives in 2012. The HRC’s decision-making was conducted within the compensation governance framework described above.

 

2012 and 2013 Annual Base Salaries.    The HRC recalibrated executive officer base salaries and target and maximum payouts for annual incentive compensation in early 2010 as a result of its re-evaluation of the appropriate compensation structure for the Company’s executive officers. In setting base salaries at higher than pre-financial crisis levels and reducing target and maximum annual incentive compensation opportunities from pre-financial crisis levels, the HRC sought to achieve a better balance between fixed and variable annual compensation to reduce the focus on short-term performance and the potential related risks.

 

The annual base salaries for Mr. Stumpf ($2,800,000) and Ms. Tolstedt ($1,700,000) have not changed since March 2010. Effective March 11, 2012, Mr. Sloan’s salary was increased to $1,700,000 from $1,500,000 to achieve better parity among the Company’s senior level executives. Effective March 10, 2013, each of Mr. Carroll’s and Ms. Modjtabai’s base salaries were increased to $1,700,000 from $1,500,000 and Mr. Hoyt’s base salary was increased to $2,200,000 from $2,000,000 based on their responsibilities and as part of a competitive, balanced mix of total compensation. The base salaries for the named executives are paid entirely in cash.

 

2012 Annual Incentive Compensation.    In accordance with Section 162(m) and the Performance Policy, the HRC established two alternative Performance Policy goals as a precondition to any 2012 annual incentive awards: (1) EPS of at least $2.50 or (2) RORCE of at least the median of the Financial Performance Peer Group. The Company’s actual results exceeded both of these Performance Policy goals, with EPS of $3.36 and RORCE of 13.4%, which is above the median RORCE in the Financial Performance Peer Group (9.5%). As a result, the 2012 annual incentive awards paid to the named executives are expected to be deductible under Section 162(m). In addition, satisfaction of the Performance Policy goals gave the HRC the authority to award maximum 2012 incentive compensation of up to $94.5 million for each named executive (i.e., 0.5% of the Company’s 2012 net income of $18.9 billion), or such lesser amount as the HRC in its discretion determines.

 

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In considering annual incentive compensation for the named executives and in exercising its discretion to pay less than the maximum permitted by the Performance Policy, the HRC established target and maximum incentive award opportunities of 50% and 100% of base salary, respectively, for the named executives other than Mr. Stumpf. The HRC did not establish a pre-determined target and maximum opportunity for Mr. Stumpf to retain greater discretion in determining his annual incentive award. The HRC established qualitative performance objectives for Mr. Stumpf regarding strategic leadership, financial discipline, risk management, talent development, succession planning, team member diversity, and his role in articulating the Company’s culture and Vision and Values to stakeholders and offering national leadership on relevant Company and industry issues.

 

In determining 2012 annual incentive awards for the named executives, the HRC considered information pertaining to the factors described above under “Compensation Program Governance.” Other than achievement of one of the alternative Performance Policy goals, no single factor was considered to be more important than others in the HRC’s decision-making process. In addition, although the HRC reviewed compensation data for similarly situated executives in the Labor Market Peer Group to assess the competitiveness of the Company’s overall pay and compensation mix, it did not make a separate preliminary determination of an annual incentive award amount and then adjust it to reflect the Labor Market Peer Group data.

 

The HRC determined to pay 2012 annual incentive awards to the named executives in the following manner:

 

   

for the portion of the award amount up to $1 million, all cash; and

 

   

for the portion of the award amount over $1 million, 2/3 in cash and 1/3 in RSRs that vest ratably over three years.

 

For example, an incentive award of $1.6 million would be paid in the form of $1.4 million in cash and $200,000 in RSRs (i.e., 1/3 of the amount over $1 million).

 

The HRC structured the payments in this manner to properly balance growth initiatives and appropriate risk taking, and to be consistent with the Company’s increased emphasis on long-term incentives as opposed to short-term cash payouts. The HRC also believes the payment of a portion of the annual incentive in the form of an RSR award that vests over time mitigates risks inherent in annual incentive compensation.

 

Stumpf.    In making the 2012 annual incentive compensation award determination for Mr. Stumpf, the HRC considered, among other factors, the following:

 

   

the Company’s record 2012 net income of $18.9 billion, record EPS of $3.36, and RORCE of 13.4%;

 

   

the Company’s relative performance compared with the Financial Performance Peer Group in the financial metrics discussed above under “—Compensation Program Governance—Peer Group Analysis—Financial Performance Peer Group;”

 

   

the Company’s relative performance compared with the Financial Performance Peer Group in

 

  Ø  

1-, 3-, and 5-year return on average common equity,

 

  Ø  

1-, 3-, and 5-year RORCE,

 

  Ø  

1-, 3-, and 5-year total stockholder return;

 

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the Company’s success in attaining strategic corporate objectives, including

 

  Ø  

growing revenue year over year,

 

  Ø  

improving the Company’s capital position while increasing common stock dividends and share repurchases,

 

  Ø  

significant progress in achieving expense efficiency initiatives while pursuing revenue opportunities,

 

  Ø  

improving market share in many businesses,

 

  Ø  

managing the Company’s stabilized and improving credit quality,

 

  Ø  

continued progress resolving mortgage-related and other legal matters,

 

  Ø  

substantial but not complete progress in achieving diversity and inclusion initiatives; and

 

  Ø  

positioning the Company for future success following the financial crisis and regulatory reform;

 

   

compensation of chief executive officers in the Labor Market Peer Group; and

 

   

the Board’s qualitative assessment of Mr. Stumpf’s performance.

 

The Board believes that Mr. Stumpf has continued to show strong and effective leadership in the aftermath of the financial crisis, leading the Company to outstanding 2012 financial performance without compromising our risk management principles. The Board believes his leadership continues to be critical to achieving our long-term strategic goals of strengthening our balance sheet and building capital to support future growth while returning more capital to our stockholders; reducing our risk profile through effective management of credit, market and operational risks; strategically positioning the Company to take advantage of revenue opportunities in existing and new businesses while managing our expenses by serving customers better and more efficiently; and communicating the Company’s mission and values to our investors, communities and other stakeholders. Upon consideration of Mr. Stumpf’s performance, including the factors set forth above, the HRC approved, and the Board ratified, a 2012 annual incentive compensation award for Mr. Stumpf of $4,000,000.

