DEF 14A 1 d897049ddef14a.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.      )

 

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

 

Check the appropriate box:

 

¨    Preliminary Proxy Statement

 

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

 

x    Definitive Proxy Statement

 

¨    Definitive Additional Materials

 

¨    Soliciting Material Pursuant to §240.14a-12

 

Wells Fargo & Company


(Name of Registrant as Specified In Its Charter)

 

  


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

 

Payment of Filing Fee (Check the appropriate box):

 

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

 

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

 

 

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

 

 

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¨    Fee paid previously with preliminary materials.

 

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

 

  (1)    Amount Previously Paid:

 

 

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

 

 

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  (4)    Date Filed:

 

 


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LOGO

 

 

WELLS FARGO & COMPANY

 

March 16, 2016

 

Dear Stockholder,

 

The 2016 annual meeting of stockholders of Wells Fargo & Company will be held on April 26, 2016 at 8:00 a.m., Mountain Standard Time, at the Hyatt Regency Scottsdale at Gainey Ranch, 7500 East Doubletree Ranch Road, Scottsdale, Arizona. 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, using your mobile device, 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 and Chief Executive Officer


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WELLS FARGO & COMPANY

420 Montgomery Street

San Francisco, California 94104

 

 

 

Notice of Annual Meeting of Stockholders

 

 

Tuesday, April 26, 2016

8:00 a.m., Mountain Standard Time (MST)

Hyatt Regency Scottsdale at Gainey Ranch

7500 East Doubletree Ranch Road

Scottsdale, Arizona 85258

 

 

Items of Business

 

1.   Elect as directors the 15 nominees named in our proxy statement;

 

2.   Vote on an advisory resolution to approve executive compensation;

 

3.   Ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2016;

 

4.   Vote on a stockholder proposal to adopt a policy to require an independent chairman, if properly presented at the meeting and not previously withdrawn;

 

5.   Vote on a stockholder proposal to provide a report on the Company’s lobbying policies and practices, if properly presented at the meeting and not previously withdrawn; and

 

6.   Consider any other business properly brought before the meeting.

 

Record Date and Voting

 

You may vote if you owned shares of our common stock at the close of business on March 1, 2016, the record date for notice of and voting at our annual meeting.

 

It is important that your shares be represented and voted at the meeting. You can vote your shares over the internet, using your mobile device, 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 instructions on how to vote your shares, see the information beginning on page 81 of the proxy statement.

 

Meeting Admission and Notice of Internet Availability of Proxy Materials

 

You or your legal proxy may attend the meeting if you owned shares of our common stock at the close of business on March 1, 2016. If you or your legal proxy plan to attend the meeting in person, you must follow the admission procedures described on page 84 of the proxy statement. If you do not comply with these procedures, you or your legal proxy will not be admitted to the meeting.

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on April 26, 2016: Wells Fargo’s 2016 Proxy Statement and Annual Report to Stockholders for the year ended December 31, 2015 are available at: www.proxypush.com/wfc (for record holders) or www.proxyvote.com (for street name holders and Company Plans participants).

 

By Order of the Board of Directors,

LOGO

Anthony R. Augliera

Corporate Secretary

 

This notice and the accompanying proxy statement, 2015 annual report, and proxy card or

voting instruction form were first made available to stockholders beginning on or about March 16, 2016.


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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 2016 Annual Meeting of Stockholders

 

 

Date and Time:

Tuesday, April 26, 2016

8:00 a.m., MST*

Place:

Hyatt Regency Scottsdale at Gainey Ranch

7500 East Doubletree Ranch Road

Scottsdale, Arizona 85258

 

 

*Arizona does not recognize Daylight Saving Time

 

Items of Business and Voting Recommendations

 

 

Items for Vote

       Board Recommendation  

 

1.         

 

 

 

Elect 15 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 2016

 

     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 2016 Annual Meeting of Stockholders

 

 

Voting.    Holders of our common stock as of the record date, March 1, 2016, are entitled to notice of and to vote at our annual meeting. 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
  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, applicable QR Barcode, 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 an admission ticket available online or other proper verification of stock ownership and a valid photo ID. Please review the admission procedures under “Voting and Other Meeting Information—Meeting Admission Information” 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 84 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, using your mobile device, or by

telephone, or complete, sign, date, and return your proxy or voting instruction form.

 

 

Wells Fargo & Company 2016 Proxy Statement            i


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Corporate Governance Highlights

 

 

Recent Corporate

Governance

Enhancements

and Updates

  

–       Implemented Proxy Access. The Board amended the Company’s By-Laws, effective December 17, 2015, to permit an eligible stockholder (or a group of up to 20 stockholders) who has owned 3% of the Company’s stock for 3 years to nominate up to the greater of 2 directors and 20 percent of the Board, subject to the terms and conditions in the By-Laws.

–       Elected President and Chief Operating Officer in November 2015. As part of the Board’s oversight of management succession planning, the Board elected Timothy J. Sloan as President and Chief Operating Officer in November 2015.

–       Increased Oversight of Political and Lobbying Activities and Spending. The Company increased reporting provided to the Board’s Corporate Responsibility Committee on political and lobbying activities as part of the committee’s oversight responsibilities for the Company’s government relations activities and public advocacy policies and programs.

