DEF 14A 1 d857487ddef14a.htm DEFINITIVE NOTICE & PROXY STATEMENT Definitive Notice & Proxy Statement
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SCHEDULE 14A

 

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

Exchange Act of 1934 (Amendment No.      )

 

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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)

 

  


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Table of Contents

LOGO

 

WELLS FARGO & COMPANY

 

March 17, 2015

 

Dear Stockholder:

 

The 2015 annual meeting of stockholders of Wells Fargo & Company will be held on April 28, 2015 at 8:30 a.m., Central Daylight Time, at The Ritz-Carlton, St. Louis, 100 Carondelet Plaza, St. Louis, Missouri. 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 or listen to live audio of the meeting.

 

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 before the meeting.

 

Thank you for your interest in Wells Fargo.

 

Sincerely,

LOGO

John G. Stumpf

Chairman, President and

Chief Executive Officer


Table of Contents

WELLS FARGO & COMPANY

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

DATE AND TIME:   

Tuesday, April 28, 2015

8:30 a.m., Central Daylight Time (CDT)

PLACE:   

The Ritz-Carlton, St. Louis

100 Carondelet Plaza

St. Louis, Missouri 63105

ITEMS OF BUSINESS:   

•      Elect as directors the 16 nominees named in the accompanying proxy statement;

 

  

•      Vote on an advisory resolution to approve executive compensation;

  

•      Ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2015;

  

•      Vote on the following two stockholder proposals, if properly presented at the meeting and not previously withdrawn:

 

–     Adopt a policy to require an independent chairman;

 

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

  

•      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 March 3, 2015, the record date.
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 81 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 or your legal proxy may attend the meeting if you owned shares of our common stock at the close of business on March 3, 2015. If you or your legal proxy holder plan to attend the meeting in person, you must follow the admission procedures described beginning on page 84 of the proxy statement. If you do not comply with these procedures, you will not be admitted to the meeting.

INTERNET

AVAILABILITY

OF PROXY MATERIALS:

   Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on April 28, 2015: Wells Fargo’s 2015 Proxy Statement and Annual Report to Stockholders for the year ended December 31, 2014 are available at: www.proxydocs.com/wfc (for record holders) or www.proxyvote.com (for street name holders).

 

By Order of the Board of Directors,

LOGO

Anthony R. Augliera

Corporate Secretary

 

This notice and the accompanying proxy statement, 2014 annual report, and proxy card or

voting instruction form were first made available to stockholders beginning on or about March 17, 2015.


Table of Contents

PROXY STATEMENT SUMMARY

 

This summary highlights certain information contained 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.

 

Wells Fargo 2015 Annual Meeting of Stockholders

 

Date and Time:  

Tuesday, April 28, 2015

8:30 a.m., CDT

Place:  

The Ritz-Carlton, St. Louis

100 Carondelet Plaza, St. Louis, Missouri 63105

 

Items of Business and Voting Recommendations

 

Items for Vote

  Board Recommendation

1.         

  Elect 16 directors   FOR all nominees

2.        

  Advisory resolution to approve executive compensation (Say on Pay)   FOR

3.        

  Ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2015   FOR

4-5.    

  Two stockholder proposals as described in our Notice of Annual Meeting   AGAINST both proposals

 

In addition, stockholders may be asked to consider any other business properly brought before the meeting.

 

Voting and Admission to Wells Fargo 2015 Annual Meeting of Stockholders

 

Voting. Stockholders as of the record date, March 3, 2015, are entitled to vote. Each share of common stock outstanding on the record date is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on at our annual meeting.

 

Even if you plan to attend our annual meeting in person, please cast your vote as soon as possible by:

 

LOGO   using the Internet   LOGO   scanning the QR
Barcode on your
voting materials,
where available
  LOGO   calling toll-free
from the U.S.,
U.S. territories
and Canada
  LOGO   mailing your signed
proxy or voting
instruction form

 

Check your notice of internet availability of proxy materials or your proxy or voting instruction form for the web address of our internet voting site and toll-free telephone voting number.

 

Admission. Wells Fargo stockholders as of the record date are entitled to attend the annual meeting. Our admission procedures require all stockholders attending the annual meeting to present proper verification of stock ownership and a valid photo ID. Please review the admission procedures under “Voting and Other Meeting Information—Meeting Admission Information” beginning on page 84.

 

Live Audio of Meeting. You may listen to live audio of the annual meeting, but will not be able to vote your shares or ask questions while you are listening to the meeting. Please see page 85 for more information on how to listen to the live annual meeting.

 

 

Each stockholder’s vote is important. Please submit your vote and proxy over the internet or by telephone, or complete, sign, date and return your proxy or voting instruction form.

 

 

Wells Fargo & Company 2015 Proxy Statement            i


Table of Contents

Corporate Governance Highlights

 

Board of Directors      

Stockholder Rights

and Engagement

      Compensation       Strategy and Risk

•   Independent Lead Director

•   15 of 16 director nominees are independent

•   All standing Board committees consist solely of independent directors

•   Held 9 Board meetings in 2014

•   Board meets regularly in executive session

•   98.95% average attendance by directors in 2014 at Board and committee meetings

•   100% of directors serve on four or fewer public company boards, and no director who is CEO of a public company serves on more than three public company boards

   

•   Annual director elections

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

•   Stockholders may call special meetings and act by written consent

•   Lead Director and senior management participate in investor outreach program with the Company’s largest institutional investors

•   Investor feedback resulted in enhanced disclosures in our 2015 proxy statement about Board performance evaluations, Board succession planning and the experience of our directors

   

•   Pay-for-performance compensation philosophy and approach

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

•   Prohibit hedging of Company securities

•   Prohibit pledging by directors and executive officers of Company equity securities as collateral for margin or other similar loan transactions

•   Multiple executive compensation clawback and recoupment policies

•   Independent compensation consultant engaged by Human Resources Committee

 

   

•   Board oversight of Company strategy, financial performance, risk management framework and risk appetite

•   Risk oversight by full Board and its committees

•   Risk Committee includes the chairs of each of the Board’s standing committees

•   Board reinforcement and oversight of strong ethics and risk cultures

•   Compensation program designed consistent with safety and soundness and without undue risk

•   Board oversight of CEO and management succession planning

 

 

The Board has a robust process for evaluating its performance. In 2014, the Board enhanced its self-evaluation process by encouraging directors to provide feedback on the individual contributions of directors to the work of the Board and its committees. The Board’s annual performance evaluation is a key component of its director nomination process and succession planning. The Board’s succession planning in 2014 focused primarily on:

 

   

the composition of the Board and its committees,

 

   

the upcoming retirements of directors and succession plans for committee chairs,

 

   

our commitment to Board diversity, and

 

   

recruiting strategies for adding new directors to complement the existing skills and experience of the Board in areas identified in the Board’s self-assessment and consistent with the Company’s strategic priorities such as managing risk.

LOGO

 

The Board’s succession planning takes into account its views on the importance of Board refreshment and having an appropriate balance of experience and perspectives on the Board. Recently, the Board added two new directors (Elizabeth A. Duke and Suzanne M. Vautrinot) who enhance the overall mix of skills and experience on the Board and reflect the Board’s efforts to bring fresh perspectives to the Board. The accompanying charts illustrate the varying tenure of our independent directors and the diversity of our Board. In addition, the chart on the following page provides information about the principal qualifications and experience of all of our directors.

 

LOGO

 

 

ii            Wells Fargo & Company 2015 Proxy Statement


Table of Contents

Item 1 — Election of Directors

 

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

 

Nominee

 

Age

 

Director
Since

 

Principal Occupation

or Affiliation

 

Principal Qualifications

and Experience

 

Indep-
endent

 

  Committees  

(* Chair)

John D. Baker II   66   2009   Executive Chairman and Director, FRP Holdings, Inc.   Financial Management; Business Development; Business Operations; Regulatory; Legal   Yes   AEC; CRC; Credit
Elaine L. Chao   61   2011   Former U.S. Secretary of Labor   Governmental Relations; Social Responsibility; Community Affairs; Regulatory; HR; Governance   Yes   Credit; Finance
John S. Chen   59   2006   Executive Chairman and Chief Executive Officer, BlackBerry Limited   Technology; Information Security; Marketing/Consumer; International; Public Policy; Community Affairs   Yes   HRC
Lloyd H. Dean   64   2005   President, Chief Executive Officer and Director, Dignity Health   Business Operations; Regulatory; Social Responsibility; Strategic Planning; Community Affairs; Governance   Yes   CRC; GNC; HRC*; Risk
Elizabeth A. Duke   62   2015   Former member of the Federal Reserve Board of Governors   Financial Services; Risk Management; Financial Management; Governmental Relations; Regulatory   Yes   Risk
Susan E. Engel   68   1998   Retired Chief Executive Officer, Portero, Inc.   Marketing/Consumer; Technology; Business Operations; Strategic Planning; Business Development   Yes   Credit; Finance; HRC
Enrique Hernandez, Jr.   59   2003   Chairman, President, Chief Executive Officer and Director, Inter-Con Security Systems, Inc.   Risk Management; Legal; Financial Management; Strategic Planning; Management Succession Planning; Governance   Yes   AEC; CRC; Finance*; Risk*
Donald M. James   66   2009   Chairman and Director, Vulcan Materials Company   Risk Management; Legal; Strategic Planning; Regulatory; Management Succession Planning; Governance   Yes   Finance; HRC
Cynthia H. Milligan   68   1992   Dean Emeritus, College of Business Administration, University of Nebraska-Lincoln   Financial Services; Academia/Public Policy; Regulatory; Risk Management; Legal   Yes   CRC; Credit*; GNC; Risk
Federico F. Peña   68   2011   Senior Advisor, Vestar Capital Partners; Former U.S. Secretary of Energy and Former U.S. Secretary of Transportation   Governmental Relations; Public Policy; Regulatory; Risk Management; Legal; Financial Management; Business Development; Social Responsibility   Yes   AEC; CRC; GNC
James H. Quigley   63   2013   CEO Emeritus and a retired Partner of Deloitte   Accounting and Financial Reporting; Financial Management; Regulatory; Risk Management; Business Operations; Strategic Planning; Governance   Yes   AEC*; Credit; Risk
Judith M. Runstad   70   1998   Former Partner and currently Of Counsel, Foster Pepper PLLC   Financial Services; Regulatory; Risk Management; Legal; Governmental Relations; Governance; Community Affairs   Yes   CRC*; Credit; Finance; Risk
Stephen W. Sanger   68   2003   Retired Chairman and Chief Executive Officer, General Mills, Inc.   Marketing/Consumer; Strategic Planning; HR; Management Succession Planning; Governance   Yes  

Lead Director

GNC*; HRC; Risk

John G. Stumpf   61   2006   Chairman, Chief Executive Officer and President, Wells Fargo & Company   Financial Services; Business Leadership; Business Operations; Risk Management   No   N/A
Susan G. Swenson  

66

  1998   Retired President and Chief Executive Officer, Sage Software-North America, Inc.   Technology; Marketing/Consumer; Financial Management; Business Operations   Yes   AEC; GNC
Suzanne M. Vautrinot   55   2015   President, Kilovolt Consulting Inc.; Major General (retired), U.S. Air Force   Information/Cyber Security; Technology; Governmental Relations; Public Policy; Business Operations; International   Yes   AEC

 

AEC           Audit and Examination Committee

 

GNC       Governance and Nominating Committee

CRC           Corporate Responsibility Committee

 

HRC       Human Resources Committee

Credit        Credit Committee

 

Risk       Risk Committee

Finance      Finance Committee

 

 

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

 

 

Wells Fargo & Company 2015 Proxy Statement            iii


Table of Contents

2014 Company Performance Highlights

 

We highlight below the Company’s 2014 performance and compensation decisions for our named executives—John G. Stumpf (CEO), John R. Shrewsberry (CFO since May 2014, and previously President and CEO of Wells Fargo Securities, LLC), Timothy J. Sloan (Senior Executive Vice President, Wholesale Banking, and former CFO during part of 2014), David M. Carroll (Senior Executive Vice President, Wealth, Brokerage and Retirement), Avid Modjtabai (Senior Executive Vice President, Consumer Lending), and Carrie L. Tolstedt (Senior Executive Vice President, Community Banking).

 

   
Company Performance Highlights   

•      Record net income of $23.1 billion, up 5% from 2013

•      Record diluted earnings per share of $4.10, up 5% from 2013

•      Revenue of $84.3 billion, compared with $83.8 billion for 2013

•      Return on assets of 1.45%, compared with 1.51% for 2013

•      Return on equity of 13.41%, compared with 13.87% for 2013

•      Returned $12.5 billion to stockholders through dividends and net share repurchases, up from $7.2 billion in 2013

•      Tier 1 capital ratio of 12.45% under Basel III (General Approach), up from 12.33% at year-end 2013

•      Efficiency ratio of 58.1%, compared with 58.3% for 2013

•      Loans of $862.6 billion, up $40.3 billion from year-end 2013

•      Deposits of $1,168.3 billion, up $89.1 billion from year-end 2013

•      Credit losses down 35% from 2013, and nonaccrual loans down 18% from year-end 2013

 

2014 Compensation Decision Highlights

 

Based on application of our compensation principles to the Company’s 2014 results, consideration of the Company’s performance and the individual performance of the named executives, and the other relevant factors described in our CD&A, the HRC approved the 2014 compensation decisions shown in the table below for our named executives, including decisions in July 2014 to align the compensation structure for Mr. Shrewsberry to be consistent with the compensation structure for our other named executives. This table is not a substitute for, and should be read together with, the Summary Compensation Table on page 56 which presents 2014 named executive compensation paid, accrued or awarded for 2014 in accordance with SEC disclosure rules and includes additional compensation elements and other important information.

 

Named Executive

       Base Salary    
Rate
($)
    Annual
        Incentive        
Award
($)(1)
     Long-Term Equity  Incentives              Total         
($)
 
            Performance    
Share Award
($)(2)
         RSR Award    
($)(3)
    

John G. Stumpf

Chairman, President and CEO

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

John R. Shrewsberry

Senior Executive Vice President and CFO

     1,700,000 (4)      1,600,000         2,800,000         2,000,000         8,100,000(4)   

Timothy J. Sloan

Senior Executive Vice President

(Wholesale Banking) and former CFO during part of 2014

     2,000,000 (4)      1,600,000         5,500,000         1,500,000         10,600,000(4)   

David M. Carroll

Senior Executive Vice President

(Wealth, Brokerage and Retirement)

     1,700,000        1,400,000         5,500,000         1,000,000         9,600,000       

Avid Modjtabai

Senior Executive Vice President

(Consumer Lending)

     1,700,000        1,300,000         5,500,000         1,000,000         9,500,000       

Carrie L. Tolstedt

Senior Executive Vice President

(Community Banking)

     1,700,000        1,300,000         5,500,000         1,000,000         9,500,000       

 

(1)   One-third of the annual incentive award amount over $1 million was paid in RSRs that vest over three years. See pp. 48-49.
(2)   Dollar value of 2014 Performance Shares at “target.” Actual pay delivered or realized for Performance Shares will be determined in the first quarter of 2017 and may range from zero to 150% of the target shares, or zero to 125% of the target shares in the case of Mr. Shrewsberry whose grant was made prior to his becoming an executive officer, depending on Company performance. See pp. 51-53.
(3)   Dollar value of July 2014 RSR grants vesting over 4 years beginning on the first anniversary of the grant date. See p. 53.
(4)   Reflects current base salary rate based on increases approved by the HRC in July 2014, following Mr. Sloan’s appointment as the Head of Wholesale Banking and Mr. Shrewsberry succeeding him as the Company’s CFO on May 15, 2014. See p. 48 as well as the Summary Compensation Table on p. 56 which reports actual salary amounts earned for 2014.

 

 

iv            Wells Fargo & Company 2015 Proxy Statement


Table of Contents

Consistent with our pay for performance philosophy and as reflected in the table below, the compensation structure and decisions for our CEO and other named executive officers emphasize variable compensation which is determined based on Company, line of business and individual performance. In addition, the Company’s executive compensation program provides a high proportion of pay (including part of annual incentives) for our named executives in the form of long-term equity awards subject to performance conditions which further align our named executives’ and our stockholders’ interests in increasing stockholder value over the long-term. Our long-term equity awards are granted primarily in the form of Performance Shares that vest based on achievement of three-year Return on Realized Common Equity (RORCE) performance criteria. Percentages below are based on the total in the 2014 Compensation Decisions table above.

 

    

Emphasis on Variable Over Fixed Pay

       

High Proportion of Pay in Equity

    

Fixed

(Base Salary)

  

Variable “At-Risk”

(Annual Incentive and LTI)

       

Cash

  

Equity(1)

CEO

   15%    85%       30%    70%

Other NEO Average

   19%    81%       32%    68%
(1)   Includes Performance Shares that vest subject to RORCE performance criteria over a three-year performance period, RSRs granted as a portion of annual incentive award that vest over three years, and RSRs granted in July 2014 to named executives, other than our CEO, that vest over four years.