 

Sloan.    In making the 2012 annual incentive compensation award determination for Mr. Sloan, the HRC considered, among other things, the following:

 

   

the factors listed in the first 4 bullet points cited above for Mr. Stumpf;

 

   

compensation of chief financial officers in the Labor Market Peer Group; and

 

   

the recommendations of Mr. Stumpf based on his assessment of Mr. Sloan’s 2012 performance.

 

Since Mr. Sloan successfully transitioned to his new role as CFO during 2011, he has continued to play an integral part in the Company’s achievement of 2012 financial priorities, including planning and implementing the Company’s expense management and efficiency initiative, capital planning and risk management. He is a primary spokesman for the Company with investors, the media and the investment community and his efforts have furthered the Company’s reputation with those audiences. Upon consideration of Mr. Sloan’s performance, including the factors set forth above, the HRC approved a 2012 annual incentive compensation award for Mr. Sloan of $1,600,000.

 

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Carroll, Hoyt, Modjtabai, and Tolstedt.    In making the 2012 annual incentive compensation award determinations for Messrs. Carroll and Hoyt, and Mses. Modjtabai and Tolstedt, the HRC considered, among other things, the following:

 

   

the factors listed in the first 4 bullet points cited above for Mr. Stumpf;

 

   

compensation of similarly situated executives in the Labor Market Peer Group, where such information was available;

 

   

the recommendations of Mr. Stumpf based on his assessment of their respective 2012 performance; and

 

   

success in achieving strategic objectives in the business lines for which each is responsible as discussed below, including success in furthering the Company’s objectives of cross-selling products from other business lines to customers, risk management, the Company’s efficiency initiative, and each executive’s ability to operate as a team.

 

In determining the annual incentive awards for 2012, the HRC considered each named executive’s success against his or her objectives for 2012, which included the financial performance of his or her respective business line and a risk and other qualitative assessment of how those results were achieved. The HRC did not evaluate financial performance based on whether specific business line numerical financial targets were achieved—and therefore specific business line numerical financial targets were not material in the context of 2012 annual incentive award decisions for these named executives—nor did it make a separate preliminary 2012 annual incentive award determination based on business line financial results and then adjust the award up or down based on other factors. Consistent with the process described above in “Compensation Program Governance,” the HRC, in its discretion, evaluated business line financial results not in isolation or with a predetermined or set importance or weight, but rather holistically, in the context of the business line’s contribution to the Company’s overall financial performance, the difficulty of achieving the results in the particular economic, regulatory or strategic environment, the quality of the results from a risk management perspective, and the collaboration among business lines. Additionally, the HRC has structured a majority of the total pay for these named executives to be provided in Performance Shares rather than annual incentive compensation. The HRC believes this compensation design is appropriate given the Company’s diversified business model, and a desired focus on teamwork and the long-term performance of the Company as a whole, as opposed to short-term financial results from annual individual business line performance.

 

Mr. Carroll led the Wealth, Brokerage and Retirement (“WBR”) businesses to achieve record net income of $1.3 billion in 2012 despite the continuing economic, political and regulatory uncertainties affecting capital markets. Under his leadership, WBR accomplished a number of important strategic objectives, including increasing client assets, continuing to leverage relationships with Wholesale Banking and Community Banking to attract new customers and increase the number of products and services we provide to our existing customers, and positioning WBR for future growth as the economy improves. Upon consideration of Mr. Carroll’s performance, including the factors set forth above, the HRC approved a 2012 annual incentive compensation award for Mr. Carroll of $1,425,000.

 

Mr. Hoyt led Wholesale Banking to achieve record net income of $7.8 billion in 2012 on broad-based and diversified loan growth achieved while continuing to adhere to the Company’s risk management principles. He positioned Wholesale Banking for future success by continuing to develop and strengthen customer relationships to provide the Company with additional opportunities to serve

 

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its customers as the economy improves. Upon consideration of Mr. Hoyt’s performance, including the factors set forth above, the HRC approved a 2012 annual incentive compensation award for Mr. Hoyt of $1,900,000.

 

Under Ms. Modjtabai’s leadership, Consumer Lending originated a record $524 billion of residential mortgages in 2012 and increased its auto and credit card lending even as the economic recovery remained uneven. Consumer Lending continued to effectively manage the Company’s credit exposure by improving credit quality and reducing non-strategic/liquidating consumer credit portfolios. Upon consideration of Ms. Modjtabai’s performance, including the factors set forth above, the HRC approved a 2012 annual incentive compensation award for Ms. Modjtabai of $1,425,000.

 

Ms. Tolstedt led Community Banking, combined with Consumer Lending and other business lines, to achieve net income of $10.5 billion in 2012. Under her leadership, Community Banking achieved a number of strategic objectives, including record cross-sell and record deposit levels, and the launch of several successful mobile banking initiatives. For the fourth consecutive year, Wells Fargo was the number one Small Business Administration lender in dollar volume in the U.S. Upon consideration of Ms. Tolstedt’s performance, including the factors set forth above, the HRC approved a 2012 annual incentive compensation award for Ms. Tolstedt of $1,530,000.