–       Enhanced Oversight of Information Security Risk (including Cyber) and Technology Risk. The Board enhanced Audit and Examination Committee and Risk Committee oversight of information security risk (including cyber) and technology risk through the holding of periodic joint meetings of those committees to focus on these specific risks.

–       Updated Code of Ethics and Business Conduct Applicable to Team Members and Directors. The Board approved an updated Code of Ethics and Business Conduct, effective April 1, 2016, which applies to our team members and directors and continues to reflect our core value of holding ourselves to the highest standards of ethical behavior.

Board Governance

  

–       Independent Lead Director

–       14 of 15 director nominees are independent

–       All standing Board committees consist solely of independent directors

–       Held 9 Board meetings in 2015

–       Board meets regularly in executive session

–       96.75% average Board attendance in 2015 at Board and committee meetings

Stockholder Rights

and Engagement

  

–       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, and during 2015 the Company engaged with institutional investors representing approximately 25% of our outstanding common stock to discuss a variety of topics, including proxy access, Board composition, director tenure, other current governance issues, and our executive compensation program

Compensation

  

–       Pay-for-performance compensation philosophy and approach

–       Robust stock ownership and retention policies for our non-employee 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

Strategy and Risk

  

–       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 oversight and reinforcement of our strong ethics and risk cultures

–       Compensation program designed consistent with the safety and soundness of the Company and without undue risk

 

ii            Wells Fargo & Company 2016 Proxy Statement


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Our Board Composition

 

 

Our Board’s Governance and Nominating Committee regularly evaluates the size and composition of the Board and assesses whether there is an appropriate balance of experience and perspectives on the Board. The Board’s succession planning in 2015 and the beginning of 2016 reflected its continued focus on the importance of Board refreshment, 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 annual self-evaluation process. The accompanying charts illustrate the varying tenure, diversity, and qualifications and experience of our director nominees.

 

Recent changes in Board composition and committee Chair roles include:

 

•       After 17 years of dedicated service on our Board, Judith M. Runstad has decided not to stand for re-election and will retire from our Board at the 2016 annual meeting

 

•       Federico F. Peña succeeded Ms. Runstad as Chair of the Corporate Responsibility Committee and a member of the Risk Committee on March 1, 2016

 

•       Elizabeth A. Duke, an independent director with financial services and risk management experience, joined our Board in January 2015 and serves on our Credit Committee, Finance Committee, and Risk Committee

 

•       Suzanne M. Vautrinot, an independent director with cyber security experience, joined our Board in February 2015 and serves on our Audit and Examination Committee and Credit Committee

 

As a result of Ms. Runstad’s retirement, the size of our Board will decrease to 15 members at our 2016 annual meeting, which is consistent with the size range (14 to 19 directors) of the Board over the last 10 years.

  LOGO

 

LOGO  

Wells Fargo Policy:

Our Board recognizes the importance of an appropriate balance of experience and perspectives on the Board and does not believe arbitrary term limits are appropriate.

 

Tenure reflects full years of completed service.

   LOGO  

Wells Fargo Process:

The GNC and the Board consider diversity in evaluating director nominees.

Gender, race, and ethnic diversity 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.

 

LOGO

 

 

Wells Fargo Policy:

Retirement age of 72

  

 

LOGO

 

 

Wells Fargo & Company 2016 Proxy Statement            iii


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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   67   2009   Executive Chairman and Director, FRP Holdings, Inc.  

Financial Management; Business Development; Business Operations; Regulatory; Legal

  Yes   AEC; CRC; Credit
Elaine L. Chao   62   2011   Former U.S. Secretary of Labor  

Governmental Relations; Social Responsibility; Community Affairs; Regulatory; Human Resources; Governance

  Yes   Credit; Finance
John S. Chen   60   2006   Executive Chairman and Chief Executive Officer, BlackBerry Limited  

Technology; Information Security; Marketing/Consumer; International; Public Policy; Community Affairs

  Yes   HRC
Lloyd H. Dean   65   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   63   2015   Former member of the Federal Reserve Board of Governors  

Financial Services; Risk Management; Financial Management; Governmental Relations; Regulatory

  Yes   Credit; Finance; Risk
Susan E. Engel   69   1998   Retired Chief Executive Officer, Portero, Inc.  

Marketing/Consumer; Technology; Business Operations; Strategic Planning; Business Development

  Yes   Credit; Finance; HRC
Enrique Hernandez, Jr.       60   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   CRC; Finance*; Risk*
Donald M. James   67   2009  

Retired Chairman and Chief Executive Officer, Vulcan Materials Company

 

Risk Management; Legal; Strategic Planning; Regulatory; Management Succession Planning; Governance

  Yes   Finance; HRC
Cynthia H. Milligan   69   1992   Dean Emeritus, College of Business Administration, University of Nebraska-Lincoln  

Financial Services; Academia/ Public Policy; Regulatory; Risk Management; Legal; Social Responsibility

  Yes   CRC; Credit*; GNC; Risk
Federico F. Peña   69   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; Risk
James H. Quigley   64   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
Stephen W. Sanger   69   2003   Retired Chairman and Chief Executive Officer, General Mills, Inc.  