 

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

 

The HRC believes its 2014 compensation decisions were consistent with our compensation principles, they will benefit stockholders for short-term and long-term Company performance, and the compensation paid to the named executives for 2014 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.

 

The Board recommends that you vote FOR the advisory resolution to approve the compensation paid to the Company’s named executives.

 

Item 3 — Ratify Appointment of Independent Registered Public Accounting Firm

 

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, 2015.

 

The Board recommends that you vote FOR the ratification of KPMG as our independent registered public accounting firm for 2015.

 

Items 4 and 5 — Stockholder Proposals

 

Stockholders are being asked to vote on the following stockholder proposals, if properly presented at the meeting and not previously withdrawn:

 

   

Adopt a policy to require an independent chairman; and

 

   

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

 

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

 

 

Wells Fargo & Company 2015 Proxy Statement            v


Table of Contents

TABLE OF CONTENTS

 

   

Page

Item 1—Election of Directors

  2

•        Director Nominees for Election

  2

•        Director Election Standard

  11

•         Compensation Committee Interlocks and Insider Participation

  11

•        Other Matters Relating to Directors

  11

Corporate Governance

  12

•        Our Investor Outreach Program

  12

•        Director Independence

  13

•        Board Leadership Structure and Lead Director

  14

•         Board and Committee Meetings; Annual Meeting Attendance

  15

•        Committees of the Board

  15

•        Director Nomination Process

  18

•         Board Performance Evaluations and Succession Planning

  19

•        Our Commitment to Board Diversity

  21

•        The Board’s Role in Risk Oversight

  21

•        Risk Management and Compensation Practices

  23

•        HRC and GNC Use of Compensation Consultant

  25

•        Director Compensation

  26

•        Communications with Directors

  28

•        Management Succession Planning and Development

  28

Information About Related Persons

  29

•        Related Person Transactions

  29

•        Related Person Transaction Policy and Procedures

  30

Ownership of Our Common Stock

  32

•        Directors and Executive Officers

  32

•        Principal Stockholders

  35

•        Section  16(a) Beneficial Ownership Reporting Compliance

  35

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

  36

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

  36

•        Compensation Committee Report

  37

•        Compensation Discussion and Analysis

  38

•        Executive Compensation Tables

  56

2014 Summary Compensation Table

  56

2014 Grants of Plan-Based Awards

  59

Outstanding Equity Awards at Fiscal Year-End 2014

  61

2014 Option Exercises and Stock Vested

  63

Post-Employment Compensation

  63

2014 Pension Benefits

  65

2014 Non-Qualified Deferred Compensation

  68

Potential Post-Employment Payments

  72

Item  3—Appointment of Independent Registered Public Accounting Firm for 2015

  75

•        KPMG Fees

  75

•         Audit and Examination Committee Pre-Approval Policies and Procedures

  75

•        Audit and Examination Committee Report

  76

Stockholder Proposals

  77

•        Item  4—Stockholder Proposal to Adopt a Policy to Require an Independent Chairman

  77

•        Item  5—Stockholder Proposal to Provide a Report on the Company’s Lobbying Policies
and Practices

  79

Voting and Other Meeting Information

  81

•        Voting Information

  81

•        Meeting Admission Information

  84

•        Other Information

  85

Stockholder Information for Future Annual Meetings

  87
 

Acronyms Used in this Proxy Statement

  87

 

vi            Wells Fargo & Company 2015 Proxy Statement


Table of Contents

WELLS FARGO & COMPANY

 

420 Montgomery Street

San Francisco, California 94104

 

PROXY STATEMENT

 

You are invited to attend Wells Fargo’s 2015 annual meeting of stockholders to be held on Tuesday, April 28, 2015, and to vote on the items of business described in this proxy statement. Please read this proxy statement carefully and consider the information it contains when deciding how to vote your shares at the annual meeting. When we use the term “proxy materials” in this proxy statement, we mean the notice of the 2015 annual meeting of stockholders, this proxy statement, our annual report to stockholders for the fiscal year ended December 31, 2014, and the proxy card or voting instruction form. The proxy materials were first made available to stockholders beginning on or about March 17, 2015.

 

Your vote is important. Our Board is soliciting your proxy to vote your shares of our common stock at the annual meeting, or at any adjournment or postponement of the meeting. We encourage you to vote as soon as possible before the meeting, even if you plan to attend in person. Information about the annual meeting and voting your shares appears beginning on page 81 of this proxy statement.

 

The following table describes the items to be considered at the meeting and, for the reasons detailed elsewhere in the proxy statement, how the Board recommends that you vote:

 

Items for Vote

   Board Recommendation  

1.         

  Elect 16 directors    FOR all nominees

2.        

  Advisory resolution to approve executive compensation (Say on Pay)    FOR

3.        

  Ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2015    FOR

4-5.    

  Two stockholder proposals as described in our Notice of Annual Meeting    AGAINST both proposals

 

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. See Voting and Other Meeting Information beginning on page 81 for more information.

 

Wells Fargo & Company 2015 Proxy Statement            1


Table of Contents

ITEM 1 — ELECTION OF DIRECTORS

 

Director Nominees for Election

 

The Board has set 16 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 Elizabeth A. Duke and Suzanne M. Vautrinot, have been previously elected by our stockholders. Ms. Duke and Ms. Vautrinot were elected as directors by our Board effective January 1, 2015 and February 24, 2015, respectively, and are standing for election by our stockholders for the first time at the annual meeting. The Board has determined that each nominee for election as a director at the annual meeting is an independent director, except for John G. Stumpf, as discussed below under “Director Independence.”

 

The Board recommends you vote FOR each of the nominees 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 proxy holders 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 only 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,” 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 many of the areas highlighted in the accompanying chart which the Board views as important when evaluating director nominees. 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 background and range of expertise, knowledge, and experience, including as a result of his or her valued service on our Board and its committees, that provide the Board as a whole with an appropriate and diverse mix of qualifications, skills and attributes necessary for the Board to fulfill its oversight responsibility to the Company’s stockholders.   

 

DIRECTOR QUALIFICATIONS AND EXPERIENCE

REPRESENTED ON OUR BOARD

 

•     financial services,

•     financial management,

•     accounting or financial reporting,

•     risk management,

•     strategic planning,

•     regulatory and/or legal,

•     technology and information security,

•     marketing/consumer,

•     human resources, including management succession planning,

•     business development,

•     community affairs,

•     corporate governance,

•     governmental relations or public policy,

•     social responsibility,

•     international, and

•     business operations.

 

Below we provide 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 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, skills or attributes that led to the Board’s conclusion that each nominee should serve as a director of the Company.

 

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JOHN D. BAKER II

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

FRP Holdings, Inc.

 

Age: 66

 

Director Since: 2009

 

Business Experience:    Mr. Baker has served as Executive Chairman and a director of FRP Holdings, Inc. (successor to Patriot Transportation Holding, Inc.), Jacksonville, Florida (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 until November 2007. Mr. Baker also currently serves as Chairman of Panadero Aggregates Holdings, LLC, a construction aggregates company located in Jacksonville, Florida, and a senior advisor for Brinkmere Capital Partners, a private equity firm. He was formerly a director of Duke Energy Corporation, Progress Energy Inc., Texas Industries, Inc., and Patriot Transportation Holding, Inc.

 

Principal Qualifications and Experience

 

   As the CEO or chairman of two public companies during the past 18 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 more recently as the lead investor and senior advisor for a private equity firm, and his business development 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.
   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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ELAINE L. CHAO

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

News Corporation

Vulcan Materials Company

 

Age: 61

 

Director Since: 2011

 

Business Experience:    Ms. Chao served as the 24th U.S. Secretary of Labor from January 2001 until January 2009. Ms. Chao presently serves as chairman of the Ruth Mulan Chu Chao Foundation (family foundation). From August 1996 to January 2001, and January 2009 to August 2014, Ms. Chao was a Distinguished Fellow at the Heritage Foundation, Washington, D.C. 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 and Deputy Secretary of the U.S. Department of Transportation. She was formerly a director of Dole Food Company, Inc. and Protective Life Corporation.

Principal Qualifications and Experience

 

   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.
   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, and her previous work at two large financial services companies contributes relevant industry experience to the Board.
   Having overseen corporate governance issues at the Department of Labor Employee Benefits Security Administration and as a current and former board member of a number of prominent public companies, including past chair of the governance committee of Dole Food Company and a member of the nominating and corporate governance committee of News Corp, she also brings additional corporate governance experience to the Board.
   Ms. Chao has a Master of Business Administration from Harvard Business School.

 

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JOHN S. CHEN

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

BlackBerry Limited

The Walt Disney Company

 

Age: 59

 

Director Since: 2006

 

Business Experience:    Mr. Chen has served as Executive Chairman and Chief Executive Officer of BlackBerry Limited, Waterloo, Ontario, Canada (wireless telecommunications) since November 2013. Prior to joining BlackBerry, he served as Chairman and Chief Executive Officer of Sybase, Inc. from July 2010, when SAP AG acquired Sybase, until he retired in November 2012. He also served as Chairman, CEO, President, and as a director of Sybase from November 1998 until July 2010. Mr. Chen also serves as a Special Advisor of Silver Lake Partners, a private investment firm. He was formerly a director of Sybase, Inc.

Principal Qualifications and Experience

 

–      As the executive chairman and CEO of BlackBerry Limited and as a former CEO of Sybase, Mr. Chen has over 16 years of leadership and executive management experience. 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.

–      Mr. Chen also brings to the Board finance and business strategy experience and, as a result of his work with several public sector organizations, an important focus on international relations and business and community affairs.

–      His experience at BlackBerry and 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.

–      Mr. Chen holds a Master of Science from California Institute of Technology.

 

   

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LLOYD H. DEAN

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

Navigant Consulting, Inc.

Premier, Inc.

 

Age: 64

 

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. He was formerly a director of Cytori Therapeutics, Inc.

Principal Qualifications and Experience

 

–      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 23 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.

–      Mr. Dean’s prior service as the non-executive chairman and a director of Cytori Therapeutics provides an additional corporate governance perspective to the Board.

–      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.

 

 

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ELIZABETH A. DUKE

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

None

 

Age: 62

 

Director Since: 2015

 

Business Experience:    Ms. Duke has served as an executive-in-residence at Old Dominion University (higher education), Norfolk, Virginia, since March 2014. She served as a member of the Federal Reserve Board of Governors from August 2008 to August 2013, where she served as Chair of the Federal Reserve’s Committee on Consumer and Community Affairs and as a member of its Committee on Bank Supervision and Regulation, Committee on Bank Affairs, and Committee on Board Affairs. Previously, she was chief operating officer of TowneBank from 2005 to 2008, and was an executive vice president at Wachovia Bank, N.A., (2004 to 2005) and at SouthTrust Bank (2001 to 2004) which was acquired by Wachovia in 2004. Ms. Duke also served as chief executive officer of Bank of Tidewater, which was acquired by SouthTrust, and chief financial officer of Bank of Virginia Beach.

Principal Qualifications and Experience

 

–      As a former member of the Federal Reserve Board of Governors, Ms. Duke has broad experience and knowledge of the U.S. financial system, financial regulation, and economic and public policy matters.

–      Ms. Duke’s service as a Federal Reserve Governor during a critical time for the U.S. economy and banking system provides her with experience identifying, assessing, and managing risk exposures of financial firms such as the Company, as well as insight and a unique understanding of risks and opportunities that contribute important risk management experience to the Board.

–      She also brings extensive financial services and financial management experience to the Board as a result of various senior leadership roles leading banking operations in markets where the Company does business, including as chief operating officer of TowneBank, chief executive officer of Bank of Tidewater, and as a senior officer of SouthTrust Bank and Wachovia Bank, N.A., the last three of which banks along with Bank of Virginia Beach are now part of the Company.

–      Ms. Duke has a Master of Business Administration from Old Dominion University.

 

   

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SUSAN E. ENGEL

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

None

 

Age: 68

 

Director Since: 1998

 

Business Experience:    Ms. Engel served as Chief Executive Officer of Portero, Inc., New York, New York (an online retailer of luxury pre-owned and vintage personal accessories) from July 2009 until June 2013 when the company was acquired. She served as Chairwoman, CEO, 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. She was formerly a director of SUPERVALU INC.

Principal Qualifications and Experience

 

–      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 22 years, including as CEO of Portero, Inc. and Lenox Group.

–      Her senior leadership roles in retail-based businesses provide business development, retail, marketing and online sales experience to the Board, which is important to our retail and internet banking businesses.

–      Her experience serving as the president and chief executive officer of Champion Products, Inc., the athletic apparel division of Sara Lee Corporation for approximately three years and as a consultant with Booz Allen Hamilton, a large management consulting firm, for over 14 years also provide her with significant experience in business operations and strategic planning.

–      Ms. Engel has a Master of Business Administration from Harvard Business School.

 

 

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ENRIQUE HERNANDEZ, JR.

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

Chevron Corporation

McDonald’s Corporation

Nordstrom, Inc. (Chairman)

 

Age: 59

 

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.

Principal Qualifications and Experience

 

–      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, particularly in areas such as business strategy, risk assessment and succession planning.

–      Mr. Hernandez also has extensive experience in the banking industry, as well as 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, which have further enhanced his finance experience.

–      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.

 

   

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DONALD M. JAMES

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

Vulcan Materials Company

Southern Company

 

Age: 66

 

Director Since: 2009

 

Business Experience:    Mr. James has served as Chairman and a director of Vulcan Materials Company, Birmingham, Alabama (construction materials) since July 2014. Prior to that, he served as Chief Executive Officer since 1996 and Chairman since 1997 of Vulcan Materials Company.

Principal Qualifications and Experience

 

–      Mr. James brings extensive leadership and executive management experience to the Board as the current chairman and former 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, SouthTrust 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 service as chairman of the Governance Committee 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 University of Alabama and a law degree from University of Virginia.

 

 

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CYNTHIA H. MILLIGAN

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

Calvert Funds

Kellogg Company

Raven Industries, Inc.

 

Age: 68

 

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.

Principal Qualifications and Experience

 

–      Ms. Milligan has extensive experience in the financial services industry, including as a bank regulator, consultant 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.

–      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.

 

   

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FEDERICO F. PEÑA

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

Sonic Corp.

 

Age: 68

 

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. Since July 2014, he also has served as a Senior Advisor to the Colorado Impact Fund.

Principal Qualifications and Experience

 

–      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.

–      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 business development 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.

 

 

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JAMES H. QUIGLEY

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

Hess Corporation

Merrimack Pharmaceuticals, Inc.

 

Age: 63

 

Director Since: 2013

 

Business Experience:    Mr. Quigley served as senior partner of Deloitte LLP, New York, New York (audit, financial advisory, risk management, tax, and consulting) from June 2011 until his retirement in June 2012, when he was named CEO Emeritus. Prior to his retirement, he served as chief executive officer of Deloitte Touche Tohmatsu Limited (DTTL, the Deloitte global network) from June 2007 to June 2011, and as chief executive officer of Deloitte LLP, the U.S. member firm of DTTL, from 2003 until 2007.

Principal Qualifications and Experience

 

–      Mr. Quigley brings extensive leadership, accounting and financial reporting, auditing and risk management experience to the Board. He served Deloitte for over 35 years in a wide range of leadership positions, including as CEO, and provided accounting, financial advisory and consulting services to many of Deloitte’s leading clients in a range of industries.

–      Mr. Quigley’s broad management experience running a prominent global firm, as well as his experience advising diverse multinational companies operating in complex environments, provides the Board with key perspective on leadership, business operations, strategic planning, risk and corporate governance matters.

–      His current service as trustee of the International Financial Reporting Standards Foundation and a member of the Board of Trustees of The German Marshall Fund of the United States also provides valuable insight on international business affairs.

–      He previously was a co-chairman of the Transatlantic Business Dialogue and a director of the Center for Audit Quality, a trustee of the Financial Accounting Foundation, a member of the U.S. Securities and Exchange Commission Advisory Committee on Improvements to Financial Reporting, and a member of numerous committees of the American Institute of Certified Public Accountants.

–      He earned a Bachelor of Science degree and honorary Doctorate of Business from Utah State University.

 

   

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JUDITH M. RUNSTAD

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

None

 

Age: 70

 

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. She was formerly a director of Potlatch Corporation.

Principal Qualifications and Experience

 

–      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 40 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’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.

 

 

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STEPHEN W. SANGER

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

Pfizer Inc.

 

Age: 68

 

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. Mr. Sanger joined General Mills in 1974 and held various management positions at General Mills before becoming chairman and CEO in 1995. He was formerly a director of Target Corporation.

Principal Qualifications and Experience

 

–      Mr. Sanger brings leadership, executive management, and marketing and consumer experience to the Board, as well as valuable experience in corporate strategy and mergers and acquisitions.

–      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.

–      Mr. Sanger has served as our Board’s Lead Director since 2012.