 

2012 Long-Term Incentive Compensation.    In February 2012, the HRC awarded long-term incentive compensation to the named executives in the form of Performance Shares under the LTICP. The named executives were awarded the following target number of Performance Shares: Stumpf—398,470; Sloan—175,327; Carroll—175,327; Hoyt—215,174; Modjtabai—175,327; and Tolstedt—175,327. Each Performance Share entitles the holder to receive one share of Company common stock upon vesting plus dividend equivalents on the final number of earned and vested Performance Shares reinvested as additional Performance Shares from the date of grant, subject to the same vesting terms. The 2012 Performance Share awards are scheduled to vest in the first quarter of 2015 based on the Company’s RORCE relative to the Financial Performance Peer Group, with the final number of earned and vested Performance Shares subject to adjustment upward (to a maximum of 150% of the original target number granted) or downward to zero, as follows:

 

   

if the Company’s RORCE rank is equal to or better than 75% of the companies in the Financial Performance Peer Group, the final number of Performance Shares will be 150% of the target number granted;

 

   

if the Company’s RORCE rank is between 50% and 75% of the companies in the Financial Performance Peer Group, the final number of Performance Shares will be interpolated on a straight-line basis between 100% and 150% of the target number granted;

 

   

if the Company’s RORCE rank is between 25% and 50% of the companies in the Financial Performance Peer Group, the final number of Performance Shares will be interpolated on a straight-line basis between 50% and 100% of the target number granted; and

 

   

if the Company’s RORCE rank is below 25% of the companies and is not the lowest in the Financial Performance Peer Group, the final number of Performance Shares will be interpolated on a straight-line basis between 0% and 50% of the target number granted.

 

In addition, for any year in the three-year performance period that the Company incurs a Net Operating Loss, the target number of Performance Shares will be reduced by one-third.

 

Under our stock ownership policy, executives are required to hold, while employed by the Company or an affiliate and for one year after retirement, shares of Company common stock equal to

 

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at least 50% of the after-tax profit shares acquired upon exercise of stock options or upon distribution of other Company stock-based awards, subject to a maximum requirement of 10 times the executive’s cash salary at the time of exercise or distribution of the award. Consistent with our stock ownership policy, and as a condition to receiving the Performance Share awards, each named executive has agreed to hold, while employed by the Company and for at least one year after retirement, shares of our common stock equal to at least 50% of the after-tax shares (assuming a 50% tax rate) acquired upon exercise or vesting of equity awards. This holding restriction is intended to align the named executives’ interests with stockholders over the long-term and to mitigate compensation-related risk.

 

The HRC structured the vesting and the variability of the final award number as an incentive and reward for these named executives to achieve continued superior financial performance for the Company and its stockholders through the entire vesting period. The HRC included the downward adjustment for Net Operating Losses to reduce the target number of Performance Shares in the event of poor absolute Company performance and included the hold-past-retirement condition to maintain alignment with stockholders’ interests for more than the duration of each executive’s career and to mitigate compensation-related risk. For purposes of these awards, “Net Operating Loss” means for any year in the performance period a loss that results from adjusting a net loss as reported in the Company’s consolidated financial statements to eliminate the effect of the following items, each determined based on generally accepted accounting principles: (1) losses resulting from discontinued operations; (2) extraordinary losses; (3) the cumulative effect of changes in generally accepted accounting principles; and (4) any other unusual or infrequent loss which is separately identified and quantified.

 

Similar to 2010 and 2011, the HRC chose to grant 2012 long-term incentive compensation in the form of Performance Shares. The HRC believes that Performance Shares closely align management’s interests with stockholders’ interests. The HRC also believes that the risks to management of forfeiting all or a significant portion of the Performance Share awards is an effective performance incentive, and the ability for management to earn additional Performance Shares for superior Company performance during the performance period provides a significant retention and motivational reward to the named executives.

 

The HRC chose RORCE as the performance measure because it represents a profitability goal that can be accurately compared with the Financial Performance Peer Group, and it is one of the performance measures approved by stockholders in the LTICP given our intent that the awards be tax deductible under Section 162(m). The HRC believes that RORCE effectively reflects the Company’s objective to achieve profitability with strong capital levels, capturing the importance of both performance and risk management.

 

In determining target values and realizable pay opportunities for the Performance Share awards, the HRC reviewed total compensation between the estimated median and 75th percentile for the Labor Market Peer Group. Total compensation, including long-term compensation, is intended to be competitive with total compensation for comparable positions and performance at peers. The HRC determined a dollar value of the Performance Share grants, taking into account individual experience and responsibilities, to provide an opportunity to realize variable compensation commensurate with performance. Administratively, the target dollar value of each executive’s Performance Share grant was converted to a number of shares of Company common stock using the closing stock price on the grant date.

 

In granting the 2012 Performance Shares and establishing their terms, the HRC considered the appropriateness of this award structure in the context of Federal Reserve guidance on incentive

 

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compensation arrangements, and the need for continued leadership by the named executives over the three-year performance and vesting period. The HRC believes that the Performance Share grants reinforce all four of the Company’s compensation principles.

 

Long-Term Incentive Compensation Program

 

Performance Shares have been the key component of our long-term incentive compensation program for named executives since 2009, serving a number of purposes, including linking pay of our named executives to the future long-term performance of our Company. The main features of the four Performance Share awards that our named executives had outstanding in 2012 and the amounts earned for a performance period ending in 2012 are summarized below:

 

Performance Period

  

Performance Measure

  

Performance Measure
Target Levels and
Adjustment Based on
Future Performance

  

Performance Shares
Earned

Retention Performance
Shares granted
December 2009
(2010-2012)

   Average RORCE relative to KBW Bank Sector Index peer group   

•      RORCE rank ³ 75% of peers -150% of target earned

•      RORCE rank between 50% and 75% of peers -100% to 150% of target earned on a straight-line basis

•      RORCE rank between 25% and 50% of peers -50% to 100% of target earned on a straight-line basis

•      RORCE rank below 25% of peers -0% to 50% of target earned on a straight-line basis provided not lowest ranked

   For the 2010-2012 performance period, 150% of the target Retention Performance Shares were earned based on the HRC’s certification in March 2013 of the Company’s average RORCE performance of 12.3% which resulted in a ranking equal to or greater than the 75th percentile compared with peers

Performance
Shares granted
June 2010
(June 2010-June 2013)