Marketing/Consumer; Strategic Planning; Human Resources; Management Succession Planning; Governance

  Yes  

Lead Director

GNC*; HRC; Risk

John G. Stumpf   62   2006   Chairman and Chief Executive Officer, Wells Fargo & Company  

Financial Services; Business Leadership; Financial Management; Business Operations; Risk Management

  No   N/A
Susan G. Swenson   67   1998   Chair and Chief Executive Officer, Novatel Wireless, Inc.  

Technology; Marketing/Consumer; Financial Management; Business Operations

  Yes   AEC; GNC
Suzanne M. Vautrinot   56   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; Credit

 

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.

 

iv            Wells Fargo & Company 2016 Proxy Statement


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2015 Company Performance Highlights

 

 

We highlight below the Company’s 2015 performance and compensation decisions for our named executive officers—John G. Stumpf (CEO), John R. Shrewsberry (CFO), Timothy J. Sloan (President and Chief Operating Officer (COO) since November 2015, prior to that Senior Executive Vice President, Wholesale Banking), David M. Carroll (Senior Executive Vice President, Wealth and Investment Management), Avid Modjtabai (Senior Executive Vice President, Consumer Lending), and Carrie L. Tolstedt (Senior Executive Vice President, Community Banking).

 

   

Company

      Performance       Highlights

 

•     Net income of $22.9 billion, compared with $23.1 billion for 2014

•     Diluted earnings per share of $4.12, compared with $4.10 for 2014

•     Revenue of $86.1 billion, compared with $84.3 billion for 2014

•     Noninterest expense of $50.0 billion, compared with $49.0 billion for 2014

•     Return on assets of 1.31%, compared with 1.45% for 2014

•     Return on equity of 12.60%, compared with 13.41% for 2014

•     Returned $12.6 billion to stockholders through dividends and net share repurchases

•     Strong capital position – Common Equity Tier 1 ratio (fully phased-in) well above the regulatory minimum and our internal buffer

•     Efficiency ratio of 58.1%, consistent with 2014

•     Loans of $916.6 billion, compared with $862.6 billion at year end 2014

•     Deposits of $1,223.3 billion, compared with $1,168.3 billion at year end 2014

•     Total stockholder return of 1.9%, 19.9%, and 14.7%, respectively, for the 1-, 3- and 5-year periods ended December 31, 2015

 

 

2015 Compensation Decision Highlights

 

 

Based on application of our compensation principles to the Company’s 2015 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 2015 compensation decisions shown in the table below for our named executives. This table is not a substitute for, and should be read together with, the Summary Compensation Table on page 57 which presents named executive compensation paid, accrued, or awarded for 2015 in accordance with SEC disclosure rules and includes additional compensation elements and other important information.

 

Named Executive

     Base Salary  
Rate
($)(4)
   Annual
    Incentive     
Award

($)
  Long-Term Equity  Incentives               Total          
($)
          Performance  
Share Award
($)(2)
     RSR Award  
($)(3)
  

John G. Stumpf

       2,800,000          4,000,000 (1)       12,500,000                   19,300,000  

John R. Shrewsberry

       1,700,000          850,000         5,500,000          1,000,000          9,050,000  

Timothy J. Sloan

       2,000,000          1,000,000         6,500,000          1,500,000          11,000,000  

David M. Carroll

       1,700,000          850,000         5,500,000          1,000,000          9,050,000  

Avid Modjtabai

       1,700,000          850,000         5,500,000          1,000,000          9,050,000  

Carrie L. Tolstedt

       1,700,000          850,000         5,500,000          1,000,000          9,050,000  
(1)   A portion of the annual incentive award amount for our CEO was paid in RSRs that vest over three years. See pp. 48-50.
(2)   Dollar value on date of grant of 2015 Performance Shares at “target.” Actual pay delivered or realized for Performance Shares will be determined in the first quarter of 2018 and may range from zero to 150% of the target shares, depending on Company performance. See pp. 53-54.
(3)   Dollar value on date of grant of July 2015 RSR grants vesting over four years beginning on the first anniversary of the grant date. See pp. 54-55.
(4)   Effective March 6, 2016, the base salary of Mr. Sloan was increased to $2,400,000 and the base salary of each of Messrs. Shrewsberry and Carroll and Mses. Modjtabai and Tolstedt was increased to $1,750,000. The increase in base salary for Mr. Sloan reflects his additional responsibilities as President and COO. Mr. Sloan retained his responsibilities as head of Wholesale Banking following his election as President and COO.

 

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 tied to performance. In addition, the Company’s executive compensation program provides a high proportion of pay for our named executives in the form of long-term equity awards that are subject to cancellation upon occurrence of specified performance conditions which discourage excessive risk taking and further align our named executives’ and our stockholders’ interests in

 

Wells Fargo & Company 2016 Proxy Statement            v


Table of Contents

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 2015 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%          31%   69%    

 Other NEO Average

  19%   81%          28%   72%    
(1)   Includes Performance Shares that vest subject to RORCE performance criteria over a three-year performance period, RSRs granted as a portion of the annual incentive award for our CEO that vest over three years, and RSRs granted in July 2015 to named executives, other than our CEO, that vest over four years.

 

Item 2 — Advisory Resolution to Approve Executive Compensation

 

 

The HRC believes that its 2015 compensation decisions were consistent with our compensation principles and will benefit stockholders for short-term and long-term Company performance, and that the compensation paid to the named executives for 2015 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 for 2016

 

 

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, 2016.