–      Mr. Sanger holds a Master of Business Administration from the University of Michigan.

 

   

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JOHN G. STUMPF

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

Chevron Corporation

Target Corporation

 

Age: 61

 

Director Since: 2006

 

Business Experience:    Mr. Stumpf has served as our Chairman since January 2010, 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.

Principal Qualifications and Experience

 

–      Mr. Stumpf has been employed with the Company for over 33 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 has extensive leadership and risk management experience, and his service on the board of directors for The Clearing House and the Financial Services Roundtable and on the Financial Advisory Council for the Federal Reserve Board provide additional insight to the Board on key issues facing the Company and the financial services industry.

–      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.

–      He has a Master of Business Administration from the University of Minnesota.

 

 

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SUSAN G. SWENSON

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

Harmonic Inc.

Novatel Wireless, Inc.

Spirent Communications plc

 

Age: 66

 

Director Since: 1998*

 

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.

 

* Reflects service since the Wells Fargo – Norwest merger. Served as a director of the former Wells Fargo from 1994 to 1998.

Principal Qualifications and Experience

 

–      Ms. Swenson brings extensive leadership, executive management, and information technology experience to the Board. Ms. Swenson has over 30 years’ experience in the telecommunications industry, including as the CEO or COO of several public and private companies, and as chair of the board 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 have 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, internet, 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, and has extensive financial management expertise.

 

   

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SUZANNE M. VAUTRINOT

 

CURRENT PUBLIC COMPANY DIRECTORSHIPS:

Ecolab Inc.

Symantec Corporation

 

Age: 55

 

Director Since: 2015

 

Business Experience:    Ms. Vautrinot has served as President of Kilovolt Consulting Inc., San Antonio, Texas (a cyber security strategy and technology consulting firm) since October 2013. Ms. Vautrinot retired from the United States Air Force in October 2013 after 31 years of service. During her distinguished career with the United States Air Force, she served in a number of leadership positions including as Major General and Commander, 24th Air Force, Air Forces Cyber and Air Force Network Operations from April 2011 to October 2013, Special Assistant to the Vice Chief of Staff of the United States Air Force in Washington, D.C. from December 2010 to April 2011, Director of Plans and Policy, U.S. Cyber Command and Deputy Commander, Network Warfare, U.S. Strategic Command from June 2008 to December 2010, and Commander, Air Force Recruiting Service from July 2006 to June 2008. She has been awarded numerous medals and commendations, including the Defense Superior Service Medal and Distinguished Service Medal.

Principal Qualifications and Experience

 

–      As a result of more than 30 years of service in various leadership and command roles in the United States Air Force, Ms. Vautrinot brings extensive space and cyber technology and operations expertise to our Board at a time when protecting financial institutions and the financial system from cyber threats is a top priority.

–      In addition to her vast cyber expertise, Ms. Vautrinot has led large, complex, and global organizations which will bring operational, strategic, and innovative technology skills to the Board. She retired as a Major General and Commander, 24th Air Force, where she oversaw a multi-billion dollar cyber enterprise responsible for operating, extending, maintaining, and defending the Air Force portion of the Department of Defense global network.

–      As Commander, 24th Air Force, she led a workforce unit of approximately 14,000 military, civilian and contractor personnel, which along with her other leadership roles and assignments in the United States Air Force, provides her with significant planning and policy, strategic security and workforce development expertise.

–      She has a Bachelor of Science from the United States Air Force Academy, a Master of Science in systems management from the University of Southern California, and was a National Security Fellow at the John F. Kennedy School of Government at Harvard University.

 

 

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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 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.

 

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 2014. During 2014, no member of the HRC was an employee, officer, or former officer of the Company. None of our executive officers served in 2014 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. (successor to Department 56), 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 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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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, the role of the Board, 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 the majority vote standard for directors, management succession planning, the Board’s leadership structure and the responsibilities of the Lead Director. The Board reviews the Corporate Governance Guidelines annually and, in 2014, the Board amended the Corporate Governance Guidelines to enhance or further discuss various Board governance policies and practices, including the following:

 

   

the Board’s performance evaluation process;

   

the Board’s views on term limits and Board refreshment and related changes in the director retirement policy;

   

the Board’s review of the Company’s strategic plans;

   

our policy prohibiting the pledging of Company equity securities by our directors and executive officers;

   

our director training program; and

   

the Board’s engagement with stockholders and our investor outreach program.

 

The Board also has 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. For over 100 years, we also have had a code of ethics that applies to all team members. 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.

 

Our Corporate Governance Guidelines and our Codes of Ethics are available on our website at: https://www.wellsfargo.com/about/corporate/corporate_governance.

 

Our Investor Outreach Program

 

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. Through our investor outreach program, our Lead Director and management participate 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. In the fall of 2014, the Company contacted many of our largest institutional investors and met with institutional investors representing approximately 27% of the Company’s common stock. We also met with other investors and organizations interested in our corporate governance practices and policies. We share the feedback received during our outreach process with the GNC and our Board and, in 2014, discussion topics with our institutional investors included Board composition and refreshment, director tenure, other current governance issues, and our executive compensation program.

 

As described above, the Board amended our Corporate Governance Guidelines in 2014 to enhance and provide additional information about the Board’s performance evaluation process as part of its regular review of our corporate governance practices and, at the same time, to be responsive to feedback from our investors. Our proxy statement reflects enhanced disclosure about the Board’s performance evaluation and succession planning processes as well as additional information about the skills and experience of our directors based on the input received from our investors. 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 us to continue to evolve our corporate governance practices in a way that reflects the insights and perspectives of our many stakeholders.

 

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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 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. These Director Independence Standards consist of the NYSE’s “bright line” standards of independence as well as additional standards, known as categorical standards of independence, adopted by the Board. The Director Independence Standards are available on our website at: https://www.wellsfargo.com/about/corporate/corporate_governance.

 

Based on the Director Independence Standards, the Board considered information in early 2015 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. 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, Elizabeth A. Duke, Susan E. Engel, Enrique Hernandez, Jr., Donald M. James, Cynthia H. Milligan, Federico F. Peña, James H. Quigley, Judith M. Runstad, Stephen W. Sanger, Susan G. Swenson, and Suzanne M. Vautrinot) are independent under the Director Independence Standards, including the NYSE “bright line” standards of independence. The Board determined, therefore, that 15 of the Board’s 16 director nominees are independent. The Board previously determined that Howard V. Richardson was an independent director prior to his retirement from the Board in January 2014.

 

In connection with making its independence determinations, the Board considered the following relationships, as well as the relationships with certain directors described under “Related Person Transactions,” under the Director Independence Standards and determined that all of these relationships satisfied the NYSE “bright line” standards of independence and were immaterial under the Board’s categorical standards of independence:

 

Banking and Financial Services Relationships   The Company’s banking and other subsidiaries had ordinary course banking and financial services relationships in 2014 with most of our directors, some of their immediate family members, and/or certain entities affiliated with such directors and their immediate family members, including entities currently associated with Mses. Chao, Duke, Engel, Milligan, Runstad, and Swenson and Messrs. Baker, Chen, Dean, Hernandez, James, Peña, and Sanger, 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.
Business Relationships   The Company and its subsidiaries purchase products or services in the ordinary course of business from wireless telecommunications carriers, including products and services provided to those carriers by BlackBerry Limited, where Mr. Chen is executive chairman and chief executive officer. The aggregate amount of payments made by the Company during 2014 to these carriers and to BlackBerry for the use of BlackBerry devices did not exceed 1% of BlackBerry’s or the Company’s 2014 consolidated gross revenues. James H. Quigley is a retired partner of Deloitte, which provides advisory services in the ordinary course of business to the Company and its subsidiaries. Mr. Quigley retired as a partner of Deloitte in 2012, and the Company’s payments in 2014 to Deloitte were less than 1% of that firm’s and the Company’s 2014 consolidated gross revenues. Mr. Richardson was a retired partner of an accounting firm that also provided advisory services to the Company.
Charitable Relationships   The Company or its charitable foundation made charitable contributions during 2014 to a tax-exempt organization where Mr. Dean is employed as an executive officer and to tax-exempt organizations where Mr. Baker serves and Mr. Hernandez formerly served as chairman of the board of trustees. In each case, the contributions were less than $100,000.
Other Relationships   Elizabeth A. Duke has outstanding pension and supplemental retirement plan balances with an aggregate actuarial present value of approximately $155,000 earned from her prior employment with SouthTrust Corporation and its successor, Wachovia Corporation, which employment ended in 2005. No additional service-based contributions or accruals will be made to either plan balance. Payment of the plan balances is not conditioned on any future service or performance by Ms. Duke and will be made in accordance with the applicable plan documents. The Company assumed these pre-existing obligations under the applicable plans following the Wachovia merger at the end of 2008.

 

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Board Leadership Structure and Lead Director

 

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 our Company. Mr. Stumpf, with over 33 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 vision, 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 issues 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, values 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 (15 of the 16 director nominees are independent under 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 an independent Lead Director, and in November 2014, the independent directors appointed Stephen W. Sanger to continue to serve as Lead Director in 2015.

 

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;

 

 

   

Facilitating the Board’s review and consideration of stockholder proposals properly submitted for inclusion in the Company’s annual proxy statement;

 

 

   

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.

 

 

 

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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. Mr. Sanger also serves as Lead Director of Wells Fargo Bank, National Association, the Company’s principal banking subsidiary.

 

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 with Mr. Stumpf regarding his assessment of his own performance. Mr. Sanger’s participation in the Chairman and CEO performance evaluation, as well as his participation as a member of the HRC in the HRC’s management succession planning processes, helps him evaluate whether the combined Chairman and CEO position continues to be the right governance structure for the Board and the Company, including in the event of a CEO transition. In addition, Mr. Sanger’s participation in the Company’s investor outreach program and leadership role in facilitating the Board’s review and consideration of stockholder proposals provide him with 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 so that the Board is in position to consider the continued appropriateness of having the same person serve as Chairman and CEO.

 

Board and Committee Meetings; Annual Meeting Attendance

 

Directors are expected to attend all Board meetings and meetings of committees on which they serve. Directors also are expected to attend each annual stockholders meeting. All of the 14 nominees for director in 2014 attended the Company’s annual stockholders meeting that year.

 

The Board held nine meetings during 2014. Attendance by the Board’s current directors at meetings of the Board and its committees averaged 98.95% during 2014. Each current director who served as a director in 2014 attended at least 75% of the total number of 2014 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 2014 meetings. During 2014, 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” above.

 

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.

 

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 annually 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. A current copy of each committee’s charter is available on our website at: https://www.wellsfargo.com/about/corporate/corporate_governance.

 

Additional information about the Board’s seven standing committees, including their key responsibilities, appears below.

 

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AUDIT AND EXAMINATION COMMITTEE

(AEC)

 

NUMBER OF MEETINGS IN 2014:    10

COMMITTEE MEMBERS:  Quigley (Chair); Baker; Hernandez; Peña; Swenson; Vautrinot

Primary Responsibilities:

 

•  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 our internal controls;

 

•  Selects and evaluates our independent auditor, including their qualifications and independence and approves all audit engagement fees and terms and all non-audit engagements of the independent auditor and engagement fees of any other external auditor for additional required audit, review or attest services;

 

•  Approves the appointment and compensation of the Company’s Chief Auditor and oversees the performance of the Chief Auditor and the internal audit function;

 

•  Oversees operational risk, legal and regulatory compliance and financial crimes (Bank Secrecy Act and Anti-Money Laundering) risk, approves significant supporting operational risk, compliance and financial crimes policies and programs, including our information security program, and reviews regulatory examination reports and communications;

 

•  Reviews and discusses the implementation and effectiveness of our ethics, business conduct and conflicts of interest program; and

 

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

 

Independence and Experience:  Each member of the AEC is independent, as independence for audit committee members is defined by NYSE and SEC rules. The Board has determined, in its business judgment, that each current member of the AEC listed above is financially literate as required by NYSE rules, and that each of John D. Baker II, Enrique Hernandez, Jr., Federico F. Peña, James H. Quigley, and Susan G. Swenson qualifies as an “audit committee financial expert” as defined by SEC regulations. No AEC member may serve on the audit committee of more than two other public companies.

 

CORPORATE RESPONSIBILITY COMMITTEE (CRC)  

NUMBER OF MEETINGS IN 2014:    3

COMMITTEE MEMBERS:  Runstad (Chair); Baker; Dean; Hernandez; Milligan; Peña

Primary Responsibilities:

 

•  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 relationships with external stakeholders regarding significant social responsibility matters; and

 

•  Monitors the Company’s reputation, including with its customers, and receives reports and updates on customer service and complaints and other matters relating to the Company’s brand and reputation.

 

CREDIT COMMITTEE  

NUMBER OF MEETINGS IN 2014:    4

COMMITTEE MEMBERS:  Milligan (Chair); Baker; Chao; Engel; Quigley; Runstad

Primary Responsibilities:

 

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

 

•  Oversees the effectiveness and administration of our credit risk management framework and other credit policies, including the organizational structure of Risk Asset Review (RAR), RAR’s examination of the company’s credit portfolios, processes and practices, the Company’s adherence to credit risk appetite metrics, and credit risk aggregation and concentration limits;

 

•  Reviews management’s assessment of the appropriateness of the allowance for credit losses, including the methodology and governance supporting the allowance for credit losses; and

 

•  Reviews and approves other credit-related activities as it deems appropriate or that are required to be approved by law or regulation, including the Company’s credit quality plan, credit stress testing framework and related stress test results.

 

FINANCE COMMITTEE  

NUMBER OF MEETINGS IN 2014:    3

COMMITTEE MEMBERS:  Hernandez (Chair); Chao; Engel; James; Runstad

Primary Responsibilities:

 

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

 

•  Reviews the Company’s annual financial plan, approves the Company’s capital management and stress-testing policies, and oversees the administration and effectiveness of the Company’s capital management and planning activities; and

 

•  Reviews financial and investment performance, and recommends to the Board the declaration of common stock dividends and securities issuances, the repurchase of securities and approval of significant capital expenditures.

 

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GOVERNANCE AND NOMINATING COMMITTEE (GNC)  

NUMBER OF MEETINGS IN 2014:    3

COMMITTEE MEMBERS:  Sanger (Chair); Dean; Milligan; Peña; Swenson

Primary Responsibilities:

 

• 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 oversees a 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 in connection with stockholder engagement on matters subject to the oversight of such other committees.

 

Independence:  Each member of the GNC is independent, as independence is defined by NYSE rules.

 

   

HUMAN RESOURCES COMMITTEE

(HRC)

 

NUMBER OF MEETINGS IN 2014:    5

COMMITTEE MEMBERS:  Dean (Chair); Chen; Engel; James; Sanger

Primary Responsibilities:

 

• Discharges the Board’s responsibilities relating to the Company’s overall compensation strategy and the compensation of our executive officers;

 

• Oversees the Company’s incentive compensation practices so that they are consistent with the safety and soundness of the Company and do not encourage excessive risk-taking and reviews and approves benefit and compensation plans and arrangements applicable to executive officers of the Company;

 

• Evaluates the CEO’s performance and approves and recommends the CEO’s compensation to our Board for approval and approves compensation for our other executive officers and any other officers or employees as the HRC determines appropriate;

 

• Oversees talent management and succession planning and diversity and inclusion 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.

 

Independence:  The Board has determined that each member of the HRC is a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, as amended, an “outside director” for purposes of Section 162(m) of the Internal Revenue Code, and is independent, as independence for compensation committee members is defined under NYSE rules.

 

   
RISK COMMITTEE  

NUMBER OF MEETINGS IN 2014:    6

COMMITTEE MEMBERS:  Hernandez (Chair); Dean; Duke; Milligan; Quigley; Runstad; Sanger

Primary Responsibilities:

 

• Approves and oversees the Company’s enterprise-wide risk management framework, which outlines our overarching risk management approach and policies, and approves the framework and policies for managing our major risks, including credit, market, liquidity, operational, compliance, financial crimes, model, strategic, reputational, cross-functional, and emerging risks;

 

• Oversees the Corporate Risk function and the performance of the Chief Risk Officer, approves the appointment and compensation of the Chief Risk Officer, and monitors the effectiveness of our enterprise-wide risk program;

 

• Annually recommends to the Board, and monitors adherence to, our risk appetite, and reviews our aggregate enterprise-wide risk profile and its alignment with our strategy and risk appetite; and

 

• Oversees liquidity and funding risks, and risks associated with acquisitions and significant new business or strategic initiatives.

 

Independence:  Each member of the Risk Committee is independent, as independence is defined by NYSE rules.

 

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Director Nomination Process

 

The GNC is responsible for leading 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 leadership, executive management, financial, industry 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. As described below, the GNC also oversees the Board’s performance evaluation process and administers the director retirement policy.