   Average RORCE relative to Financial Performance Peer Group    Same as above    To be determined between 0% and 150% of target number by the HRC in third quarter 2013 based on average RORCE over three twelve-month performance periods ending June 2013 compared with peers

Performance
Shares granted
February 2011
(2011-2013)

   Average RORCE relative to Financial Performance Peer Group    Same as above    To be determined between 0% and 150% of target number by the HRC in first quarter 2014 based on average RORCE over the 2011-2013 performance period compared with peers

Performance
Shares granted
February 2012
(2012-2014)

  

Average RORCE relative to Financial Performance Peer Group

•      Subject to downward adjustment by 1/3 for each year the Company incurs a Net Operating Loss

   Same as above    To be determined between 0% and 150% of target number by the HRC in first quarter 2015 based on average RORCE over the 2012-2014 performance period compared with peers

 

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For additional information about the terms of these awards, see the CD&A discussion above, the narrative discussion following the Grants of Plan-Based Awards Table, and footnotes (5) and (6) to the Outstanding Equity Awards at Fiscal Year-End Table in addition to our prior year proxy statements.

 

Other Compensation Components

 

Participation in Retirement and Other Benefit Programs.    Our named executives participate in the same benefit programs generally available to all our team members, including health, disability, and other benefit programs, which include the Company 401(k) Plan and, for employees hired prior to July 1, 2009, the Company’s qualified Cash Balance Plan (frozen in July 2009). Certain of the named executives, together with team members whose covered compensation exceeds IRC limits for qualified plans, also participated in non-qualified Supplemental 401(k) and Supplemental Cash Balance Plans prior to those plans being frozen in July 2009. Following the freezing of the plans, the Company no longer makes additional contributions for participants in these plans, although additional investment income continues to accrue to participants’ individual accounts at the rates provided for in the plans.

 

Named executives and certain other highly compensated team members also can participate in our Deferred Compensation Plan. Effective January 1, 2011, the Company amended this plan to provide for supplemental Company matching contributions for any compensation deferred into the Deferred Compensation Plan by a plan participant, including named executives, that otherwise would have been eligible (up to certain IRS limits) for a matching contribution under the Company’s 401(k) Plan.

 

The HRC believes these programs are similar to and competitive with those offered by our Labor Market Peer Group. We provide information about the benefits under these plans in the Pension Benefits table and Non-Qualified Deferred Compensation table and related narrative.

 

Perquisites and Other Compensation.    The HRC has intentionally limited perquisites to executive officers and in 2010 reduced or eliminated almost all executive perquisite programs, including those providing for relocation-related home purchase expenses and reimbursements for financial planning services, automobile allowance, club dues, and parking. For security or business convenience, we provide a car and driver to Mr. Stumpf, primarily for business travel and occasionally for commuting. In addition, the HRC may from time to time approve security measures if determined to be in the business interests of our Company for the safety and security of our executives and other team members. In 2012, the HRC approved residential security measures for Ms. Modjtabai and the Company paid for the cost of installing a home security system for Ms. Modjtabai as disclosed in the Summary Compensation Table.

 

Post-Retirement Arrangements.    We do not have employment or “golden parachute” or other severance agreements with our named executives. We have a plan that provides salary continuation for team members, including named executives, who are discharged under the circumstances stated in that plan.

 

Tax Considerations.    Section 162(m) of the IRC limits the deductibility of compensation paid to certain executive officers in excess of $1,000,000, but excludes “performance-based compensation” from this limit. For 2012, the HRC awarded annual incentive awards to our named executives under our stockholder-approved Performance Policy, which is intended to provide “performance-based compensation” under IRC Section 162(m). Because salary is not considered “performance-based compensation” under Section 162(m), the portion of base salary paid to each of our named executives in excess of $1 million will not be tax deductible by the Company.

 

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Of the three elements of compensation paid to named executives in 2012, annual base salary is not considered “performance-based compensation” and is therefore subject to the $1 million deduction limit under Section 162(m). In 2012, the Company paid an aggregate of approximately $5.1 million in base salary to its named executives in excess of the combined deduction limit for these executives, thereby forgoing approximately $1.8 million in aggregate tax benefit related to the loss of deduction for named executives’ compensation, assuming a 35% corporate tax rate. Based on the Company’s 2012 income before taxes of approximately $28.5 billion, the amount of deduction lost represents approximately 0.006% of such income. The 2012 annual incentive and Performance Share awards to the named executives are intended to be performance-based compensation and, therefore, tax deductible under Section 162(m). Although the HRC believes the tax-deductibility of executive compensation is important, it was outweighed for 2012 executive compensation purposes by the HRC’s desire to achieve the strategic and compensation goals described herein.

 

Conclusion

 

The HRC believes that its compensation decisions for the named executives in 2012 were consistent with the Company’s four compensation principles. Based on the considerations described herein, the HRC and the Company believe the compensation paid to the named executives for 2012 was reasonable and appropriate.

 

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Executive Compensation Tables

 

The following tables, accompanying footnotes and narrative provide information about compensation paid to the Company’s named executives as described in the CD&A.

 

2012 SUMMARY COMPENSATION TABLE

 

Name and Principal Position

  Year     Salary
($)(2)
    Stock
Awards

($)(3)(4)(5)
    Option
Awards
($)(6)
    Non-Equity
Incentive
Compensation

($)(7)
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(8)(9)
    All Other
Compensation
($)(10)
    Total
($)
 
(a)   (b)     (c)     (e)     (f)     (g)     (h)     (i)     (j)  

John G. Stumpf

Chmn., Pres. & CEO

    2012        2,800,000        12,500,004        —          4,000,000        3,558,081        15,000        22,873,085   
    2011        2,800,000        12,000,026        —          3,100,000        1,928,295        14,700        19,843,021   
    2010        3,239,847        11,000,009        —          3,300,000        1,405,335        28,531        18,973,722   

Timothy J. Sloan

Sr. Exec. VP & CFO

    2012        1,661,686        5,500,008        121,350        1,600,000        111,111        15,000        9,009,155   
    2011        1,331,402        5,500,004        —          1,400,000        87,786        14,700        8,333,892   