 

The Board recommends that you vote FOR the ratification of KPMG as our independent registered public accounting firm for 2016.

 

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.

 

vi            Wells Fargo & Company 2016 Proxy Statement


Table of Contents

 

 

TABLE OF CONTENTS

 

 

             Page        
      

Corporate Governance

       2  

Our Corporate Governance Framework and Governance Documents

       2  

Our Investor Outreach Program

       2  

Item 1 – Election of Directors

       3  

Board Qualifications and Experience

       3  

Director Nominees for Election

       3  

Director Election Standard and Nomination Process

       11  

Director Independence

       13  

Our Board Leadership Structure and Lead Director

       14  

Board Performance Evaluations and Succession Planning

       15  

Our Commitment to Board Diversity

       17  

Board and Committee Meetings; Annual Meeting Attendance

       17  

Committees of our Board

       18  

Our Board’s Role in Risk Oversight

       22  

Management Succession Planning and Development

       24  

Communications with our Directors

       24  

Additional Information

       25  

HRC and GNC Use of Compensation Consultant

       25  

Director Compensation

       26  

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  

Stock Ownership Requirements and Other Policies

       32  

Director and Executive Officer Stock Ownership Table

       33  

Section 16(a) Beneficial Ownership Reporting Compliance

       34  

Principal Stockholders

       35  

Executive Compensation

       36  

Item 2 – Advisory Resolution to Approve Executive Compensation

       36  

Compensation Committee Report

       37  

Compensation Discussion and Analysis

       37  

Executive Compensation Tables

       57  

2015 Summary Compensation Table

       57  

2015 Grants of Plan-Based Awards

       59  

Outstanding Equity Awards at Fiscal Year-End 2015

       61  

2015 Option Exercises and Stock Vested

       63  

2015 Pension Benefits

       64  

2015 Nonqualified Deferred Compensation

       67  

Potential Post-Employment Payments

       71  

Compensation Governance and Risk Management

       73  

Audit Matters

       75  

Item 3 – Ratify Appointment of Independent Registered Public Accounting Firm for 2016

       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  

Stockholder Information for Future Annual Meetings

       85  

Other Information

       85  

 

Wells Fargo & Company 2016 Proxy Statement            vii


Table of Contents

WELLS FARGO & COMPANY

 

 

 

Proxy Statement

 

 

You are invited to attend Wells Fargo’s 2016 annual meeting of stockholders to be held on Tuesday, April 26, 2016, 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 2016 annual meeting of stockholders, this proxy statement, our annual report to stockholders for the fiscal year ended December 31, 2015, and the proxy card or voting instruction form.

 

The proxy materials were first made available to stockholders beginning on or about March 16, 2016.

 

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.

 

Voting Matters

 

 

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

 

Items for Vote

    Board
   Recommendation  
    Page Reference  
  (for more detail)
  Management proposals    

1.         

  Elect 15 directors   FOR all nominees   3  

2.        

  Advisory resolution to approve executive compensation (Say on Pay)   FOR   36

3.        

  Ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2016   FOR   75
  Stockholder Proposals    

4.        

  Adopt a policy to require an independent chairman   AGAINST   77

5.        

  Provide a report on the Company’s lobbying policies and practices   AGAINST   79

 

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 2016 Proxy Statement            1


Table of Contents

 

 

CORPORATE GOVERNANCE

 

 

Our Corporate Governance Framework and Governance Documents

 

Our Board is committed to sound and effective corporate governance principles and practices. Our Board has adopted Corporate Governance Guidelines to provide the framework for the governance of the Board and the Company. These Guidelines address, 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, director compensation, the Board’s leadership structure, and the responsibilities of the Lead Director. The Board reviews the Corporate Governance Guidelines annually.

 

Our Board also has adopted our Codes of Ethics, which state our policy and standards for ethical conduct by our team members, including executive officers, and directors. We expect all of our team members and directors 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.

 

Information relating to corporate governance of the Company, including the following corporate governance documents, is available on our website at https://www.wellsfargo.com/about/corporate/governance:

 

   

The Board’s Corporate Governance Guidelines, including its Director Independence Standards

 

   

Our Codes of Ethics applicable to team members as well as directors; our updated Code of Ethics and Business Conduct applicable to both team members and directors will be effective April 1, 2016 and continues to reflect our commitment to the highest standards of ethical behavior

 

   

Charters for each of the Board’s seven standing committees, including the Audit and Examination Committee, the Governance and Nominating Committee, and the Human Resources Committee

 

   

Our Board Communication Policy, which describes how stockholders and other interested parties can communicate with the Board

 

   

Our By-Laws, which were amended and restated effective December 17, 2015 to implement proxy access and permit an eligible stockholder (or a group of up to 20 stockholders) who has owned 3% of the Company’s stock for 3 years to nominate up to the greater of 2 directors and 20 percent of the Board, subject to the terms and conditions specified in the By-Laws. Our By-Laws also include provisions which allow stockholders to call special meetings and act by written consent.