 

The GNC identifies potential candidates for first-time nomination as a director primarily through recommendations it receives from our current and former Board members and executive officers as well as from our stockholders and contacts in the communities we serve. The GNC also has the authority to engage a third-party search firm to identify potential candidates. In 2014, Elizabeth A. Duke was identified and recommended to the GNC by our Chairman and CEO and a third-party search firm retained by the GNC. In addition, Suzanne M. Vautrinot was identified and recommended by a former director and executive officer of the Company to our Chairman and CEO for consideration by the GNC. In addition to identifying and providing information on a number of potential director candidates, the third-party search firm reviewed and provided information about Mses. Duke and Vautrinot for review by the GNC and the Board.

 

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.”

 

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 taking into account the particular qualifications, skills, experience and attributes that the Board believes are important to the Company such as those described under “Director Nominees for Election” above. 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 rules, regulations, or policies 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.

 

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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.

 

Board Performance Evaluations and Succession Planning

 

Our Board has a robust process for evaluating the performance of the Board and its committees. As part of the Board’s annual self-evaluation process, the directors consider various topics relating to Board composition, structure, effectiveness and responsibilities, as well as the overall mix of director skills, experience and backgrounds. In 2014, the Board enhanced its self-evaluation process by encouraging directors also to provide
feedback on the individual contributions of directors to the work of the Board   

and its committees. Mr. Sanger, as GNC Chair and Lead Director, contacted each of our directors individually during 2014 to discuss and obtain his or her assessment of the Board’s performance. He presented those assessments to the Board for discussion in executive session, and any necessary follow-up items were reviewed by Mr. Sanger with the GNC, the Board and management, as appropriate. Each committee conducts a separate self-evaluation process led by the committee chair, as provided in its charter. The Board’s and each committee’s performance evaluation includes a review of the Corporate Governance Guidelines and its committee charter, respectively, to consider any proposed changes.

 

The Board’s annual performance evaluation is a key component of its director nomination process and succession planning. In its succession planning, the GNC and the Board consider the results of the Board’s self-evaluation, as well as other appropriate information, including the overall mix of tenure and experience of the Board, upcoming retirements of individual directors, the types of skills and experience desirable for future Board members, and the needs of the Board and its committees at the time. The Board values the contributions of directors who have developed extensive experience and insight into the Company during the course of their service on the Board and, therefore, the Board does not believe arbitrary term limits on directors’ service are appropriate. At the same time, the Board recognizes the importance of Board refreshment to help ensure an appropriate balance of experience and perspectives on the Board.

 

The Board’s succession planning in 2014 focused primarily on the composition of the Board and its committees, the upcoming retirements of directors under the director retirement policy, succession plans for committee chairs, our commitment to Board diversity, and recruiting strategies for adding new directors to complement the existing skills and experience of the Board in areas identified in the Board’s performance evaluation process and consistent with

  

Our Board Performance

Evaluation Process

 

LOGO

 

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the Company’s strategic priorities such as managing risk. The Board also considered the possibility that future director candidates with valuable experience may be close to the Board’s retirement age of 70. In order to facilitate the Board’s recruitment of new directors with appropriate skills, experience and backgrounds and provide for an orderly transition of leadership on the Board and its committees, in November 2014 the Board increased the retirement age for directors to 72. The Board’s decision to increase the retirement age, however, was made with the understanding that directors may not necessarily serve until their retirement age.

 

The recent addition to the Board of Mses. Duke and Vautrinot enhanced the overall mix of skills and experience of the Board in areas including financial services, risk management and cyber security. Ms. Duke brings to the Board and its Risk Committee extensive experience in the financial services industry, including as a former member of the Federal Reserve Board of Governors. Ms. Vautrinot brings to the Board and the AEC significant technology and cyber security experience from over 30 years of distinguished service in the United States Air Force, including as a retired Major General and Commander, 24th Air Force, Air Force Cyber, and Air Force Network Operations and other leadership positions. The addition of these two new directors reflects the Board’s efforts to bring fresh perspectives to the Board, and the chart below illustrates the varying tenure of the Board’s independent directors.

 

LOGO

 

As a result of the addition of Mses. Duke and Vautrinot, the Board currently has 16 members, which is consistent with the size range (14 to 19 directors as reflected in the chart below) of the Board over the last 10 years. The Board believes its current size is appropriate to enable the Board to fulfill its oversight responsibilities, including through its committees by providing the committees with an appropriate number of directors who have the right mix of skills and experience. Although the Board expects that its size may fluctuate based on various factors, including the retirement of directors, the availability of director candidates with desirable experience, and the needs of the Board, the Board also expects that its size is likely to move to the lower end of its historical range over time. The following chart shows the number of director nominees for election to our Board at each annual meeting over the last ten years.

 

LOGO

 

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Our Commitment to Board Diversity

 

Although the GNC does not have a separate policy specifically governing diversity, as described in the Corporate Governance Guidelines and its charter the GNC will consider, in identifying first-time candidates or nominees for director, and 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 also incorporates this broad view of diversity into its director nomination process by taking into account all of the factors above when evaluating and recommending director nominees to serve on the Board so 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, operational, 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, as reflected in the charts below. The GNC and the Board believe that the 16 nominees bring to the Board a variety of different backgrounds, skills, professional and industry experience, and other personal qualities, attributes, and perspectives that contribute to the overall diversity of the Board. The GNC and the Board will continue to monitor the effectiveness of their practice of considering diversity through assessing the results of any new director search efforts, such as those recently involving Mses. Duke and Vautrinot, and through the GNC’s and Board’s self-evaluation processes in which directors discuss and evaluate the composition and functioning of the Board and its committees.

 

LOGO

 

The Board’s Role in Risk Oversight

 

Financial institutions such as the Company must manage a variety of business risks that can significantly affect financial performance, including operational, credit, interest rate, market, investment, and liquidity and funding risks. Our risk culture is strongly rooted in our vision and values and, in order to succeed in our mission of satisfying all of our customers’ financial needs and helping them succeed financially, our business practices and operating model must support prudent risk management practices.

 

Key elements of our risk management framework and culture include understanding and following our overall enterprise statement of risk appetite, which describes the nature and level of risks that we are willing to take to achieve our strategic and business objectives, and the “tone at the top” set by our Board, CEO and Operating Committee members, which consist of our Chief Risk Officer and other senior executives reporting directly to our CEO. Our senior management develops our enterprise statement of risk appetite in the context of our risk management framework and culture. The Board approves our statement of risk appetite annually and, together with our CEO and the Operating Committee, is the starting point for establishing and reinforcing our risk culture and overseeing our risks.

 

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The Board performs its risk oversight function primarily through its seven standing committees, including its Risk Committee. All of these committees report to the whole Board and are comprised solely of independent directors. The Board’s risk governance structure is outlined below, and additional information about our risk management framework and practices, as well as the responsibilities of each of our Board committees, is described in the Financial Review – Risk Management section in our 2014 annual report on Form 10-K and under Committees of the Board in this proxy statement.

 

Each of the Board’s committees is responsible for oversight of specific risks outlined in each of their charters, including reputation risk. The Risk Committee does not duplicate the risk oversight efforts of other Board committees but rather helps ensure end-to-end ownership of oversight of all enterprise risk issues in one Board committee and across all risk types. To facilitate discussion and communication about enterprise-wide risk matters and avoid unnecessary duplication, the Risk Committee’s members include the chairs of each of the Board’s other committees. The following chart summarizes key risk oversight responsibilities of our Board and its committees.

 

Board of Directors

Annually approves overall enterprise risk appetite statement

         

Risk Committee

Oversight includes:

•       Enterprise-wide risk management framework, which outlines the policies, processes, and governance structures used to execute the Company’s risk management program

•       Functional framework and oversight policies, which outline roles and responsibilities for managing key risk types

•       Corporate Risk function, including performance and compensation of the Chief Risk Officer

•       Aggregate enterprise-wide risk profile and alignment of risk profile with the Company’s strategy, goals, objectives, and risk appetite

•       Risk appetite statement, including changes in risk appetite and adherence to risk limits

•       Risks associated with acquisitions and significant new business or strategic initiatives

•       Liquidity and funding risks, emerging risk, strategic risk, and cross-functional risk

         

Audit and

Examination

Committee

  Credit Committee  

Corporate

Responsibility

Committee

 

Finance

Committee

 

Governance

and

Nominating

Committee

 

Human

Resources

Committee

Oversight includes:

• Internal controls over financial reporting

• External auditor performance

• Internal audit function, including performance of the Chief Auditor

• Operational risk (including technology), compliance with legal and regulatory requirements, and financial crimes risks

• Ethics, business conduct and conflicts of interest program

 

Oversight includes:

• Credit risk, including high risk portfolios

• Allowance for credit losses, including governance and methodology

• Adherence to enterprise credit risk appetite metrics and concentration limits

• Compliance with credit risk framework, policies and underwriting standards

• Credit stress testing activities

• Risk Asset Review organization, resources, and examinations of credit portfolios, processes, and practices

 

Oversight includes:

• Fair and responsible mortgage and other consumer lending reputational risks

• Reputation, including with customers, as well as customer service and complaint matters

• Social responsibility risks, including political and environmental risks

 

Oversight includes:

• Interest rate risk, including mortgage servicing rights

• Market risk, including trading and derivative activities, and counter party risks

• Investment risk, including fixed-income and equity portfolios

• Capital adequacy assessment and planning, and stress testing activities

• Annual financial plan

 

Oversight includes:

• Corporate governance compliance

• Board and committee performance

 

Oversight includes:

• Compensation risk management

• Talent management and succession planning

 

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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. Managers are accountable for managing risks through day-to-day operations and, in some cases, management committees have been established to inform the risk management framework and provide governance and advice regarding management functions. These management committees include the Company’s Operating Committee, which meets 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 who meet regularly during the year, and reviews significant and emerging risk topics and high-risk business initiatives, particularly those that may result in additional regulatory or reputational risk. These and other committees help management facilitate enterprise-wide understanding and monitoring of risks and challenges faced by the Company. Management’s corporate risk organization is headed by the Company’s Chief Risk Officer who, among other things, provides oversight, opines on the performance strategy of all risks taken by the businesses, and provides credible challenge to risks incurred. The Chief Risk Officer is appointed by and reports to the Board’s Risk Committee. The Chief Risk Officer, as well as the Chief Enterprise, Credit, Market, Compliance, Operational Risk, Information Security and Financial Crimes Risk Officers as his direct reports, work closely with the Board’s committees and frequently provide reports and updates to the committees and the committee chairs on risk issues during and 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 practices which include active oversight and monitoring by the HRC over our incentive compensation practices. More information about the processes and procedures by which the HRC considers and determines the compensation of our named executive officers is included in our CD&A. The HRC may delegate certain of its responsibilities to one or more HRC members or to designated members of senior management or committees. The HRC has delegated authority to the Director of Human Resources and the Director of Compensation and Benefits for the administration of the Company’s benefit and compensation programs; however, the HRC generally has sole authority relating to incentive compensation plans applicable to executive officers, the approval of awards under any equity-based plans or programs and material amendments to any benefit or compensation plans or programs.

 

In addition, the HRC oversees the Company’s overall strategy with respect to incentive compensation practices so that they are consistent with the safety and soundness of the Company and do not encourage excessive risk taking. As part of this oversight responsibility, the HRC reviews and monitors 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 and practices that apply to the Company’s named executives discussed in the CD&A (see “Compensation Program Governance—Risk Management”) apply equally to our Covered Employees (which include other senior executives), including:

 

   

an emphasis on overall Company performance in compensation decisions, and for lines of business, their contribution to overall Company performance;

 

   

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;

 

   

evaluation of individual performance based on the individual’s focus on appropriate risk-management practices aligned with the Company’s risk appetite as well as risk outcomes;

 

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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;

 

   

our 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 other employees are expected to retain that number of shares subject to the same limit while employed by the Company.

 

For 2014, the HRC continued to use long-term Performance Share awards for a broader group of management and to defer 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. Beginning for 2013, the number of Performance Shares that vest at the end of the three-year performance period is based on the Company’s absolute and relative Return on Realized Common Equity (RORCE) performance. The three-year RORCE performance metric is aligned with the Company’s risk appetite and focuses on long-term stockholder value creation.

 

Performance Share awards granted since 2013 also are subject to two separate performance-based vesting conditions. First, beginning in 2012, the Company added a risk-balancing performance condition to Performance Share awards to reduce those awards in the event of poor absolute financial performance by the Company. Second, beginning in 2013, the HRC also incorporated an additional risk-balancing performance condition into Performance Share awards granted to our senior executives and deferred awards granted to our Covered Employees as part of annual incentive compensation. The additional performance-based vesting condition gives the HRC full discretion to cancel all or a portion of those awards if, among other things, the employee 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. Similar to its approach to evaluating risk in making its incentive compensation decisions for our executive officers since 2012, the HRC continued in 2015 to consider the Company’s risk management framework when evaluating the individual performance of our named executives during 2014 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. 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.

 

Through the ICRM program and subject to the oversight of Corporate Human Resources, (1) each line of business within Wells Fargo is accountable for identifying employees whose activities, individually or as a group, may expose Wells Fargo to material risk and (2) the management teams within Wells Fargo’s international locations are responsible for overseeing implementation and supervision of Wells Fargo remuneration policies and practices in those locations. Each line of business is responsible for understanding the risks associated with each job covered by an incentive arrangement and making sure the business’ incentive arrangements are balanced and do not encourage imprudent risk-taking.

 

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In accordance with our IRCM Policy that was approved by the HRC in July 2011 and last amended in November 2012, the ICRM program coordinates annually an enterprise-wide assessment of business line and corporate staff incentive compensation plans in which our Covered Employees participate. In conjunction with this annual review process, our corporate and line of business risk officers provide independent reviews of such incentive compensation arrangements and risk-balancing features and are accountable to our Chief Risk Officer. Currently, the HRC meets with our Chief Risk Officer annually to review and assess any risks posed by our enterprise 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 risk 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 the safety and soundness of the Company and applicable regulatory guidance.

 

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

 

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 are available 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, and its CEO, George Paulin, to provide independent advice on executive and non-employee director compensation matters for 2014. 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 maintain 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 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 2014. In November 2014, the HRC assessed the independence of Cook & Co. and Mr. 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 2014 was $207,830, 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.

 

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Director Compensation

 

The table below provides information on 2014 compensation for our non-employee directors other than Elizabeth A. Duke and Suzanne M. Vautrinot, who joined our Board in 2015. Mr. Stumpf is an employee director and does not receive separate compensation for his Board service. The Company 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.

 

2014 Director Compensation Table

 

Name

   Fees
Earned
or Paid
in Cash
($)(3)
    Stock
Awards
($)(5)
     Option
Awards
($)(6)
     Non-Equity
Incentive Plan
Compensation
($)
     Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings
     All
Other
Compen-
sation
($)(7)
   Total
($)
 
(a)    (b)     (c)      (d)      (e)      (f)      (g)    (h)  

John D. Baker II

     165,000        160,035                                    325,035   

Elaine L. Chao

     107,000        160,035                                    267,035   

John S. Chen

     103,000        160,035                                    263,035   

Lloyd H. Dean (1)

     152,000        160,035                                    312,035   

Susan E. Engel

     143,000        160,035                                    303,035   

Enrique Hernandez, Jr. (1)

     194,000        160,035                               5,000      359,035   

Donald M. James

     109,000        160,035                                    269,035   

Cynthia H. Milligan (1)

     150,000        160,035                                    310,035   

Federico F. Peña

     138,000 (4)      160,035                                    298,035   

James H. Quigley (1)

     150,500        160,035                                    310,535   

Howard V. Richardson (2)

     8,750                                           8,750   

Judith M. Runstad (1)

     172,000        160,035                                    332,035   

Stephen W. Sanger (1)

     183,000        160,035                                    343,035   

Susan G. Swenson

     119,000        160,035                                    279,035   
(1)   Effective January 1, 2015, non-management directors serving on Wells Fargo Bank’s board receive an annual cash retainer of $10,000, payable quarterly in arrears, and a fee of $2,000 per separate meeting not held concurrently with or immediately prior to or following a Company Board or committee meeting.

 

(2)   Mr. Richardson resigned as a director effective January 31, 2014.

 

(3)   Includes fees earned in 2014 but paid in 2015 and fees earned in 2014 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 2014 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

     818.7663         40,750   
     886.7602         46,750   
     716.9333         36,750   
     743.3418         40,750   

Lloyd H. Dean

     215.9936         10,750   
     175.4552         9,250   
     160.9442         8,250   
     177.8548         9,750   

Donald M. James

     658.0269         32,750   
     507.3976         26,750   
     443.8158         22,750   
     487.9606         26,750   

Stephen W. Sanger

     999.5982         49,750   
     829.8558         43,750   
     853.4920         43,750   
       834.5494         45,750   

 

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(4)   Includes a cash award of $15,000 which was approved by the Board and paid to Mr. Peña in January 2014 for his service on the AEC in connection with the transition of the AEC chair role in 2014.

 

(5)   We granted 3,235 shares of our common stock to each non-employee director elected at the 2014 annual meeting of stockholders on April 29, 2014. 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.