David M. Carroll(1)

Sr. Exec. VP, Wealth, Brokerage & Retirement

    2012        1,500,000        5,500,008        —          1,425,000        168,135        15,000        8,608,143   
    2011        1,500,000        5,000,026        —          1,400,000        96,227        14,700        8,010,953   
    2010        1,374,329        4,969,072        —          1,500,000        64,187        14,700        7,922,288   

David A. Hoyt

Sr. Exec. VP, Wholesale Banking

    2012        2,000,000        6,750,008        1,994,728        1,900,000        178,185        15,000        12,837,921   
    2011        2,000,000        6,500,022        —          1,875,000        151,930        14,700        10,541,652   
    2010        2,293,231        6,500,002        1,766,934        2,000,000        190,389        14,700        12,765,256   

Avid Modjtabai

Sr Exec. VP, Consumer Lending

    2012        1,500,000        5,500,008        —          1,425,000        52,204        87,838        8,565,050   
               

Carrie L. Tolstedt

Sr. Exec. VP, Community Banking

    2012        1,700,000        5,500,008        —          1,530,000        105,204        15,000        8,850,212   
    2011        1,700,000        5,500,004        —          1,400,000        84,172        14,700        8,698,876   
    2010        1,542,912        5,500,018        —          1,235,000        115,271        14,700        8,407,901   

 

(1)   Although under SEC rules Mr. Carroll would not be considered a named executive, we elected to include information about Mr. Carroll’s compensation in the CD&A and these executive compensation tables given the substantially similar total 2012 compensation for Mr. Carroll and Ms. Modjtabai and the contributions of the Wealth, Brokerage & Retirement businesses managed by Mr. Carroll to the Company’s 2012 performance.

 

(2)   The amount shown for Mr. Sloan’s salary for 2011 and 2012 reflect increases effective in March 2011 following his appointment as CFO and in March 2012 to achieve better parity among the Company’s senior level executives.

 

(3)  

For 2012, the stock awards included in column (e) consist of Performance Shares, which will vest, if at all, in the first quarter of 2015, subject to the Company’s achievement of certain performance conditions for the three-year period ending December 31, 2014. Because the achievement of these performance conditions depends upon the occurrence of market-related future events, the value shown for each of these awards is its grant date fair value calculated by multiplying the target number of shares subject to the award by $31.37, the NYSE closing price per share on the grant date. The target number of Performance Shares for purposes of calculating the value is the number of shares that would be earned for achieving the median performance for the performance period.

 

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The table below shows the grant date, the target number of Performance Shares, the grant date per share fair value, and total grant date fair value for the 2012 stock awards shown in column (e).

 

Name

   Grant
Date
     Performance
Shares (#)
     Per Share
Fair Value ($)
     Total Grant Date
Fair Value ($)
 

Mr. Stumpf

     2/28/2012         398,470         31.37         12,500,004   

Mr. Sloan

     2/28/2012         175,327         31.37         5,500,008   

Mr. Carroll

     2/28/2012         175,327         31.37         5,500,008   

Mr. Hoyt

     2/28/2012         215,174         31.37         6,750,008   

Ms. Modjtabai

     2/28/2012         175,327         31.37         5,500,008   

Ms. Tolstedt

     2/28/2012         175,327         31.37         5,500,008   

 

For more information about the valuation model used to calculate the grant date fair value of stock awards, refer to Note 19 (Common Stock and Stock Plans) to our 2012 financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

 

(4)   The Performance Shares referred to in footnote (3) and included in column (e) are subject to adjustment upward (to a maximum of 150% of the target award) or downward (to zero) depending upon the achievement of certain performance conditions based on the average of the Company’s RORCE for the three fiscal years ending on December 31, 2012, 2013 and 2014, and ranked in comparison to the average RORCE for each company in the Financial Performance Peer Group for the same three fiscal years.

 

Assuming that the Company’s performance during the measurement period results in the maximum number of Performance Shares vesting, each named executive would be entitled to receive the following number of Performance Shares having the related total grant date value shown after his or her name: Mr. Stumpf—597,705 Performance Shares, $18,750,006; Mr. Sloan—262,990 Performance Shares, $8,249,996; Mr. Carroll—262,990 Performance Shares, $8,249,996; Mr. Hoyt—322,761 Performance Shares, $10,125,013; Ms. Modjtabai—262,990 Performance Shares, $8,249,996; and Ms. Tolstedt—262,990 Performance Shares, $8,249,996.

 

Additional information about the Performance Shares appears in the CD&A and in the Grants of Plan-Based Awards table, footnotes and related narrative.

 

(5)  

The amount of stock awards shown in column (e) for each of Mr. Sloan, Ms. Modjtabai and Ms. Tolstedt does not include certain RSR grants as a portion of annual incentive awards earned for years prior to becoming a named executive, as follows: 22,839 RSRs granted to Mr. Sloan on February 22, 2011 as a portion of his 2010 annual incentive award with a grant date fair value of $716,688 based on the NYSE closing price per share on grant date; 4,251 RSRs granted to Ms. Modjtabai on February 28, 2012, as a portion of her 2011 annual incentive award with a grant date fair value of $133,354 based on the NYSE closing price per share on the grant date, and 12,215 RSRs granted to Ms. Tolstedt on February 23, 2010 as a portion of her 2009 annual incentive award with a grant date fair value of $333,347 based on the NYSE closing price per share on grant date. Because these RSRs were for service commencing in the prior year (2010 in the case of Mr. Sloan, 2011 in the case of Ms. Modjtabai, and 2009 in the case of Ms. Tolstedt), such RSR grants were not reported as compensation in the applicable year of grant. The potential for an annual incentive award was originally communicated to each of Mr. Sloan, Ms. Modjtabai, and Ms. Tolstedt as a cash incentive award, and such annual incentive award would have been reported as non-equity incentive compensation in column (g) earned for the applicable fiscal year

 

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if such executive had been a named executive officer for the respective year. See also footnote (7) below and footnote (5) to the Outstanding Equity Awards at Fiscal Year-End table.