 

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 2015, the Company contacted many of our largest institutional investors and engaged with institutional investors representing approximately 25% of the Company’s common stock. We also met with other 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 2015, discussion topics with our institutional investors included proxy access, Board composition, director tenure, other current governance issues, and our executive compensation program. The Board’s adoption of proxy access and the proxy access provision contained in our By-Laws were based, in part, on 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 other 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.

 

2            Wells Fargo & Company 2016 Proxy Statement


Table of Contents

Item 1 — Election of Directors

 

 

Board Qualifications and Experience

 

 

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 management,

•        accounting or financial reporting,

•        financial services,

•        risk management,

•        strategic planning,

•        regulatory and/or legal,

•        information security (including cyber) and technology,

•        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 Board’s nominees, including their age and the month and 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.

 

Director Nominees for Election

 

The Board has set 15 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 have been previously elected by our stockholders. Judith M. Runstad, a current director, is not standing for re-election and will retire when her term expires at the 2016 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.”

 

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.

 

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

 

Wells Fargo & Company 2016 Proxy Statement            3


Table of Contents

 

 

 

LOGO                 

 

JOHN D. BAKER II

 

Age: 67

 

Director since:

January 2009

 

Other Current Public Company Directorships:

 

FRP Holdings, Inc.

 

Committees:

 

Audit and Examination

Corporate Responsibility

Credit

 

    

Business Experience

 

Mr. Baker has served as Executive Chairman and a director of FRP Holdings, Inc. (formerly Patriot Transportation Holding, Inc. prior to the spin-off of its transportation business in early 2015), 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 19 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 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.

 

 

 

 

LOGO                 

 

ELAINE L. CHAO

 

Age: 62

 

Director since:

July 2011

 

Other Current Public Company Directorships:

 

Ingersoll-Rand plc

News Corporation

Vulcan Materials Company

 

Committees:

 

Credit

Finance

 

    

Business Experience

 

Ms. Chao served as the 24th U.S. Secretary of Labor from January 2001 until January 2009. From August 1996 to January 2001, January 2009 to August 2014 and since May 2015, Ms. Chao was and is a Distinguished Fellow at the Heritage Foundation, Washington, D.C. (research and educational organization). 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 as past chair or a member of the nominating and corporate governance committees of two public companies, she also brings additional corporate governance experience to the Board.

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

 

 

 

4            Wells Fargo & Company 2016 Proxy Statement


Table of Contents

 

 

 

LOGO                 

 

JOHN S. CHEN

 

Age: 60

 

Director since:

September 2006

 

Other Current Public Company Directorships:

 

BlackBerry Limited

The Walt Disney Company

 

Committees:

 

Human Resources

 

    

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 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 17 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.

 

 

 

 

LOGO                 

 

LLOYD H. DEAN

 

Age: 65

 

Director since:

June 2005

 

Other Current Public Company Directorships:

 

McDonald’s Corporation Navigant Consulting, Inc.

 

Committees:

 

Corporate Responsibility

Governance and Nominating

Human Resources (Chair)

Risk

 

    

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. and Premier, 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 system 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 24 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.

 

 

 

Wells Fargo & Company 2016 Proxy Statement            5


Table of Contents

 

 

 

LOGO                 

 

ELIZABETH A. DUKE

 

Age: 63

 

Director since:

January 2015

 

Other Current Public Company Directorships:

 

None

 

Committees:

 

Credit

Finance

Risk

    

Business Experience

 

Ms. Duke 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. From March 2014 to September 2015, she served as executive-in-residence at Old Dominion University (higher education), Norfolk, Virginia. 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.

 

 

 

 

LOGO                 

 

SUSAN E. ENGEL

 

Age: 69

 

Director since:

May 1998

 

Other Current Public Company Directorships:

 

None

 

Committees:

 

Credit

Finance

Human Resources

 

    

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 presently provides services to Trewstar Corporate Board Services, a director search firm specializing in placement of women on corporate boards. 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 23 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.

 

 

 

 

6            Wells Fargo & Company 2016 Proxy Statement


Table of Contents

 

 

 

LOGO                 

 

ENRIQUE HERNANDEZ, JR.

 

Age: 60

 

Director since:

January 2003

 

Other Current Public Company Directorships:

 

Chevron Corporation

McDonald’s Corporation

Nordstrom, Inc. (Chairman)

 

Committees:

 

Corporate Responsibility

Finance (Chair)

Risk (Chair)

 

    

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 past chair of the audit committee of Nordstrom and serves as current chair of the audit committee of 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.

 

 

 

 

LOGO                 

 

DONALD M. JAMES

 

Age: 67

 

Director since:

January 2009

 

Other Current Public Company Directorships:

 

The Southern Company

 

Committees:

 

Finance

Human Resources

 

    

Business Experience

 

Mr. James served as Chairman and a director from 1997 until December 2015 and Chief Executive Officer from 1997 until July 2014 of Vulcan Materials Company, Birmingham, Alabama (construction materials). He was formerly a director of Vulcan Materials Company.

 

Principal Qualifications and Experience

 

–        Mr. James brings extensive leadership and executive management experience to the Board as the former chairman and CEO of Vulcan Materials Company where he also served in various senior management positions, 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 a member of the firm’s Executive Committee, 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.