 

(6)   The Company ceased granting options to non-employee directors effective January 1, 2011. However, upon exercise of options granted prior to September 28, 2004 by tender of shares of our common stock, directors automatically received “reload” options. The last reload options were granted to a director in 2013. As of December 31, 2014, none of the options outstanding included a reload feature.

 

       The table below shows for each non-employee director, the aggregate number of shares of our common stock underlying unexercised options at December 31, 2014. All options were fully exercisable at December 31, 2014.

 

Name

  

Number of
Securities Underlying
Unexercised Options

John D. Baker II

   22,570

Elaine L. Chao

  

John S. Chen

   41,289

Lloyd H. Dean

   38,374

Susan E. Engel

   48,938

Enrique Hernandez, Jr.

   44,442

Donald M. James

   22,570

Cynthia H. Milligan

   52,182

Federico F. Peña

  

James H. Quigley

  

Howard V. Richardson

  

Judith M. Runstad

   52,182

Stephen W. Sanger

   52,182

Susan G. Swenson

   44,442

 

(7)   The amount under “All Other Compensation” for Mr. Hernandez represents a Company matching contribution during 2014 under the Company’s charitable matching contribution program, which matches charitable gifts of up to $5,000 per year, on a dollar-for-dollar basis, for all employees and non-employee directors of the Company.

 

Cash Compensation.    The following table shows the components of cash compensation paid to non-employee directors in 2014. Directors who join the Board during the year receive a prorated annual cash retainer. Effective January 1, 2015, the annual Lead Director fee was increased to $40,000 and the AEC and Risk Committee Chair fees were increased to $35,000.

 

2014 Component

  

Amount ($)

Annual Cash Retainer

   75,000

Annual Lead Director Fee

   35,000

Annual Committee Chair Fees

  

AEC and Risk Committee

   30,000

CRC, Credit Committee, Finance Committee, GNC and HRC

   25,000

Regular or Special Board or Committee Meeting Fee

     2,000

 

Equity Compensation.    For 2014, 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 having a value of $160,000, 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 $160,000 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 $180,000 effective January 1, 2015 for service beginning with the 2015 annual meeting.

 

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The Company ceased granting options to non-employee directors effective January 1, 2011. Directors who exercised options granted before September 28, 2004 by delivering shares of previously owned common stock or shares purchased in the open market received 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 was 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. The last reload options were granted to a director in 2013. As of December 31, 2014, none of the options outstanding included a reload feature.

 

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 2014 on interest-bearing accounts was 2.35%. 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, 2014, and each director who has served less than five years is on track to meet this ownership level.

 

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 (1) an e-mail to BoardCommunications@wellsfargo.com or (2) a letter to Wells Fargo & Company, P.O. Box 63750, San Francisco, California 94163. Additional information about 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.

 

Management Succession Planning and 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, the Lead Director and the Board. Management regularly identifies high potential executives for additional responsibilities, new positions, promotions or similar assignments to expose them to diverse 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.

 

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INFORMATION ABOUT RELATED PERSONS

 

Related Person Transactions

 

Lending and Other Ordinary Course Financial Services Transactions.    During 2014 our executive officers, directors (including all HRC members), and each of the persons we know of that beneficially owned more than 5% of our common stock on December 31, 2014 (Berkshire Hathaway Inc., BlackRock, Inc., and The Vanguard Group), 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 with our banking and other subsidiaries in the ordinary course of business, including deposit, brokerage, investment advisory, capital markets, investment banking and insurance transactions. 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 applicable), 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. In the ordinary course of business, we also purchase or sell insurance and other products and services of Berkshire Hathaway and its affiliates and purchase investment management technology products and advisory services from BlackRock and its affiliates. We and our customers also may invest in mutual funds, exchange traded funds and other products affiliated with BlackRock and Vanguard in the ordinary course of business. All of these transactions were entered into on an arms’ length basis and under customary terms and conditions.

 

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 in compliance with the requirements under the Sarbanes-Oxley Act of 2002. 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.

 

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, 2014:

 

Executive Officer

  Original
Loan
Amount
  Highest
Principal
Balance
During
2014
  12/31/14
Balance
  Principal
and
Interest
Paid
During
2014
  Interest
Rate
  

Purpose

Richard D. Levy

Executive Vice President

and Controller

  $325,000   $325,000   $325,000   $0   0%    Loan made prior to his becoming an executive officer in September 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 2014, Inter-Con provided guard services to certain of the Company’s retail banking stores under an agreement we first entered into in 2005. Payments in 2014 to Inter-Con under this contract did not exceed 1% of Inter-Con’s or the Company’s 2014 consolidated gross revenues, and each year since this contractual relationship began the Board has

 

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determined that our relationship with Inter-Con does not impair Mr. Hernandez’s independence under our Director Independence Standards. In 2014, we paid Inter-Con approximately $2 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 Cynthia H. Milligan’s brother, James A. Hardin, as a wealth management advisor. In 2014, James Hardin received compensation of approximately $270,000, including sales commissions. He also received approximately $25,000 as a long term cash award that “cliff” vests after three years. We established the compensation paid to Mr. Hardin in 2014 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, Mr. Hardin also received employee benefits generally available to all of our team members. Mr. Hardin does not share the home of Ms. Milligan, and Ms. Milligan does not have an interest in his employment relationship. Mr. Hardin is not an executive officer of the Company and does not directly report to an executive officer of the Company. We believe that this employment relationship does not have any impact on or impair the independence of Ms. Milligan or her ability to represent your best interests as a director.

 

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.

 

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 $120,000 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.

 

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 $120,000, 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 reported pursuant to SEC rules in our proxy statement;

 

   

Transactions with another entity at which a related person’s only relationship with that entity is as a director, limited partner, or beneficial owner of less than 10% of that entity’s ownership interests (other than a general partnership interest);

 

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Transactions with another entity at which a related person’s only relationship with that entity is as an employee (other than an executive officer), 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 an employee (other than an executive officer) or a director or trustee (other than chairman of the board or board of trustees), 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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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 robust stock ownership policies that apply to our directors and executive officers as summarized in the chart below.

 

Director Stock Ownership Policy Requirements    After five years on the Board, each non-employee director must own stock having a value equal to five times the annual cash retainer we pay our directors, and maintain at least that stock ownership level while a member of the Board and for one year after service as a director terminates
Executive Officer Stock Ownership Policy Requirements    Until one year following retirement, our executive officers must 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, 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).

 

Anti-Hedging Policies.    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.

 

Pledging Policy.    In 2014, our Board of Directors adopted policies which are reflected in our Corporate Governance Guidelines that prohibit our directors and executive officers from pledging Company equity securities as collateral for margin or other similar loan transactions.

 

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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 group owned on February 27, 2015, 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 27, 2015, 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)  

Name

   Common
Stock
Owned
(2)(3)
    Options
Exercisable
within 60 days
of 2/27/15 (5)
  Common
Stock Units
(6)(7)
  Total (8)  

Non-Employee Directors

     (a)      (b)   (c)     (d)   

John D. Baker II

     38,139          22,570     58,754     119,463   

Elaine L. Chao

     150                —     16,891     17,041   

John S. Chen

     28,125          41,289     11,820     81,234   

Lloyd H. Dean

     33,940          38,374     16,361     88,675   

Elizabeth A. Duke

     1,076                —            —     1,076   

Susan E. Engel

     13,433          41,198     92,411     147,042   

Enrique Hernandez, Jr.

     14,700          44,442     68,779     127,921   

Donald M. James

     3,863          22,570     57,151     83,584   

Cynthia H. Milligan

     92,852          44,442     26,702     163,996   

Federico F. Peña

     16,282                —            —     16,282   

James H. Quigley

     150                —      5,407     5,557   

Judith M. Runstad

     73,850          44,442     28,049     146,341   

Stephen W. Sanger

     21,662          44,442     93,781     159,885   

Susan G. Swenson

     89,245          44,442     35,653     169,340   

Suzanne M. Vautrinot

     100                —         723     823   

Named Executives

        

David M. Carroll

     283,229          386,422            —     669,651   

Avid Modjtabai

     239,321          562,051     15,326     816,698   

John R. Shrewsberry

     114,925          367,247     21,563     503,735   

Timothy J. Sloan

     378,373        1,369,168     38,780     1,786,321   

John G. Stumpf*

     1,333,711        3,871,413     75,792     5,280,916   

Carrie L. Tolstedt

     529,273        2,569,095     31,541     3,129,909   
All directors and executive officers as a group (28 persons) (4)      4,482,554      12,072,323   788,523     17,343,400   
*   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 have 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 both of the Company’s 401(k) and Stock Purchase Plans as of February 27, 2015.

 

(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, 5,275 shares held in a trust of which he is a co-trustee and a partnership in which he is a partner; also includes 332 shares held for the benefit of family members as to which he disclaims beneficial ownership;

   

David M. Carroll, 280,936 shares held in a trust of which he is a co-trustee;

 

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

   

Lloyd H. Dean, 1,122 shares held in a trust of which he is co-trustee;

   

Enrique Hernandez, Jr., 14,700 shares held in a trust of which he is a co-trustee;

   

Cynthia H. Milligan, 8,075 shares held by spouse, and 1,061 shares held by spouse in an IRA account;

   

Federico F. Peña, 16,282 shares held in a trust;

   

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

   

Stephen W. Sanger, 18,099 shares held in trusts of which he is a co-trustee;

   

John R. Shrewsberry, 108,581 shares held in a trust of which he is a co-trustee;

   

Timothy J. Sloan, 377,950 shares held in a trust of which he is a co-trustee;

   

John G. Stumpf, 777,313 shares held in trusts of which he is a co-trustee, and 5,353 shares held by spouse in an IRA account;

   

Carrie L. Tolstedt, 512,180 shares held in a trust of which she is a co-trustee;

   

Suzanne M. Vautrinot, 100 shares held in a trust; and

   

All directors and executive officers as a group, 3,120,057 shares.

 

(4)  

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

 

(5)   Includes the following number of RSRs and 2012 Performance Shares (including whole share dividend equivalents credited as of February 27, 2015) that will vest within 60 days of February 27, 2015: Mr. Stumpf—25,007 RSRs and 646,406 Performance Shares; Mr. Shrewsberry—77,663 RSRs and 107,734 Performance Shares; Mr. Carroll—4,402 RSRs and 284,419 Performance Shares; Ms. Modjtabai—4,402 RSRs and 284,419 Performance Shares; Mr. Sloan—78,249 RSRs and 284,419 Performance Shares; and Ms. Tolstedt—4,528 RSRs and 284,419 Performance Shares; and all executive officers as a group—397,826 RSRs and 2,645,957 Performance Shares.

 

(6)   For executive officers, includes the following whole common stock units credited to their accounts as of February 27, 2015 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

            —         —

Avid Modjtabai

     15,108         218

John R. Shrewsberry

     10,315    11,248

Timothy J. Sloan

     38,780         —

John G. Stumpf

     75,792         —

Carrie L. Tolstedt

     31,541         —

All executive officers as a group

   263,706    12,335

 

(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 23,580 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 27, 2015) granted under the Company’s LTICP that were not vested as of February 27, 2015, or expected to vest within 60 days after February 27, 2015. 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

     26,527      379,213

Avid Modjtabai

     25,925      379,213

John R. Shrewsberry

     68,321      245,870

Timothy J. Sloan

     38,157      397,274

John G. Stumpf

     42,404      861,849

Carrie L. Tolstedt

     25,842      379,213

All executive officers as a group

   357,645    3,772,206

 

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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, 2014.

 

Name and Address

of Beneficial Owner (1)(2)(3)

   Amount and Nature
of Beneficial Ownership

of Common Stock (1)(2)(3)
   Percent
of Common
Stock Owned
(a)    (b)    (c)

Warren E. Buffett

Berkshire Hathaway Inc.

3555 Farnam Street

Omaha, Nebraska 68131

   490,010,323    9.5%

BlackRock, Inc.

55 East 52nd Street

New York, New York 10022

   289,529,831    5.6%

The Vanguard Group, Inc.

100 Vanguard Boulevard

Malvern, Pennsylvania 19355

   268,721,371    5.2%
(1)   Based on a Schedule 13G/A filed on February 14, 2014 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 487,770,323 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/A filed on February 9, 2015 with the SEC by BlackRock, Inc. on behalf of itself and certain of its subsidiaries. Each of BlackRock and its subsidiaries has sole voting power over 242,221,326 and shared voting power over 54,405 of the shares. Each of BlackRock and its subsidiaries has sole dispositive power over 289,475,426 and shared dispositive power over 54,405 of the shares.

 

(3)   Based on a Schedule 13G filed on February 10, 2015 with the SEC by The Vanguard Group, Inc., on behalf of itself and certain of its subsidiaries. The Vanguard Group has sole voting power over 8,228,165 of the shares, sole dispositive power over 260,957,480 of the shares and shared dispositive power over 7,763,891 of the shares.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, 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 2014. 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 2 — EXECUTIVE COMPENSATION AND ADVISORY RESOLUTION

TO APPROVE EXECUTIVE COMPENSATION (SAY ON PAY)

 

Advisory Resolution to Approve Executive Compensation (Say on Pay)

 

As provided by the Dodd-Frank Act and SEC rules, we provide our stockholders with an advisory vote to approve the compensation of our executive officers, or “say on pay”. 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. The next advisory vote on executive compensation will occur at our 2016 annual meeting unless our Board determines otherwise.

 

We are asking our stockholders to approve an advisory resolution regarding compensation paid to named executives as described in the CD&A, the compensation tables and related disclosures. This item gives our stockholders the opportunity to express their views on our 2014 compensation decisions and policies for our named executives as discussed in this proxy statement. Although the say on pay vote is advisory and not binding on our Board, the HRC will take the outcome of the vote into consideration when making future executive compensation decisions. We describe in our CD&A and related compensation tables our 2014 compensation principles, governance and decisions for the named executives.

 

Highlights include:

 

   

Our four compensation principles continued to guide the HRC in making its pay decisions for our named executive officers:

 

  1. Pay for Performance
  2. Foster Risk Management Culture
  3. Attract and Retain Top Executive Talent
  4. Encourage Creation of Long-Term Stockholder Value

 

   

For 2014, the HRC maintained the relative balance between base salary and annual incentive award opportunity for each of our named executive officers to reduce undue focus on short-term financial performance at the risk of the Company’s long-term interests.

 

   

The HRC also maintained the 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.

 

   

The HRC continued to enhance our strong compensation risk-management practices to discourage imprudent short-term risk taking by requiring executives to bear the long-term risk of their activities.

 

Voting and Effect of Vote

 

We are requesting your non-binding, advisory vote on the following resolution:

 

RESOLVED, that the compensation paid to the Company’s named executives, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and related material disclosed in this proxy statement, is hereby APPROVED.

 

You will vote FOR, AGAINST or ABSTAIN on this Item 2. Because your vote is advisory, it will not be binding on the Company, the Board or the HRC and will not overrule any decision by the Board or require the Board to take any action. However, the Board values our stockholders’ views on executive compensation matters and will consider the outcome of this vote when deliberating future executive compensation decisions for named executives.

 

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Board Recommendation

 

As noted in the CD&A, the HRC believes its 2014 compensation decisions were consistent with our compensation principles, they will benefit stockholders for short-term and long-term Company performance, and the compensation paid to the named executives for 2014 was reasonable and appropriate.

 

The Board recommends that you vote FOR the advisory resolution to approve the compensation paid to the Company’s named executives, as disclosed in this proxy statement in the CD&A, the compensation tables and any related material (Item 2 on the proxy card).

 

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, 2014 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

 

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Compensation Discussion and Analysis

 

Our Compensation Discussion and Analysis, or CD&A, describes our executive compensation philosophy and the 2014 compensation decisions for our executive officers named in our Summary Compensation Table.

 

2014 Performance and Compensation Overview

 

2014 Company Performance Highlights. We enjoyed another year of strong financial performance. We continued to benefit from our diversified business model, with record net income and earnings per share. We grew both loans and deposits and maintained solid customer relationships across our Company during 2014. Our credit performance continued to be strong, with credit losses and nonperforming assets decreasing significantly. We continued to maintain a strong capital position while returning more of it to our stockholders through higher dividends and additional share repurchases. Highlights of our 2014 performance include:

 

Company Performance Highlights   

•      Record net income of $23.1 billion, up 5% from 2013

•      Record diluted earnings per share of $4.10, up 5% from 2013

•      Revenue of $84.3 billion, compared with $83.8 billion for 2013

•      Return on assets of 1.45%, compared with 1.51% for 2013

•      Return on equity of 13.41%, compared with 13.87% for 2013

•      Returned $12.5 billion to stockholders through dividends and net share repurchases, up from $7.2 billion in 2013

•      Tier 1 capital ratio of 12.45% under Basel III (General Approach), up from 12.33% at year-end 2013

•      Efficiency ratio of 58.1%, compared with 58.3% for 2013

•      Loans of $862.6 billion, up $40.3 billion from year-end 2013

•      Deposits of $1,168.3 billion, up $89.1 billion from year-end 2013

•      Credit losses down 35% from 2013, and nonaccrual loans down 18% from year-end 2013

 

2014 Compensation Highlights. In deciding 2014 named executive compensation, the HRC continued to be guided by four compensation principles that have historically governed its pay decisions for named executives:

 

  1.   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

 

  2.   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

 

  3.   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

 

  4.   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, including the relative balance between annual fixed compensation and annual variable “at-risk” compensation. The HRC also continued to weight long-term over annual compensation, and equity over cash compensation. Within this framework, the HRC awarded the following primary elements of compensation for 2014: base salary, annual incentive, and long-term equity-based incentive.