 

(6)   The option awards shown in column (f) for 2012 represent the following grants of “reload” options to acquired shares of common stock: Mr. Hoyt—220,157 shares, 76,094 shares, and 379,107 shares at exercise prices per share of, respectively, $34.02, $33.84, and 29.31; and Mr. Sloan—55,411 shares at an exercise price per share of $33.81. The exercise price for each reload option was equal to the NYSE closing price of common stock on the date of the respective reload grant. These reload options were automatically granted to Messrs. Hoyt and Sloan upon the exercise of original options granted during 2003 that had the reload feature. See Grants of Plan-Based Awards for additional information about reload options.

 

The value of each of the 2012 option awards shown in column (f) represents its total grant date fair value based on a fair value per option share calculated using a Black-Scholes valuation model reflecting the assumptions for each option shown in the table below as to option term, annual stock price volatility, annual dividend rate, and risk-free interest rate.

 

Name

   No. of
Options
     Fair Value
Per Option
Share
     Expected
Option
Term
     Annual
Price
Volatility
    Annual
Dividend
Rate
     Risk-Free
Interest
Rate
 

Mr. Hoyt

     220,157       $ 2.19         0.50         24.99   $ 0.88         0.15
     76,094         2.59         0.50         29.71     0.88         0.14
     379,107         3.47         0.95         32.21     0.48         0.12

Mr. Sloan

     55,411         2.19         0.50         24.99     0.88         0.15

 

The total grant date fair value for the 2010 option award shown in the Summary Compensation Table for Mr. Hoyt was also calculated based on a fair value per option share using a Black-Scholes valuation model reflecting assumptions similar in type to those described above for 2012 option awards. For more information about the valuation model used to calculate the grant date fair value of option awards, refer to “Note 19 (Common Stock and Stock Plans)” to our 2012 financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

 

(7)   Amounts shown in column (g) for 2012 reflect the annual incentive awards to the named executives. As discussed in the CD&A, a portion of the 2012 award was paid in RSRs. The number of shares of Company common stock subject to the award was determined by dividing the amount of the stock portion of the award by $36.50, the NYSE closing price of Company common stock on March 8, 2013, the grant date. These RSRs will vest in three equal annual installments, beginning on March 15, 2014. Amounts awarded to the named executives are as follows: Mr. Stumpf—27,398 shares; Mr. Sloan—5,480 shares; Mr. Carroll—3,882 shares; Mr. Hoyt—8,220 shares; Ms. Modjtabai—3,882 shares; and Ms. Tolstedt—4,841 shares. Although the RSRs were granted in 2013, they reflect compensation earned by the named executives for 2012 performance.

 

Similarly, amounts shown for 2011 reflect the annual incentive awards to the named executives, a portion of which award was paid in RSRs. The number of shares of Company common stock subject to the award was determined by dividing the amount of the stock portion of the award by $31.37, the NYSE closing price of Company common stock on February 28, 2012, the grant date. These RSRs will vest in three annual installments, beginning on March 15, 2013. Amounts awarded to the named executives are as follows: Mr. Stumpf—22,315 shares; Mr. Sloan—4,251

 

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shares; Mr. Carroll—4,251 shares; Mr. Hoyt—9,298 shares; and Ms. Tolstedt—4,251 shares. Although the RSRs were granted in 2012, they reflect compensation earned by the named executives for 2011 performance.

 

(8)   Amounts shown in column (h) represent the change in the actuarial present value of each named executive’s pension benefits under the Company Cash Balance and Supplemental Cash Balance Plans from December 31, 2011 to December 31, 2012. Column (h) also includes the change in the pension value of Mr. Hoyt’s annuity contract. The change in the present value amount results from the actuarial method used for financial accounting purposes to calculate the current value of a future pension benefit payout and does not reflect the accrual of additional pension benefits beyond investment credits on cash balance accounts. Information about the pension benefits for our named executives, and applicable discussion of investment credits for cash balance accounts, appears under “Pension Benefits” below.

 

The actuarial present value of the pension benefits for the named executives, including Mr. Stumpf, was increased by use of a lower discount rate assumed for purposes of the calculation. A 5.00% rate was used for discounting at December 31, 2011 and a 4.00% rate was used at December 31, 2012 (a 100 basis point decrease year over year). In addition, the passage of time also contributed to increase the present value calculation because each named executive is one year closer to his or her normal retirement age. For Messrs. Stumpf and Carroll, the actuarial present value of the pension benefit is further increased due to a lower interest rate used to calculate their expected lump sum payments at retirement. Additional information about the actuarial and other assumptions used to compute the value of these pension benefits is discussed in “Note 1 (Summary of Significant Accounting Policies—Pension Accounting)” and “Note 20 (Employee Benefits and Other Expenses)” to our 2012 financial statements, and also in the narrative following the Pension Benefits table under “Post-Retirement Benefits—Valuation of Accumulated Benefits under the Combined Plans.

 

(9)   Except as described below for Mr. Carroll, none of the named executives received any above-market or preferential earnings on deferred compensation for the years shown, and the amounts shown for Messrs. Stumpf, Sloan, and Hoyt, and Mses. Modjtabai and Tolstedt do not include any earnings on deferred compensation. The amount shown for Mr. Carroll includes above-market interest of $13,350 earned on amounts deferred by him under the Wachovia Corporation Executive Deferred Compensation Plan I and Wachovia Corporation Executive Deferred Compensation Plan II, calculated at a rate per annum equal to the prime rate averaged over four quarters plus 2%. These Wachovia deferred compensation plans were frozen prior to the Wachovia merger, and neither Mr. Carroll nor any other participants may make additional deferrals under, nor may any new team members participate in these plans, although interest will continue to accrue on previously deferred amounts.