 

 

 

 

Wells Fargo & Company 2016 Proxy Statement            7


Table of Contents

 

 

 

LOGO                 

 

CYNTHIA H. MILLIGAN

 

Age: 69

 

Director since:

July 1992

 

Other Current Public Company Directorships:

 

Calvert Funds (20 Calvert-sponsored mutual fund boards)

Kellogg Company

Raven Industries, Inc.

 

Committees:

 

Corporate Responsibility

Credit (Chair)

Governance and Nominating

Risk

 

    

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 serves as a trustee of the W.K. Kellogg Foundation, one of the largest philanthropic foundations in the U.S., which provides her with insight on social responsibility matters.

–        She 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 and taxation at the University of Nebraska College of Law.

 

 

 

 

LOGO                 

 

FEDERICO F. PEÑA

 

Age: 69

 

Director since:

November 2011

 

Other Current Public Company Directorships:

 

Sonic Corp.

 

Committees:

 

Audit and Examination

Corporate Responsibility (Chair)

Governance and Nominating

Risk

 

    

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, a venture capital fund dedicated to supporting local companies.

 

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.

 

 

 

 

8            Wells Fargo & Company 2016 Proxy Statement


Table of Contents

 

 

 

LOGO                 

 

JAMES H. QUIGLEY

 

Age: 64

 

Director since:

October 2013

 

Other Current Public Company Directorships:

 

Hess Corporation

Merrimack Pharmaceuticals, Inc.

 

Committees:

 

Audit and Examination (Chair)

Credit

Risk

 

    

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.

 

 

 

 

LOGO                 

 

STEPHEN W. SANGER

 

Age: 69

 

Director since:

July 2003

 

Other Current Public Company Directorships:

 

Pfizer Inc.

 

Committees:

 

Governance and Nominating (Chair)

Human Resources

Risk

 

Independent Lead Director

 

    

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 currently as a member of the audit committee and chair of the governance committee of Pfizer and previously as a member of the compensation and governance committees of Target, which enhance his human resources, management succession planning, 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.

 

 

 

 

Wells Fargo & Company 2016 Proxy Statement            9


Table of Contents

 

 

 

LOGO                 

 

JOHN G. STUMPF

 

Age: 62

 

Director since:

June 2006

 

Other Current Public Company Directorships:

 

Chevron Corporation

Target Corporation

 

    

Business Experience

 

Mr. Stumpf has served as our Chairman since January 2010 and Chief Executive Officer since June 2007. He also served as our President from August 2005 to November 2015 and as our Chief Operating Officer from August 2005 to June 2007.

 

Principal Qualifications and Experience

 

–        Mr. Stumpf has been employed with the Company for over 34 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 provides 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.

 

 

 

 

LOGO                 

 

SUSAN G. SWENSON

 

Age: 67

 

Director since:

November 1998

 

Other Current Public Company Directorships:

 

Harmonic Inc.

Novatel Wireless, Inc.

Spirent Communications plc*

 

Committees:

 

Audit and Examination

Governance and Nominating

 

    

Business Experience

 

Ms. Swenson has served as a director of Novatel Wireless, Inc. since June 2012 and as chair of Novatel’s board of directors since April 2014. On October 27, 2015, she also was appointed as Chief Executive Officer of Novatel immediately following the termination of its former CEO on that date. Previously, she 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 also held positions as the Chief Operating Officer of Atrinsic, Inc. (formerly known as New Motion, Inc.) from August 2007 to March 2008 and Amp’d Mobile, Inc. from October 2006 to July 2007. In light of her recent appointment as CEO of Novatel, Ms. Swenson has informed the Company that she is evaluating a reduction in the number of other public company boards on which she serves.

 

* Listed on the London Stock Exchange, but not subject to SEC public company reporting rules

 

Principal Qualifications and Experience

 

–        Ms. Swenson brings extensive leadership, executive management, and technology experience to the Board. Ms. Swenson has over 31 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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LOGO                 

 

SUZANNE M. VAUTRINOT

 

Age: 56

 

Director since:

February 2015

 

Other Current Public

Company Directorships:

 

Ecolab Inc.

Symantec Corporation

 

Committees:

 

Audit and Examination

Credit

    

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 brings 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.

 

 

 

Director Election Standard and Nomination Process

 

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 as of the record date the only nominees are those nominated 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.

 

Under Delaware law, directors continue in office until their successors are elected and qualified or until their earlier resignation or removal. 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.

 

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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.

 

The GNC identifies potential candidates for first-time nomination as a director through various sources, including 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 and provide information on potential candidates.

 

When the GNC has identified a potential new director nominee, it obtains publicly available information on the background of the potential nominee to make an initial assessment of the candidate in light of the following factors:

 

   

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

 

   

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

 

   

Whether the individual would be considered independent under our Director Independence Standards, which are described below 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 “Board Qualifications and Experience” 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 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, Code of Ethics applicable to directors, 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.

 

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-recommended 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;

 

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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-recommended 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-recommended nominee as the GNC may deem appropriate or desirable to evaluate the proposed nominee in accordance with the nomination process described above.

 

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/governance.

 

Based on the Director Independence Standards, the Board considered information in early 2016 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. Judith M. Runstad, a current director, will not stand for re-election and will retire from our Board at the 2016 annual meeting. The Board determined, therefore, that 14 of the Board’s 15 director nominees are independent.