 

2014 Compensation Decisions.    During 2014, consistent with our compensation principles and the compensation structure described above, the HRC made the following compensation decisions which are reflected in the chart below and discussed in more detail in this CD&A:

 

   

Paid a portion of annual incentives in Restricted Share Rights (RSRs) that vest over three years;

 

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Awarded long-term equity compensation primarily in the form of Performance Shares in February 2014 that “cliff” vest at the end of three years based on Company Return on Realized Common Equity (RORCE) performance during that period;

 

   

Granted in July 2014 long-term RSR awards that vest over four years to our named executives other than our CEO;

 

    The HRC granted the RSRs following senior executive organizational changes, including Timothy J. Sloan becoming head of Wholesale Banking and John R. Shrewsberry succeeding him as our Company’s CFO, and after evaluating the compensation of our Company’s senior executives, their contributions to the Company’s strong performance, and the importance to our Company of their continued strong and effective leadership, as well as the additional responsibilities assumed by Mr. Sloan, Mr. Shrewsberry, and other senior executives as a result of the organizational changes;

 

    Consistent with the Company’s compensation principles to pay for performance, attract, retain and motivate top executive talent, and encourage the creation of long-term stockholder value, the HRC granted the RSRs as part of an overall, balanced mix of competitive pay and to provide an incentive for those executives to continue to provide valuable leadership and services to the Company;

 

   

Increased the 2014 base salary for Mr. Shrewsberry to $1,700,000, effective July 27, 2014, and determined that his total compensation would be consistent with the overarching compensation structure for the Company’s named executives, including an annual incentive opportunity which is capped at one times base salary; and

 

   

Increased the 2014 base salary for Mr. Sloan from $1,700,000 to $2,000,000, effective July 27, 2014, based on his additional responsibilities.

 

The table below shows the 2014 compensation decisions made by the HRC for each named executive, including for Messrs. Shrewsberry and Sloan their increased annual base salary rate effective July 27, 2014. The table is not a substitute for, and should be read together with the Summary Compensation Table on page 56 which presents 2014 named executive compensation paid, accrued or awarded for 2014 in accordance with SEC disclosure rules and includes additional compensation elements and other important information.

 

Named Executive

   Base Salary
Rate
($)
     Annual
Incentive
Award
($)(1)
    Long-Term Equity  Incentives      Total
($)
 
        Performance
Share Award
($)(2)
    RSR Award
($)(3)
    

John G. Stumpf

Chairman, President and CEO

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

John R. Shrewsberry

Senior Executive Vice President and CFO

     1,700,000 (4)       1,600,000        2,800,000        2,000,000         8,100,000 (4) 

Timothy J. Sloan

Senior Executive Vice President

(Wholesale Banking) and former CFO during part of 2014

     2,000,000 (4)       1,600,000        5,500,000        1,500,000         10,600,000 (4) 

David M. Carroll

Senior Executive Vice President

(Wealth, Brokerage and Retirement)

     1,700,000         1,400,000        5,500,000        1,000,000         9,600,000   

Avid Modjtabai

Senior Executive Vice President

(Consumer Lending)

     1,700,000         1,300,000        5,500,000        1,000,000         9,500,000   

Carrie L. Tolstedt

Senior Executive Vice President

(Community Banking)

     1,700,000         1,300,000        5,500,000        1,000,000         9,500,000   
(1)   One-third of the annual incentive award amount over $1 million was paid in RSRs that vest over three years. See pp. 48-49.
(2)   Dollar value of 2014 Performance Shares at “target.” Actual pay delivered or realized for Performance Shares will be determined in the first quarter of 2017 and may range from zero to 150% of the target shares, or zero to 125% of the target shares in the case of Mr. Shrewsberry whose grant was made prior to his becoming an executive officer, depending on Company performance. See pp. 51-53.
(3)   Dollar value of July 2014 RSR grants vesting over 4 years beginning on the first anniversary of the grant date. See p. 53.
(4)   Reflects current base salary rate based on increases approved by the HRC in July 2014. See p. 48 as well as the Summary Compensation Table on p. 56 which reports actual salary amounts earned for 2014.

 

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Consistent with our pay for performance philosophy and as reflected in the table below, the compensation structure and decisions for our CEO and other named executive officers emphasize variable compensation which is determined based on Company, line of business and individual performance. In addition, the Company’s executive compensation program provides a high proportion of pay (including part of annual incentives) for our named executives in the form of long-term equity awards subject to performance conditions which further align our named executives’ and our stockholders’ interests in increasing stockholder value over the long-term. Our long-term equity awards are granted primarily in the form of Performance Shares that vest based on achievement of three-year RORCE performance criteria. Percentages below are based on the total in the 2014 Compensation Decisions table above.

 

   

Emphasis on Variable Over Fixed Pay

     

High Proportion of Pay in Equity

   

Fixed

(Base Salary)

 

Variable “At-Risk”

(Annual Incentive and LTI)

     

Cash

 

Equity(1)

CEO

  15%   85%     30%   70%

Other NEO Average

  19%   81%     32%   68%

 

(1)   Includes Performance Shares that vest subject to RORCE performance criteria over a three-year performance period, RSRs granted as a portion of annual incentive award that vest over three years, and RSRs granted in July 2014 to named executives, other than our CEO, that vest over four years.

 

The following table illustrates how our compensation principles were reflected in the HRC’s 2014 compensation decisions:

 

     

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 Compensation—At-Risk in Total Mix of Compensation

   ü    ü    ü    ü

Granted Primarily Performance Share Awards for Long-Term Compensation

   ü    ü    ü    ü

Performance-Based Total Compensation Mix

   ü    ü    ü    ü

Compensation-Related Risk Management Policies

        ü         ü

 

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

 

At the Company’s 2014 annual meeting, our stockholders approved the advisory resolution on the 2013 compensation of our named executives by 96.8% of the votes cast. The Company, Board and HRC pay careful attention to communications received from our stockholders on executive compensation matters, including the say on pay vote. During 2014, the HRC considered feedback received from our major stockholders on our executive compensation program and disclosures through our investor outreach program and the approval by our stockholders of our say on pay resolution in 2014. That feedback was reflected in the decision to continue to maintain the overarching framework and balance for our named executives’ compensation for 2014, but not for specific pay-level decisions.

 

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2014 Compensation Governance Highlights.    In making 2014 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   

–     Capped annual incentive opportunities for the named executives other than the CEO, including for Mr. Shrewsberry following his transition to the role of CFO during 2014, at one times base salary

 

–     Determined that the benefits to the Company and stockholders of achieving the appropriate compensation balance outweighed the non-deductibility of salaries and RSR awards granted in July 2014 in excess of IRC Section 162(m) limits

Maintained a 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   

–     Granted long-term equity compensation in Performance Shares that vest based on achievement of three-year RORCE performance criteria (equal to or above a specified threshold performance) relative to peers

 

n      Three-year vesting period aligns compensation to long-term risk, future performance, and strong risk management practices

 

n      Three-year RORCE performance metric for 2014 Performance Share awards was chosen as a measure that focuses on long-term stockholder value creation

 

n      The RORCE performance criteria will be evaluated on both an absolute and relative basis to focus our named executives on managing performance on an absolute basis while balancing risk and removing compensation incentive for executives to take excessive risk to achieve higher returns relative to our peers

 

–     Continued to include a 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 p. 51)

 

–     Following senior executive organizational changes during 2014, granted RSR awards in July 2014 that vest over four years to our named executives, other than our CEO, as part of an overall, balanced mix of competitive pay and to provide an incentive for those executives to continue to provide valuable leadership and services to the Company

 

–     To keep equity compensation “at risk” following retirement, provided for payment over time and subject to performance conditions

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

–     Paid a portion of 2014 annual incentive awards in RSRs that vest over three years and are subject to the HRC’s full discretion to cancel all or a portion of these awards upon the occurrence of specified performance-based vesting conditions

 

–     Evaluated the individual performance of named executives based on their focus on appropriate risk management practices to maintain individual accountability for risk outcomes

 

–     Maintained the following strong compensation governance practices:

 

n      Strong recoupment policies for recovery of previously awarded incentive compensation if the payments were based on materially inaccurate financial information or performance criteria

 

n      Robust stock ownership requirement through one year after retirement

 

n      Prohibition on hedging and speculative trading in Company stock

 

–     Prohibited our directors and executive officers from pledging Wells Fargo equity securities in connection with a margin loan or similar transaction under the Company’s new pledging policy adopted in 2014

 

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Compensation Elements

 

The Company’s executive compensation program provides a mix of direct cash and equity compensation and 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 2014, the elements of direct compensation included base salary, annual incentive (a portion of which was paid in RSRs vesting over three years), and long-term equity incentives in the form of Performance Shares and RSRs vesting over four 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

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

•   2014 grants tied to Company’s RORCE ranking compared with peer group subject to absolute performance levels

•   2014 grants may vest from zero to 150% of target shares

•   2014 target shares adjusted downward by 1/3 for each year the Company incurs a Net Operating Loss and are subject to performance-based vesting conditions

 

•   Typically at end of 3-year measurement period

•   Failure to achieve performance targets will reduce award to zero

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 and subject to performance-based vesting conditions

 

•   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

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

 

•   Available to all Company employees on the same terms

 

N/A

Perquisites

 

•   De minimis

 

N/A

 

N/A

 

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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 components 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 our 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 (part of the LTICP), 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 under the Performance Policy a maximum amount of incentive compensation of 0.2% (reduced in 2013 from 0.5%) of the Company’s net income, as adjusted for certain items, or such lesser amount as the HRC determines in its discretion. 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. In addition, the HRC evaluates the Company’s risk management performance in order to assess the quality of the Company’s financial performance. As part of that review, the HRC receives input from the Company’s Chief Risk Officer on the Company’s risk management performance. The HRC may also review other Company performance and risk measures in making its decisions on annual incentive compensation, including Company performance relative to the Financial Performance Peer Group.

 

Peer Group Analysis.    Reflecting our 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. For 2014, the HRC continued to use 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 Return on Realized Common Equity (RORCE) performance goal under the 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.

 

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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, Inc.
U.S. Bancorp, Inc.     

 

Financial Performance Peer Group.    For 2014, 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:

 

   

profitability, 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 nonperforming 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 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 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.

 

Labor Market Peer Group. In considering the 2014 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 Sloan and Mses. Modjtabai and Tolstedt has business line performance goals for the businesses they manage. Consideration of business line performance reflects all four of our compensation principles. In determining annual incentive awards for named executives with business line responsibilities, the HRC considers 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

 

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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.

 

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 of our other named executives as part of overall executive compensation decision-making. These objectives include compliance with our policies on information security, regulatory compliance, risk management accountability and diversity and inclusion objectives, as well as objectives appropriate for each executive’s position and responsibilities. For qualitative performance objectives, including diversity and inclusion goals, the HRC exercises its judgment and discretion in assessing performance. For 2014, the HRC continued to evaluate 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 or does not meet qualitative individual performance goals related to diversity and inclusion. Consideration of individual performance reflects all four of our 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 evaluating the competitiveness of 2014 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 2014 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. 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.

 

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;

 

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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 performance-based vesting conditions;

 

   

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

 

   

adopting in 2014 a policy which prohibits executive officers from pledging Company equity securities in connection with a margin or other similar loan;

 

   

maintaining the holding requirement for stock compensation until one year after retirement;

 

   

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

 

   

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

 

   

maintaining the enhanced design of Performance Share awards to balance risk by:

 

    requiring a threshold level of absolute performance in addition to performance relative to our Financial Performance Peer Group to focus our named executives on managing performance on an absolute basis consistent with our compensation principle of paying for performance;

 

    setting a prudent level of maximum performance achievement on an absolute basis for the awards to vest at maximum to reduce the risks of executives taking excessive risk to achieve higher returns;

 

   

including a second performance trigger in Performance Share awards beginning in 2012 to reduce the target number if the Company incurs a Net Operating Loss;

 

   

including performance-based vesting conditions in RSR awards and Performance Share awards that give the HRC full discretion to cancel all or a portion of these awards if, among other things, the Company experiences a significant downturn in financial performance, material failure of risk management or our executives engage in misconduct or commit a material error that causes or might reasonably be expected to cause significant financial or reputational harm to the Company or the executive’s business group;

 

   

eliminating during 2013 the LTICP provision that would have accelerated vesting and payment of all options, stock appreciation rights (SARs), restricted stock, RSRs and performance awards upon a change in control, unless the Board or HRC takes contrary action prior to that type of event;

 

   

evaluating the performance of our named executives’ based on their focus on appropriate risk management practices to maintain individual accountability for risk outcomes; and

 

   

reviewing the Company’s incentive and commission-based compensation practices 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.”

 

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

 

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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. The Company has multiple recoupment or clawback policies in place that are applicable to our executive officers.

 

Provision   Scope of Clawback or Recoupment Requirement
Clawback Provisions included in All Equity-Based Awards   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. The LTICP specifically provides that awards are subject to any Company recoupment policy.
Unearned Compensation Recoupment Policy   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.
Extended Clawback Policy   In 2009, the Company also adopted an additional clawback policy applicable to our named executive officers and certain other highly compensation employees 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.
Performance-Based Vesting Conditions   RSR awards granted as part of annual incentives (beginning in 2012) and Performance Share awards granted to our named executives (beginning in 2013) included a provision that gives the HRC full discretion to cancel all or a portion of these awards based on specified performance-based vesting conditions (for example, if the executive took imprudent risk either intentionally, out of negligence or improperly as discussed in more detail below).

 

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.

 

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 awards 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. As a result, 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 or where a named executive has underperformed on individual performance objectives, including diversity and inclusion goals or risk management, despite the Company’s or business line 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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2014 Compensation Decisions for Named Executives

 

The HRC took the compensation actions described below for the named executives in 2014. The HRC’s decision-making was conducted within the compensation governance framework described above.

 

2014 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 base salaries for the named executives are paid entirely in cash.

 

Based on his additional responsibilities and to be consistent with the compensation structure for the Company’s other executive officers, the HRC increased the 2014 base salary for Mr. Shrewsberry to $1,700,000, effective July 27, 2014, and determined that his total compensation would be consistent with the overarching compensation structure for the Company’s named executives, including an annual incentive opportunity which is capped at one times base salary. In addition, the Committee increased the 2014 base salary for Mr. Sloan from $1,700,000 to $2,000,000, effective July 27, 2014, based on his additional responsibilities. No changes were made to other named executives’ base salaries during 2014.

 

2014 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 2014 annual incentive awards:

 

Corporate Financial Objectives Under Performance Policy
(1) EPS of at least $3.00 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 for 2014 with EPS of $4.10 and RORCE of 13.7%, which is above the median RORCE in the Financial Performance Peer Group (9.2%). As a result, the 2014 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 under the Performance Policy to award maximum 2014 incentive compensation of up to $46.1 million for each named executive (i.e., based on 0.2% of the Company’s 2014 net income of $23.1 billion), or such lesser amount as the HRC in its discretion determines.

 

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 and culture, talent development, succession planning, and his role in driving and leading our efforts to build and sustain a diverse and inclusive culture, articulating the Company’s culture and Vision and Values to stakeholders and offering national leadership on relevant Company and industry issues.

 

In determining 2014 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 2014 annual incentive awards to the named executives in the following manner consistent with the approach taken for 2013 and 2012:

 

   

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.

 

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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 helps mitigate risks inherent in annual incentive compensation.