 

(10)   For each named executive, “All Other Compensation” consists of Company matching contributions of $15,000 to the Company’s 401(k) Plan. For Ms. Modjtabai, column (i) also includes $72,838 paid for installation of a residential security system. The Company does not consider these security costs to be personal benefits because they arise from the nature of Ms. Modjtabai’s employment by the Company; however, SEC rules require disclosure of certain security costs as personal benefits.

 

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2012 GRANTS OF PLAN-BASED AWARDS

 

Name

  Grant
Date
    Estimated Possible Future
Payouts Under Non-Equity
Incentive Plan Awards(1)
    Estimated Future Payouts
Under Equity Incentive
Plan Awards (2)
    All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(3)
    Exercise
or Base
Price of
Option
Awards
    Closing
Price of
Stock on
Date of
Grant
    Grant Date
Fair Value
of Stock
and Option
Awards
 
    Threshold     Target     Maximum     Threshold     Target     Maximum            
          ($)     ($)     ($)     (#)     (#)     (#)     (#)     (#)     ($/Sh)     (S/Sh)     ($)  
(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)     (k)     (l)     (m)  

John G. Stumpf

    2/28/2012        —          4,000,000        —          —          —          —          —          —          —          —          —     
    2/28/2012        —          —          —          —          398,470        597,705        —          —          —          31.37        12,500,004   

Timothy J. Sloan

    2/28/2012        —          850,000        1,700,000        —          —          —          —          —          —          —          —     
    2/28/2012        —          —          —          —          175,327        262,990        —          —          —          31.37        5,500,008   
    7/20/2012        —          —          —          —          —          —          —          55,411 (R)      33.81        33.81        121,350   

David M. Carroll

    2/28/2012        —          750,000        1,500,000        —          —          —          —          —          —            —        —     
    2/28/2012        —          —          —          —          175,327        262,990        —          —          —          31.37        5,500,008   

David A. Hoyt

    2/28/2012        —          1,000,000        2,000,000        —          —          —          —          —          —          —          —     
    2/28/2012        —          —          —          —          215,174        322,761        —          —          —          31.37        6,750,008   
    7/16/2012        —          —          —          —          —          —          —          220,157 (R)      34.02        34.02        482,144   
    4/26/2012        —          —          —          —          —          —          —          76,094 (R)      33.84        33.84        197,083   
    1/09/2012        —          —          —          —          —          —          —          379,107 (R)      29.31        29.31        1,315,501   

Avid Modjtabai

    2/28/2012        —          750,000        1,500,000        —          —          —          —          —          —          —          —     
    2/28/2012        —          —          —          —          175,327        262,990        —          —          —          31.37        5,500,008   

Carrie L. Tolstedt

    2/28/2012        —          850,000        1,700,000        —          —          —          —          —          —          —          —     
    2/28/2012        —          —          —          —          175,327        262,990        —          —          —          31.37        5,500,008   

 

(1)   Our Performance Policy under which we make annual incentive compensation awards to named executives is a “non-equity” incentive plan under SEC rules. The amounts shown in columns (d) and (e) represent the 2012 estimated possible future payment of awards to the named executives upon satisfaction of performance conditions established pursuant to the Performance Policy, except that the amount shown in column (d) for Mr. Stumpf represents his actual 2012 incentive award. As discussed in the CD&A, the HRC did not establish a pre-determined target and maximum incentive award opportunity for Mr. Stumpf to retain greater discretion in determining his annual incentive award. As permitted by SEC rules, Mr. Stumpf’s actual 2012 incentive award is presented as his “target” payout in column (d). The actual awards for all named executives are set forth in column (g) of the Summary Compensation Table. A portion of the actual awards was paid to the named executives in RSRs. See footnote (7) to the Summary Compensation Table.

 

(2)   The potential equity incentive plan awards shown in columns (g) and (h) represent Performance Share awards included in column (e) of the Summary Compensation Table and discussed in footnotes (3) and (4) to that table. Additional information regarding the terms of these awards appears in the narrative following this table.

 

(3)   The options shown in column (j) for Messrs. Sloan and Hoyt designated with an “(R)” are reload option grants. These reload option grants were automatically granted upon the exercise of the related underlying original stock option using shares of Company common stock to pay the exercise price and are immediately exercisable. Under the LTICP, the term of each reload option is the same as the remaining term of the original option to which it relates. No original options having the reload feature have been granted under the LTICP since 2003. The reload option grants for Messrs. Sloan and Hoyt relate to original option grants made in 2003.

 

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Additional Information about the Grants of Plan-Based Awards Table

 

As described in footnote (7) to the Summary Compensation Table, the HRC granted the number of RSRs shown in that footnote under the LTICP in March 2013 to the named executives for a portion of the final payout of their potential 2012 incentive award amounts shown in columns (d) and (e) in the above table. The HRC also granted the Performance Shares shown in columns (g) and (h) of the table to the named executives in February 2012. We provide certain information about the material terms of the RSRs and Performance Shares below. Additional information about the terms of these awards appears in the CD&A and, with respect to the Performance Shares, in footnotes (3) and (4) to the Summary Compensation Table.

 

As a condition to receiving any Performance Share and/or RSR award, the named executives have agreed to hold, while employed by the Company and for at least one year after retirement, shares of Company common stock equal to at least 50% of the after-tax shares (assuming a 50% tax rate) acquired upon vesting of the Performance Shares and/or RSRs. Each Performance Share and RSR represents the right to receive one share of Company common stock upon vesting, net of applicable withholding taxes. Each of the Performance Share and RSR awards also includes the right to receive dividend equivalents in the form of additional Performance Shares or RSRs, as applicable. These additional Performance Shares and RSRs will be distributed in shares of Company common stock when and if the underlying Performance Shares and/or RSRs vest and are distributed. The HRC may reduce, delay vesting, revoke, cancel or impose additional conditions and restrictions on these awards to comply with any applicable law or regulations.