 

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 2015 with all of our directors, some of their immediate family members, and/or certain entities affiliated with such directors and their immediate family members, all of which were on substantially the same terms as those available at the time for comparable transactions with persons not affiliated with the Company and complied with applicable banking laws.

 

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 John S. Chen is executive chairman and chief executive officer. The aggregate amount of payments made by the Company during 2015 to these carriers and to BlackBerry for the use of BlackBerry devices did not exceed 1% of BlackBerry’s or the Company’s 2015 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 2015 to Deloitte were less than 1% of that firm’s and the Company’s 2015 consolidated gross revenues.

 

Charitable Relationships   

 

The Company or its charitable foundation made charitable contributions during 2015 to a tax-exempt organization where Lloyd H. Dean is employed as an executive officer and to a tax-exempt organization where John D. Baker II serves as chairman of the board of trustees. In each case, the contributions were less than $100,000.

 

 

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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.

 

 

Our 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 34 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 (14 of the 15 director nominees are independent under the Director Independence Standards) and independent Board committees, since 2009 the Board has appointed a Lead Director. Our Corporate Governance Guidelines provide that each year a majority of the independent directors will appoint an independent Lead Director, and in November 2015, the independent directors appointed Stephen W. Sanger to continue to serve as Lead Director in 2016.

 

The Board believes that its Lead Director structure, including the duties and responsibilities described in the chart below, 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, N.A., 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 process, 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.

 

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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.

 

 

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 2015 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 annually 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.

 

Our Board Performance Evaluation Process

 

LOGO

 

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.

 

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The Board’s succession planning in 2015 and the beginning of 2016 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. 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 with the understanding that directors may not necessarily serve until their retirement age.

 

Recent changes in Board composition and committee Chair roles include:

 

   

After 17 years of dedicated service on our Board, Judith M. Runstad has decided not to stand for re-election and will retire from our Board at the 2016 annual meeting

 

   

Federico F. Peña succeeded Ms. Runstad as Chair of the Corporate Responsibility Committee and a member of the Risk Committee on March 1, 2016

 

   

Elizabeth A. Duke, an independent director with financial services and risk management experience, joined our Board in January 2015 and serves on our Credit Committee, Finance Committee, and Risk Committee

 

   

Suzanne M. Vautrinot, an independent director with cyber security experience, joined our Board in February 2015 and serves on our Audit and Examination Committee and Credit Committee

 

The 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, and reflects the Board’s efforts to bring fresh perspectives to the Board. The chart below illustrates the varying tenure of the Board’s independent director nominees.

 

As a result of Ms. Runstad’s retirement, the size of our Board will decrease to 15 members at our 2016 annual meeting, which is consistent with the size range (14 to 19 directors) of the Board at each annual meeting over the last 10 years as reflected in the chart below. 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 retirements of additional directors in the coming years, the availability of director candidates with desirable experience, and the needs of the Board, the Board also expects that, over time, its size is likely to trend toward the lower end of its historical range.

 

LOGO

  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 15 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 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

  LOGO   LOGO

 

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 16 of our current directors attended the Company’s 2015 annual stockholders’ meeting.

 

The Board held 9 meetings during 2015. Attendance by the Board’s current directors at meetings of the Board and its committees averaged 96.75% during 2015. Each current director attended at least 75% of the total number of 2015 meetings of the Board and committees on which he or she served. The Board met in executive session without management present during 7 of its 2015 meetings. During 2015, 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.

 

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Committees of our 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 GNC. The following table provides current membership information for each of the Board’s standing committees.

 

Name

          AEC                   CRC                 Credit             Finance               GNC                   HRC                   Risk        

John D. Baker II

  ü   ü   ü                

Elaine L. Chao

          ü   ü            

John S. Chen

                      ü    

Lloyd H. Dean

      ü           ü   Chair   ü

Elizabeth A. Duke (1)

          ü   ü           ü

Susan E. Engel

          ü   ü       ü    

Enrique Hernandez, Jr. (2)

      ü       Chair           Chair

Donald M. James

              ü       ü    

Cynthia H. Milligan

      ü   Chair       ü       ü

Federico F. Peña (3)

  ü   Chair           ü       ü

James H. Quigley

  Chair       ü               ü

Judith M. Runstad

      ü   ü   ü            

Stephen W. Sanger

                  Chair   ü   ü

Susan G. Swenson

  ü               ü        

Suzanne M. Vautrinot (4)

  ü       ü                

ü = Member

(1)   Effective January 26, 2016, Ms. Duke became a member of the Finance Committee.
(2)   Effective March 1, 2016, Mr. Hernandez ceased to be a member of the AEC.
(3)   Effective March 1, 2016, Mr. Peña succeeded Ms. Runstad, who is retiring at the 2016 annual meeting, as Chair of the CRC and a member of the Risk Committee.
(4)   Effective February 23, 2016, Ms. Vautrinot became a member of the Credit Committee.

 

The Board has adopted a charter for each standing Board 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. Additional information about the Board’s seven standing committees, including their key responsibilities, appears below and a current copy of each committee’s charter is available on our website at: https://www.wellsfargo.com/about/corporate/governance.