 

Stumpf.    In making the 2014 annual incentive compensation award determination for Mr. Stumpf, the HRC considered, among other factors, the following:

 

   

the Company’s record 2014 net income of $23.1 billion, record diluted EPS of $4.10, and RORCE of 13.7%;

 

   

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

 

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

 

    1-, 3-, and 5-year RORCE, and

 

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

 

   

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

 

    focusing on our customers by creating exceptional Wells Fargo customer experiences and providing products and services to help them succeed financially, as demonstrated by

 

  n broad-based loan growth of 5% in 2014, and

 

  n deposit growth of 8% in 2014,

 

    maintaining a strong capital position while returning more capital to our stockholders through increased common stock dividends and additional share repurchases,

 

    focusing on expense control and continuing to realize efficiency initiatives while pursuing revenue opportunities and investing in service delivery systems for our businesses and our risk management structure,

 

    effectively maintaining our long-term risk discipline in connection with managing the Company’s credit risk and experiencing credit losses near historic lows during 2014,

 

    reinforcing our risk culture and promoting proactive risk management across the Company while continuing to enhance our approaches to risk management and operational excellence,

 

    strong, demonstrated commitment to and year over year progress on diversity and inclusion initiatives focused on supplier diversity, service of more diverse markets, team member diversity, and advocacy which includes education, team member participation and mentoring, and

 

    leading the Company as we continue to address increasing regulatory reform and oversight;

 

   

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, leading the Company to strong 2014 financial performance while continuing to strengthen our risk management principles and reinforcing a strong risk culture. The Board believes his leadership continues to be critical to achieving our long-term strategic goals of strengthening our balance sheet and maintaining a strong capital position to support future growth while returning more capital to our stockholders; reducing our risk profile through effective management of operational, credit, interest rate, market, investment, and liquidity and funding risks; strategically positioning the Company to

 

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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, strategic vision 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 2014 annual incentive compensation award for Mr. Stumpf of $4,000,000.

 

Shrewsberry.    In making the 2014 annual incentive compensation award determination for Mr. Shrewsberry, 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. Shrewsberry’s 2014 performance.

 

The Board’s confidence in Mr. Shrewsberry was rewarded by his outstanding leadership following his promotion to the CFO position in May 2014. Mr. Shrewsberry successfully transitioned to his new role and played an integral part in the Company’s achievement of 2014 financial priorities, including strengthening the Company’s capital and liquidity, positioning the Company for different interest rate environments, returning more capital to stockholders, realizing efficiency opportunities, and maintaining strong financial controls. He is a primary spokesman for the Company with investors, the media and the investment community and his efforts continue to enhance the Company’s reputation with those audiences. Upon consideration of Mr. Shrewsberry’s performance, including the factors set forth above, the HRC approved a 2014 annual incentive compensation award for Mr. Shrewsberry of $1,600,000.

 

Carroll, Modjtabai, Sloan and Tolstedt.    In making the 2014 annual incentive compensation award determinations for Messrs. Carroll and Sloan, 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 2014 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, reinforcing a strong risk culture and continuing to strengthen risk management practices in our businesses, continued focus on expense control and realization of efficiency initiatives, progress on diversity and inclusion initiatives, and each executive’s ability to operate as a member of a team.

 

In determining the annual incentive awards for 2014, the HRC also considered each named executive’s success against his or her objectives for 2014, 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 reviewed financial performance overall, as discussed under “Business Line Performance” above, for named executives with business line responsibilities but did not determine annual incentive compensation for those named executives or adjust their annual incentive compensation 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 2014 annual incentive award decisions for these named executives. Consistent with the process described above in “Compensation Program Governance,” the HRC, in its discretion, considered 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.

 

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Mr. Carroll led the Wealth, Brokerage and Retirement (“WBR”) businesses to achieve record net income of $2.1 billion in 2014, up 22% from 2013, and significant revenue growth in 2014. Under his leadership, WBR accomplished a number of important strategic objectives, including strong growth across investment portfolios, loan balances, low-cost core deposits, and assets under management and continued improvement in credit quality. WBR continued 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. Upon consideration of Mr. Carroll’s performance, including the factors set forth above, the HRC approved a 2014 annual incentive compensation award for Mr. Carroll of $1,400,000.

 

Ms. Modjtabai led Consumer Lending, which combined with Community Banking, achieved net income of $14.2 billion in 2014. Under Ms. Modjtabai’s leadership, Consumer Lending originated $175 billion of residential mortgages in 2014 despite the anticipated decline in mortgage originations and increased its credit card lending relationships in retail banking households. Consumer Lending continued to effectively manage the Company’s credit exposure through improved credit quality in our consumer real estate portfolios and continued reduction of our non-strategic/liquidating consumer credit portfolios. Upon consideration of Ms. Modjtabai’s performance, including the factors set forth above, the HRC approved a 2014 annual incentive compensation award for Ms. Modjtabai of $1,300,000.

 

Under Mr. Sloan’s leadership, following his transition from the role of CFO in May 2014, Wholesale Banking had net income of $7.6 billion in 2014 on growth across many areas including asset backed finance, asset management, commercial real estate brokerage, corporate banking, equipment finance, international, principal investing and treasury management, which was achieved while continuing to adhere to the Company’s risk management principles. Wholesale Banking also had broad-based and diversified loan growth and increased core deposits amidst increased compliance and regulatory requirements. Upon consideration of Mr. Sloan’s performance, including the factors set forth above and support he provided in transition of his prior CFO responsibilities during 2014, the HRC approved a 2014 annual incentive compensation award for Mr. Sloan of $1,600,000.

 

Ms. Tolstedt led Community Banking, which combined with Consumer Lending and other business lines, achieved net income of $14.2 billion in 2014. Under her leadership, Community Banking achieved a number of strategic objectives, including continued strong cross-sell ratios, record deposit levels, and continued success of mobile banking initiatives. For example, Wells Fargo was named “Best App” in Money magazine’s “Best Banks in America” annual list (October 2014). For the sixth consecutive year, Wells Fargo was the number one Small Business Administration 7(a) small business 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 2014 annual incentive compensation award for Ms. Tolstedt of $1,300,000.

 

2014 Long-Term Incentive Compensation.    As discussed below, the HRC awarded long-term incentive compensation to the named executives in the form of Performance Shares in February 2014 and long-term RSRs in July 2014 under the LTICP.

 

2014 Performance Share Awards.    The named executives were awarded the following target number of Performance Shares in 2014: Stumpf—271,268; Shrewsberry—60,764; Carroll—119,358; Modjtabai—119,358; Sloan—119,358; and Tolstedt—119,358. 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 2014 Performance Share awards are scheduled to vest in the first quarter of 2017 based on the average of the Company’s RORCE1 over the three-year performance period ending December 31, 2016 relative to the Financial Performance Peer Group subject to absolute performance levels, 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 125% in the case of Mr. Shrewsberry whose 2014 award was granted prior to his becoming an executive officer) or downward to zero. In addition, for any year in the three-year performance period that the Company incurs a Net Operating Loss (NOL)2, the target number of Performance Shares will be reduced by one-third.

 

1 “Return on Realized Common Equity” or RORCE, as defined in the LTICP, means the net income of the Company as reported in its consolidated financial statements (and subject to possible adjustments as specified in the LTICP), on an annualized basis less dividends accrued on outstanding preferred stock, divided by the Company’s average total common equity excluding average accumulated comprehensive income as reported in the Company’s consolidated financial statements for the relevant Performance Period.

2 For purposes of the Performance Share 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.

 

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1.   Absolute Performance Measure: If the Company’s 3-Year Average RORCE is equal to or greater than the specified maximum absolute performance level, the 2014 Performance Share award would result in vesting at maximum. If the Company’s 3-Year Average RORCE is below the threshold absolute performance level, then the award would result in no payout (no award vests for less than threshold performance).

 

If Company RORCE is:   Then, Award % Vesting of Original Grant Value is:
Average 3-year RORCE is less than 2%   Does not vest
Average 3-year RORCE is greater than or equal to 15%   150%1 x NOL Adjusted Target Award Number (subject to Net Operating Loss Adjustment and Performance-Based Vesting Conditions)
  (1)   Up to 125% for Mr. Shrewsberry which is reflective of the structure of Performance Shares below the executive officer level. The terms of future Performance Share awards for Mr. Shrewsberry, in his role as CFO, would be consistent with the structure of Performance Share awards for our other named executive officers.

 

2.   Relative Performance Measure: If the Company’s 3-Year Average RORCE is less than 15%, but equal to or greater than 2%, the 2014 Performance Share award would vest based on the Company’s relative performance among the companies in the Financial Performance Peer Group.

 

If the Company’s Return on Realized
Common Equity Ranking is:
 

Final Award

Number %1

 

Final Award Number of

Performance Shares1

Top Quartile Ranking of 75% or more   150%2   150%2 x NOL Adjusted Target Award Number
Second Quartile Ranking of 50% or more   100% to <150%2   100% to <150%2 x NOL Adjusted Target Award Number
Third Quartile Ranking of 25% or more   50% to <100%   50% to <100% x NOL Adjusted Target Award Number
Bottom Quartile Ranking below 25%   0% to <50%, provided not lowest ranked   0% to <50% x NOL Adjusted Target Award Number
  (1)   Final award number and percentage vesting are interpolated on a straight-line basis based on actual level of performance in each quartile.
  (2)   Up to 125% for Mr. Shrewsberry.

 

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 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.

 

In granting the 2014 Performance Shares and establishing their terms, the HRC considered the appropriateness of this award structure in the context of multiple factors including applicable regulatory guidance, the quality of the Company’s performance from a risk management perspective, and the need for continued leadership by the named executives over the three-year performance period. The HRC structured the vesting and the variability of the final award number of Performance Shares as an incentive and reward for these named executives to achieve continued superior financial performance, while managing risk appropriately, for the Company and its stockholders through the entire vesting period. The HRC continued to include the downward NOL adjustment to reduce the target number of Performance Shares in the event of poor absolute Company performance. In supplement to that provision, beginning in 2013 the HRC incorporated additional performance-based vesting conditions in Performance Share awards granted to our named executives to further balance risk and incent our executives to focus on long-term rather than short-term performance in a manner consistent with appropriate risk management practices and outcomes. The HRC has full discretion to cancel all or a portion of these Performance Share awards upon the occurrence of the following specified performance-based vesting conditions:

 

   

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,”

 

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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,

 

   

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,

 

   

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

 

   

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

 

Furthermore, the HRC continued to include a hold-past-retirement condition to maintain alignment with our stockholders’ interests for more than the duration of each executive’s career and to mitigate compensation-related risk.

 

Similar to its approach since 2010, the HRC chose to grant 2014 long-term incentive compensation primarily 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 continues to believe that RORCE is an appropriate long-term performance metric that focuses on long-term value creation based on strong capital levels and profitability. 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.

 

The HRC believes that the Performance Share grants reinforce all four of the Company’s compensation principles.

 

July 2014 RSR Awards.    Following senior executive organizational changes in 2014 discussed above, and consistent with the Company’s compensation principles to pay for performance, attract, retain and motivate top executive talent, and encourage the creation of long-term stockholder value, the HRC granted the following RSR awards in July 2014 as part of an overall, balanced mix of competitive pay for our named executives other than our CEO and to provide an incentive for those executives to continue to provide valuable leadership and services to the Company: Shrewsberry—38,949; Carroll—19,475; Modjtabai—19,475; Sloan—29,212; and Tolstedt—19,475.

 

In determining to grant these awards, the HRC evaluated the compensation of our Company’s senior executives, their contributions to the Company’s strong performance, and the importance to our Company of their continued strong and effective leadership. The HRC also considered the additional responsibilities assumed by Mr. Sloan, Mr. Shrewsberry, and other senior executives as a result of the recent organizational changes.

 

The RSR awards will vest in equal installments over four years beginning on the first anniversary of the grant date and, similar to the Performance Shares and RSRs granted as a portion of annual incentive awards, are subject to the stock ownership requirements described above and to cancellation in the HRC’s discretion upon the occurrence of the performance-based vesting conditions described above.

 

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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 the 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 2014 and the amounts earned for a performance period ending in 2014 are summarized below:

 

Performance

Period

  

Performance

Measure

  

Performance Measure Levels and 
Percentage of Target Performance 
Shares Earned1 based on 
Future Performance 

 

Performance Shares
Earned

Performance

Shares granted

February 2011

(2011-2013)

   Average RORCE relative to Financial Performance Peer Group   

 

RORCE rank ³ 75% of peers - 150%2 of target

 

RORCE rank between 50% and

75% of peers - 100% to 150%2 of target

 

RORCE rank between 25%

and 50% of peers - 50% to 100% of
target

 

RORCE rank below 25% of peers - 0% to 50%, provided not lowest ranked

 

  150%2 of the target Performance Shares were earned based on the HRC’s certification in March 2014 of the Company’s average RORCE performance of 13.4% which resulted in a ranking equal to or greater than the 75th percentile 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

     150%2 of the target Performance Shares were earned based on the HRC’s certification in March 2015 of the Company’s average RORCE performance of 13.8% which resulted in a ranking equal to or greater than the 75th percentile compared with peers; in addition, the HRC determined that no NOL adjustment was applicable

Performance

Shares granted

March 2013

(2013-2015)

  

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

•   Subject to performance-based vesting conditions

  

 

Absolute Performance Criteria

RORCE ³ maximum absolute

performance level of 15% – 150%2 of

target

• RORCE < threshold performance level of 2% reduces award to zero

Relative Performance Levels
(RORCE <15% but
³ 2%)

• Top Quartile RORCE rank ³ 75% -

150%2 of target

• Second Quartile RORCE rank ³ 50%

- 100% to <150%2 of target

• Third Quartile RORCE rank ³ 25% -

50% to <100% of target

• Bottom Quartile RORCE rank <25% - 0% to <50% of target, provided not lowest ranked

 

  To be determined between 0% and 150%2 of target number by the HRC in first quarter 2016

Performance

Shares granted

February 2014

(2014-2016)

  

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

•   Subject to performance-based vesting conditions

     To be determined between 0% and 150%2 of target number by the HRC in first quarter 2017

 

(1)   Percentage vesting is interpolated on a straight-line basis based on actual level of performance within each quartile.
(2)   125% for Mr. Shrewsberry, whose indicated performance shares were granted prior to his becoming an executive officer.

 

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 (3) and (4) 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 (with a company match and potential discretionary profit-sharing contribution) and, for employees hired prior to July 1, 2009, the Company’s qualified Cash Balance Plan (frozen in July 2009). The Company matched up to 6% of eligible participants’ certified compensation during 2014 and, in January 2015, the HRC authorized a discretionary profit-sharing contribution of 1% of each eligible participant’s certified compensation under the Company 401(k) Plan based on the Company’s 2014 performance.

 

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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 purpose, we provide a car and driver to Mr. Stumpf and from time to time to certain other executives, 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 certain executives and, in 2014, the Company paid for the cost of regular maintenance for the previously installed home security systems for certain of our executives.

 

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 2014, 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.

 

Of the elements of compensation paid to named executives in 2014, annual base salary is not considered “performance-based compensation” and is therefore subject to the $1 million deduction limit under Section 162(m). In 2014, the Company paid an aggregate of approximately $4.7 million in base salary to its named executives in excess of the combined deduction limit for these executives. In addition, the July 2014 RSR awards granted to our named executives other than our CEO are not intended to qualify as “performance-based compensation” for purposes of Section 162(m). As a result, the Company forwent approximately $3.1 million in aggregate tax benefit related to the loss of deduction for named executives’ compensation in the form of base salary and July 2014 RSR grants, assuming a 35% corporate tax rate. Based on the Company’s 2014 income before taxes of approximately $33.9 billion, the amount of deduction lost represents approximately 0.009% of such income. The 2014 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 2014 executive compensation purposes by the HRC’s desire to achieve the strategic, compensation and risk management goals described in this CD&A.

 

Conclusion

 

The HRC believes that its compensation decisions for the named executives in 2014 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 2014 was reasonable and appropriate.

 

Wells Fargo & Company 2015 Proxy Statement            55


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Executive Compensation Tables

 

2014 Summary Compensation Table

 

The following table, accompanying footnotes and narrative provide information about compensation paid, accrued or awarded to the Company’s named executives for the years indicated.

 

Name and

Principal Position

   Year      Salary
($)(2)
     Stock
Awards($)

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

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(7)(8)

   All Other
Compensation
($)(9)
     Total
($)
 
(a)    (b)      (c)      (e)      (f)      (g)      (h)    (i)      (j)  

John G. Stumpf

Chmn., Pres. & CEO

     2014         2,800,000         12,500,029                 4,000,000       2,108,162      18,200         21,426,391   
     2013         2,800,000         12,500,009                 4,000,000            20,400         19,320,409   
     2012         2,800,000         12,500,004                 4,000,000       3,558,081      20,000         22,878,085   

John R. Shrewsberry (1)

Sr. Exec. VP & CFO

     2014         991,188         4,800,036                 1,600,000            18,200         7,409,424   

Timothy J. Sloan (1)

Sr. Exec. VP (Wholesale Banking)

     2014         1,829,885         7,000,053                 1,600,000            18,200         10,448,138   
     2013         1,700,000         5,500,003                 1,615,000            20,400         8,835,403   
     2012         1,661,686         5,500,008         121,350         1,600,000         111,111      20,000         9,014,155   

David M. Carroll

Sr. Exec. VP (Wealth, Brokerage & Retirement)

     2014         1,700,000         6,500,058                 1,400,000          79,960      18,200         9,698,218   
     2013         1,662,452         5,500,003                 1,615,000            6,887      84,541         8,868,883   
     2012         1,500,000         5,500,008                 1,425,000         168,135      20,000         8,613,143   

Avid Modjtabai

Sr. Exec. VP (Consumer Lending)

     2014         1,700,000         6,500,058                 1,300,000            18,200         9,518,258   
     2013         1,662,452         5,500,003                 1,615,000            20,400         8,797,855   
     2012         1,500,000         5,500,008                 1,425,000          52,204      92,838         8,570,050   

Carrie L. Tolstedt

Sr. Exec. VP (Community Banking)

     2014         1,700,000         6,500,058                 1,300,000            18,200         9,518,258   
     2013         1,700,000         5,500,003                 1,530,000            20,400         8,750,403   
     2012         1,700,000         5,500,008                 1,530,000       105,204      20,000         8,855,212   
(1)   The listed positions are held as of December 31, 2014. Mr. Sloan became Senior Executive Vice President, Wholesale Banking, and Mr. Shrewsberry succeeded him as CFO on May 15, 2014. Prior to that, Mr. Shrewsberry was President and Chief Executive Officer of Wells Fargo Securities, LLC.