 

RSRs.    The RSRs granted to the named executives in March 2013 as a portion of their annual incentive compensation payout vest in three equal annual installments beginning on March 15, 2014. These RSR grants are subject to the holding requirement discussed above and are subject to substantially similar forfeiture provisions as described below for the Performance Shares and to the clawback and recoupment policies described below. Beginning for February 2012 grants, these RSR awards also are subject to a performance condition that provides the HRC full discretion to cancel all or a portion of the awards if the executive takes imprudent risk or engages in misconduct in the performance of his or her duties, including in a supervisory capacity, or the Company or the executive’s business group suffers a material downturn in financial performance or material failure of risk management. For more information about this additional clawback requirement, see the discussion on page 52 of the CD&A.

 

Performance Shares.    On February 28, 2012, the HRC granted Performance Shares under the LTICP to each named executive, subject to the achievement of specified performance criteria and satisfaction of additional conditions summarized below. The awards will vest after three years in the first quarter of 2015, with the target number of Performance Shares for each of these named executives subject to adjustment upward (to a maximum of 150% of the original target amount granted) or downward (to zero) based on the Company’s RORCE relative to the Financial Performance Peer Group performance over the three year period ending December 31, 2014 as discussed below. Each Performance Share entitles the holder to receive one share of Company common stock upon vesting plus dividend equivalents reinvested as additional Performance Shares from the date of grant, subject to the same vesting terms. The potential target and maximum share amounts of these awards are shown for each of these named executives in columns (g) and (h) above.

 

The vesting and determination of the final number of 2012 Performance Shares is based upon the “Company’s RORCE Ranking” as of December 31, 2014. This ranking is determined by calculating the average of the Company’s RORCE for the three years ending December 31, 2012, 2013, and 2014 and

 

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then ranking the resulting average relative to the RORCE averages for the companies in the Financial Performance Peer Group for the same three-year period. As explained in the CD&A, if the Company’s RORCE rank is equal to or better than 75% of the companies in the Financial Performance Peer Group at the end of this period, the named executives who received 2012 Performance Share awards will be entitled to receive a final number of Performance Shares equal to the maximum number shown in column (h) above. If the Company’s RORCE rank is between 50% and 75% of the companies in the Financial Performance Peer Group, the named executive will be entitled to receive a final number of 2012 Performance Shares interpolated on a straight-line basis between 100% and 150% of the target number shown in column (g). This target number, and thus the named executives’ final Performance Share award, is subject to downward adjustment on a straight-line basis (and potentially to zero) if the Company’s RORCE rank falls below 50% of the companies in the Financial Performance Peer Group. In addition, these 2012 Performance Share awards are subject to a second, absolute performance condition which would operate to reduce the target number of Performance Shares by one-third for each year in the three-year performance period the Company incurs a Net Operating Loss.

 

Named executives who received an award of 2012 Performance Shares will forfeit this award if employment with the Company terminates prior to the vesting date for the Performance Shares, other than because of termination of employment due to death, disability, displacement, divestiture, a change-in-control of any Company affiliate that employs the named executive, retirement or as the result of an acquisition transaction (see “Potential Post-Employment Payments” below). Upon the named executive’s retirement prior to the vesting date for the Performance Shares, the award will continue to vest in accordance with its terms (including satisfying the Net Operating Loss condition) on the scheduled vesting date provided the executive meets certain additional vesting conditions following termination of employment through that vesting date. Those additional conditions are (1) complying with the terms of an agreement with the Company regarding non-disclosure of trade secrets and other confidential information, and the non-solicitation of team members and customers, (2) complying with specified non-disparagement requirements, and (3) not performing services as an officer, director, employee, consultant or otherwise for any business which is in competition with any line of business of the Company or its affiliates for which the named executive had executive responsibilities while employed by the Company or its affiliates and which does business in any location in the geographic footprint of the Company in which the executive had executive responsibilities. In addition, these 2012 Performance Share awards are also subject to recovery or “clawback” in certain circumstances under the Company’s clawback and recoupment policies described below.

 

Clawback and Recoupment Policies.    The Company has multiple clawback and recoupment policies in place applicable to our executives as risk balancing features of our compensation program and to encourage long-term sustainable performance. Since 2006, the Company has had in place a clawback policy that allows the Company to recover any bonus or incentive compensation or cancel unvested equity awards in the event of any misconduct by the executive officer that contributed to the Company having to restate all or a significant portion of its financial statements. In 2009, the Company adopted an additional clawback policy requiring the Company to recover incentive compensation paid to any executive officer on the basis of materially inaccurate financial statements or any other materially inaccurate performance criteria, regardless of whether or not the executive engaged in misconduct. The Company subsequently extended this policy to all executive officers in 2010. This supplemented policy also provides for specific enforcement mechanisms to implement the Company’s right to recoup payments under the policy. Furthermore, equity awards granted by the Company since 2009, including awards granted to our named executives, are subject to any recoupment or clawback policies maintained by the Company or required by law.

 

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2012 (1)

 

      Option Awards     Stock Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number
of Units
of Stock
That
Have
Not
Vested
(#)
    Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested
($)
    Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
    Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested ($)
 
(a)    (b)(2)     (c)     (e)     (f)     (g)(3)(4)(6)     (h)     (i)(5)(6)     (j)  

John G. Stumpf

     550,260        —          28.43        2/24/2014        —          —          —          —     
     597,020        —          29.91        2/22/2015        —          —          —          —     
     190,880        —          30.67        8/1/2015        —          —          —          —     
     774,200        —          32.25        2/28/2016        —          —          —          —     
     226,812 (R)      —          32.52        2/25/2013        —          —          —          —     
     120,040        —          32.93        6/27/2016        —          —          —          —     
     201,402 (R)      —          36.67        2/25/2013        —          —          —          —     
     800,000        —          34.39        2/27/2017        —          —          —          —     
     400,000        —          35.06        6/26/2017        —          —          —          —     
     2,000,000        —          31.40        2/26/2018        —          —          —          —     
     —          —          —          —          17,006