 

(2)   The amounts shown as salary for each of Messrs. Shrewsberry and Sloan reflect increases in base salary rate which became effective in July 2014 as disclosed in our CD&A based on changes in their roles and responsibilities during 2014.

 

(3)   For 2014, the stock awards included in column (e) consist of (i) Performance Shares, which will vest, if at all, in the first quarter of 2017, subject to the Company’s achievement of certain performance conditions for the three-year period ending December 31, 2016, and (ii) RSRs granted on July 22, 2014 to our named executives other than Mr. Stumpf which will vest in four equal annual installments, beginning on the first anniversary of the grant date. These Performance Shares and long-term RSRs also include an adjustment provision that gives the HRC full discretion to cancel all or a portion of these awards in certain circumstances prior to payment, as discussed in more detail following the 2014 Grant of Plan-Based Awards table and in our CD&A.

 

(4)   Under the applicable FASB ASC Topic 718 rules, the “grant date” will not be determined for the 2014 Performance Shares until the settlement date for the award after the performance period has been completed, and for the RSRs, until the applicable vesting date because the HRC has the discretion to make downward adjustments to the awards prior to payment. As a result, the total amount reported in column (e) above represents the fair value of each of the Performance Shares and the RSRs on its respective “service inception date” (i.e., the date the HRC approved each award), based (i) for the Performance Shares, upon the then-probable outcome of the RORCE performance condition (i.e., the target value of the awards), and (ii) for the RSRs, upon the full number of shares subject to the award. See Notes 1 and 19 to our 2014 financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014, regarding assumptions underlying the valuation of these awards.

 

56            Wells Fargo & Company 2015 Proxy Statement


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Accordingly, the amounts included in column (e) are (i) for the Performance Shares, the fair value of the award on February 25, 2014, the service inception date, calculated by multiplying the target number of shares subject to the award by $46.08, the NYSE closing price per share on that date, and (ii) for the RSRs, the fair value of the award on July 22, 2014, the service inception date, calculated by multiplying the full number of shares subject to the award by $51.35, the NYSE closing price on July 22, 2014. The target number of Performance Shares reflects the number of shares that would be earned for achieving the absolute performance threshold and median performance relative to peers for the performance period. The table below shows for each award, its service inception date, award type and number of shares, the service inception date per share fair value, and the total service inception date fair value included in column (e).

 

Name

   Service
Inception Date
     Award Type and
Number of Shares
(#)
   Per Share
Fair Value

($)
   Total Service
Inception Date

Fair Value
($)
 

Mr. Stumpf

     2/25/2014         271,268      Performance Shares    46.08      12,500,029   

Mr. Shrewsberry

     2/25/2014         60,764      Performance Shares    46.08      2,800,005   
     7/22/2014         38,949      RSRs    51.35      2,000,031   

Mr. Sloan

     2/25/2014         119,358      Performance Shares    46.08      5,500,017   
     7/22/2014         29,212      RSRs    51.35      1,500,036   

Mr. Carroll

     2/25/2014         119,358      Performance Shares    46.08      5,500,017   
     7/22/2014         19,475      RSRs    51.35      1,000,041   

Ms. Modjtabai

     2/25/2014         119,358      Performance Shares    46.08      5,500,017   
     7/22/2014         19,475      RSRs    51.35      1,000,041   

Ms. Tolstedt

     2/25/2014         119,358      Performance Shares    46.08      5,500,017   
       7/22/2014         19,475      RSRs    51.35      1,000,041   

 

(5)   The Performance Shares included in column (e) for 2014 and discussed above are subject to adjustment upward (to a maximum of 150% of the target award, or to 125% for Mr. Shrewsberry which is reflective of the structure of Performance Shares below the executive officer level) or downward (to zero) depending upon the achievement of certain absolute and relative performance conditions based on the average of the Company’s RORCE for the three fiscal years ending on December 31, 2014, 2015 and 2016 as described in our CD&A, and subject to further downward adjustment by 1/3 in the event the Company incurs a Net Operating Loss for any year in the three-year performance period and other applicable performance-based vesting conditions as discussed in footnote (3) above and in more detail in our CD&A.

 

       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 service inception date fair value shown after his or her name: Mr. Stumpf—406,902 Performance Shares, $18,750,044; Mr. Shrewsberry—75,955 Performance Shares, $3,500,006; Mr. Sloan—179,037 Performance Shares, $8,250,025; Mr. Carroll—179,037 Performance Shares, $8,250,025; Ms. Modjtabai—179,037 Performance Shares, $8,250,025; and Ms. Tolstedt—179,037 Performance Shares, $8,250,025. Additional information about the Performance Shares appears in our CD&A and in the Grants of Plan-Based Awards table, footnotes and related narrative.

 

(6)   Amounts shown in column (g) for 2014 reflect the 2014 annual incentive awards paid or awarded in February 2015 to the named executives. As discussed in our CD&A, a portion of the 2014 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 $55.37, the NYSE closing price of Company common stock on February 24, 2015, the grant date. These RSRs will vest in three equal annual installments, beginning on March 15, 2016. Amounts awarded to the named executives are as follows: Mr. Stumpf—18,061 shares; Mr. Shrewsberry—3,613 shares; Mr. Sloan—3,613 shares; Mr. Carroll— 2,409 shares; Ms. Modjtabai—1,807 shares; and Ms. Tolstedt—1,807 shares. Although the RSRs were granted in 2015, they reflect compensation for 2014 performance.

 

       Similarly, amounts shown for 2013 reflect the 2013 annual incentive awards paid or awarded in February 2014 to the named executives. A portion of the 2013 award was also 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 $46.08, the NYSE closing price of Company common stock on February 25, 2014, the grant date. These RSRs will vest in three equal annual installments, beginning on March 15, 2015. Amounts awarded to the named executives are as follows: Mr. Stumpf—21,702 shares; Mr. Shrewsberry—22,064 shares; Mr. Sloan—4,449 shares; Mr. Carroll—4,449 shares; Ms. Modjtabai—4,449 shares; and Ms. Tolstedt—3,834 shares. Although the RSRs were granted in 2014, they reflect compensation for 2013 performance.

 

Wells Fargo & Company 2015 Proxy Statement            57


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(7)   The actuarial present value of the pension benefit for the following named executives under the Company Cash Balance and Supplemental Cash Balance Plans increased or decreased, as applicable, from December 31, 2013 to December 31, 2014 by the amount shown: Mr. Stumpf—$2,108,162; Mr. Shrewsberry—($8,275); Mr. Sloan—($11,547); Mr. Carroll—$69,684; Ms. Modjtabai—($6,161); and Ms. Tolstedt—($5,860). Pursuant to SEC rules, the amount of any decrease is not reflected in the sum shown in Column (h) for each of these named executives. The change in the present value amount results from the actuarial method and interest rate assumptions used for financial accounting purposes to calculate the current value of a future pension benefit payout. For 2014, the decrease in the actuarial present value of pension benefits for Messrs. Shrewsberry and Sloan and Mses. Modjtabai and Tolstedt is primarily attributable to decreased interest crediting rate assumptions used to calculate the present value of this benefit. The increase in the pension benefits value shown in the table for Messrs. Stumpf and Carroll is primarily attributable to the decrease in interest rate assumptions used to convert their grandfathered benefits from monthly accrued benefits into lump sum benefits, resulting in an increase in the present value of these benefits. Information about the pension benefits for our named executives, and applicable discussion of investment credits for cash balance accounts, appears under “Pension Benefits” below. See footnote (8) below for additional information regarding the amount shown in Column (h) for Mr. Carroll.

 

       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 2014 financial statements, and also in the narrative following the Pension Benefits table under “Post-Retirement Benefits—Valuation of Accumulated Benefits under the Combined Plans.

 

(8)   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, Shrewsberry, Sloan, and Mses. Modjtabai and Tolstedt do not include any earnings on deferred compensation. The amount shown for Mr. Carroll includes above-market interest of $10,276 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.

 

(9)   For each named executive, “All Other Compensation” for 2014 includes a Company matching contribution of $15,600, and a profit sharing contribution of $2,600 under the Company’s 401(k) Plan in connection with the discretionary profit sharing contribution approved in January 2015 for all eligible 401(k) Plan participants based on the Company’s 2014 performance. Profit sharing contributions are paid in the fiscal year following the year for which they are accrued. All perquisites for each of our named executive officers during 2014 did not exceed $10,000; therefore, “All Other Compensation” for 2014 does not include disclosure of any perquisite amounts as permitted under SEC rules. See “Perquisites and Other Compensation” in our CD&A for additional information.

 

58            Wells Fargo & Company 2015 Proxy Statement


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2014 Grants of Plan-Based Awards

 

The following table shows additional information about 2014 annual incentive awards and Performance Share awards and RSRs granted to our named executive officers in 2014.

 

 

Name

 

Grant
Date

 

Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1) Threshold Target Maximum

 

Estimated Future Payouts Under Equity

Incentive Plan Awards

Threshold Target Maximum

 

All Other

Stock

Awards:

Number of Shares of Stock or Units

 

All Other

Option

Awards:

Number of

Securities

Underlying

Options

 

Exercise or Base Price of Option Awards

 

Closing

Price of Stock on Date of Grant

 

Grant Date
Fair Value
of Stock
and Option
Awards

        ($)   ($)   ($)   (#)   (#)   (#)   (#)   (#)   ($/Sh)   ($/Sh)   ($)(4)
(a)   (b)   (c)   (d)   (e)   (f)   (g)(2)   (h)(2)   (i)(3)   (j)   (k)   (l)   (m)

John G. Stumpf

  2/25/2014     4,000,000                 _   _
  2/25/2014             271,268       406,902           46.08   12,500,029

John R. Shrewsberry

  2/25/2014             60,764     75,955         46.08     2,800,005
  7/22/2014       850,000   1,700,000                
  7/22/2014               38,949       51.35     2,000,031

Timothy J. Sloan

  2/25/2014       850,000   1,700,000                
  2/25/2014           119,358   179,037         46.08     5,500,017
  7/22/2014               29,212       51.35     1,500,036

David M. Carroll

  2/25/2014       850,000   1,700,000                
  2/25/2014           119,358   179,037         46.08     5,500,017
  7/22/2014               19,475       51.35     1,000,041

Avid Modjtabai

  2/25/2014       850,000   1,700,000                
  2/25/2014           119,358   179,037         46.08     5,500,017
  7/22/2014               19,475       51.35     1,000,041

Carrie L. Tolstedt

  2/25/2014       850,000   1,700,000                
  2/25/2014           119,358   179,037         46.08     5,500,017
    7/22/2014                       19,475       51.35     1,000,041
(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 2014 estimated 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 2014 incentive award. As discussed in our 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 2014 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 2014 incentive awards was paid to the named executives in RSRs. See footnote (6) 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), (4), and (5) to that table. These amounts represent the target and maximum number of performance shares approved by the HRC on the service inception date of February 25, 2014. Additional information regarding the terms of these awards appears in the narrative following this table.

 

(3)   The stock awards shown in column (i) represent long-term RSRs granted to all named executives other than Mr. Stumpf included in column (e) of the Summary Compensation Table and discussed in footnotes (3) and (4) to that table. Additional information regarding these awards appears in the narrative following this table and in our CD&A.

 

(4)   Under the applicable FASB ASC Topic 718 rules, the “grant date” (i) for the 2014 Performance Shares will not be determined until the settlement date for the award after the performance period has been completed, and (ii) for the long-term RSRs will not be determined until the applicable vesting date, because the HRC has the discretion to make downward adjustments to the awards prior to payment. As a result, the total amount reported in column (m) in the table represents the fair value of the Performance Shares and the RSRs on their respective “service inception date” (i.e., the date the HRC approved each award), based (i) for the Performance Shares, upon the then-probable outcome of the RORCE performance condition (i.e., the target value of the awards), and (ii) for the RSRs, upon the full number of shares subject to the award. See Notes 1 and 19 to our 2014 financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014, regarding assumptions underlying the valuation of these awards, and footnote (4) to the Summary Compensation Table.

 

Wells Fargo & Company 2015 Proxy Statement            59


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Additional Information about the Grants of Plan-Based Awards Table

 

As described in footnote (6) to the Summary Compensation Table, the HRC granted the number of RSRs shown in that footnote under the LTICP in February 2015 to the named executives for a portion of the final payout of their potential 2014 annual incentive award amounts shown in columns (d) and (e) in the table above. The HRC also granted the Performance Shares shown in columns (g) and (h) of this table to the named executives in February 2014 and the long-term RSRs shown in column (i) of this table to the named executives, other than Mr. Stumpf, in July 2014. We provide certain information about the material terms of these Performance Shares and RSRs below. Additional information about the terms of these awards appears in our CD&A and, with respect to the Performance Shares and long-term RSRs, in footnotes (3), (4) and (5) 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 regulation.

 

RSRs.    The RSRs granted to the named executives in February 2015 as a portion of their annual incentive compensation payout vest in three equal annual installments beginning on March 15, 2016. The long-term RSRs granted to the named executives, other than Mr. Stumpf, in July 2014 vest in four equal installments beginning on July 22, 2015. These RSR grants are subject to the holding requirement discussed above, to substantially similar forfeiture provisions as described below for the Performance Shares, and to the clawback and recoupment policies described below. 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 these additional performance-based vesting conditions, see pages 52-53 of our CD&A.

 

Performance Shares.    On February 25, 2014, the HRC granted Performance Shares under the LTICP to each named executive, subject to the achievement of specified absolute and relative performance measures and satisfaction of additional conditions summarized below. The awards will vest after three years in the first quarter of 2017, 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 125% for Mr. Shrewsberry) or downward (to zero) based on the Company’s RORCE performance over the three year period ending December 31, 2016, including Net Operating Loss and performance-based vesting conditions, as discussed on pages 51-53 in our CD&A and footnotes (3), (4), and (5) to the Summary Compensation Table. 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.

 

Named executives who received an award of 2014 Performance Shares will forfeit this award if employment with the Company terminates prior to the vesting date for the Performance Shares, other than due to death, disability, displacement, divestiture, a change-in-control of any Company affiliate that employs the named executive, or retirement. 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 and other performance-based vesting conditions) 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) to the extent enforceable by the Company under applicable state law, 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.

 

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In addition, these 2014 Performance Share awards are also subject to recovery or “clawback” in certain circumstances under the Company’s clawback and recoupment policies discussed on page 47 in our CD&A.

 

Outstanding Equity Awards at Fiscal Year-End 2014 (1)

 

The following table shows certain information about unexercised options and unvested RSRs and Performance Share awards at December 31, 2014.

 

   

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)   (c)   (e)   (f)   (g)(2)(4)           (h)     (i)(3)(4)   (j)

John G. Stumpf

     800,000       34.39   2/27/2017                    
     400,000       35.06   6/26/2017                    
  2,000,000       31.40   2/26/2018                    
                           
            8,044        B        440,972       
            19,163        C        1,050,516       
            22,143        D        1,213,879       
            646,407        F        35,436,027       
                          359,310   19,697,374
                          276,784   15,173,299

John R. Shrewsberry

      33,560       32.25   2/28/2016                    
      56,060       34.39   2/27/2017                    
      92,230       31.40   2/26/2018                    
            48,859        A        2,678,450       
            11,070        B        606,857       
            20,463        C        1,121,782       
            22,513        D        1,234,163       
            39,469        E        2,163,691       
            107,734        F        5,905,975       
                            84,539   4,634,428
                            62,000   3,398,840

Timothy J. Sloan

  120,040       32.93   6/27/2016                    
  392,380       34.39   2/27/2017                    
  494,080       31.40   2/26/2018                    
            73,288        A        4,017,648       
            1,532        B        83,984       
            3,833        C        210,125       
            4,539        D        248,828       
            29,602        E        1,622,782       
            284,419        F        15,591,840       
                          158,096   8,666,823
                          121,785   6,676,254

David M. Carroll

      17,641     253.04   4/18/2015                    
      21,441     281.52   3/31/2016                    
        7,023     293.12   2/20/2017                    
      16,221     205.93   2/19/2018