 

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Audit and Examination Committee (AEC)

 

Number of meetings

in 2015:    14

 

Members:

Quigley (Chair)

Baker

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 control over financial reporting;

 

•   Selects and evaluates our independent auditor, including its 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, financial crimes risk (Bank Secrecy Act and Anti-Money Laundering), information security risk (including cyber), and technology 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;

 

•   Oversees resolution planning; 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, 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 2015:    3

 

Members:

Peña (Chair)

Baker

Dean

Hernandez

Milligan

Runstad

  

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, support of charitable organizations, and policies and programs related to environmental sustainability and human rights;

 

•   Oversees the Company’s government relations and public advocacy policies and programs and at least annually receives reports from management on political and lobbying activities, including payments made to trade associations by Wells Fargo;

 

•   Monitors the Company’s relationships with external stakeholders regarding significant social responsibility matters;

 

•   Monitors the Company’s reputation generally, including with its customers; and

 

•   Receives reports and updates on customer service and complaints, including related to the Company’s culture and its team members’ focus on serving customers, and other matters relating to the Company’s brand and reputation.

 

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Credit Committee (Credit)

 

Number of meetings

in 2015:    8

 

Members:

Milligan (Chair)

Baker

Chao

Duke

Engel

Quigley

Runstad

Vautrinot

  

Primary Responsibilities:

 

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

 

•   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 (Finance)

 

Number of meetings

in 2015:    4

 

Members:

Hernandez (Chair)

Chao

Duke

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 capital levels relative to budgets and forecasts as well as the Company’s risk profile, 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;

 

•   Reviews the Company’s annual financial plan and financial and investment performance, and recommends to the Board the declaration of common stock dividends, the repurchase of securities, and the approval of significant capital expenditures; and

 

•   Oversees recovery planning.

 

Governance and Nominating Committee (GNC)

 

Number of meetings

in 2015:    4

 

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.

 

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Human Resources Committee (HRC)

 

Number of meetings

in 2015:    5

 

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 ratification and 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.

 

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.

 

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, as amended, and is independent, as independence for compensation committee members is defined by NYSE rules.

 

Risk Committee (Risk)

 

Number of meetings

in 2015:    7

 

Members:

Hernandez (Chair)

Dean

Duke

Milligan

Peña

Quigley

Sanger

  

Primary Responsibilities:

 

•   Approves and oversees the Company’s enterprise-wide risk management framework and structure, including through the approval of the risk management framework which outlines the Company’s approach to risk management and the policies, processes, and governance structures necessary to execute the risk management program, and approves the framework and policies for managing our key risk types;

 

•   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;

 

•   Holds joint meetings with the AEC to focus on information security risk (including cyber) and technology risk;

 

•   Oversees the Company’s Volcker compliance program; 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.

 

Wells Fargo & Company 2016 Proxy Statement            21


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Our Board’s Role in Risk Oversight

 

Wells Fargo manages a variety of risks that can significantly affect our financial performance and our ability to meet the expectations of our customers, stockholders, regulators, and other stakeholders. Among the key risk types that we manage are credit risk, financial crimes risk, information security risk (including cyber), interest rate risk, liquidity risk, market risk, model risk, operational risk, regulatory compliance risk, reputation risk, strategic risk, and technology risk. Our risk culture is strongly rooted in our Vision and Values and, in order to succeed in our mission of satisfying 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 culture and risk management framework include understanding and following our enterprise-wide statement of risk appetite, which describes the nature and magnitude of risk that we are willing to assume in pursuit of our strategic and business objectives, and the “tone at the top” set by our Board, CEO, Operating Committee (which consists of our Chief Risk Officer and other senior executives), and other members of senior management. Our senior management develops our enterprise statement of risk appetite in the context of our risk management framework and risk culture. The Board, together with our CEO and the Operating Committee, is the starting point for establishing and reinforcing our risk culture and overseeing our risks.

 

The Board carries out its risk oversight responsibilities directly and through the work of 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 2015 annual report on Form 10-K and under Committees of our Board in this proxy statement.

 

Each Board committee has defined authorities and responsibilities for considering a specific set of risk issues, as outlined in its charter, and works closely with management to understand and oversee the Company’s key risk exposures. Allocating risk responsibilities among each Board committee increases the overall amount of attention devoted to risk management. The Risk Committee serves as a focal point for enterprise-wide risk issues, overseeing all key risks facing the Company. In this role, the Risk Committee supports and assists the Board’s other standing committees as they consider their specific risk issues. The Risk Committee includes the chairs of each of the Board’s other standing committees so that it does not duplicate the risk oversight efforts of other Board committees and to provide it with a comprehensive perspective on risk across the Company and across all individual risk types.

 

In addition to providing a forum for risk issues at the Board level, the Risk Committee provides oversight of the Corporate Risk function, and plays an active role in approving and overseeing the Company’s enterprise-wide risk management framework established by management to manage risk and the functional framework and oversight policies developed by management for each key risk type. The Risk Committee and the full Board review and approve the enterprise statement of risk appetite annually, and the Risk Committee actively monitors the Company’s risk profile relative to the approved risk appetite.

 

As part of the Board’s and its committee’s annual self-evaluation process, the Board’s committees annually review their respective charters in light of regulatory requirements, updates to the Company’s risk coverage statement (which defines the key risk types facing the Company), implementation and update of the Company’s risk management framework and other functional risk management frameworks, and director and committee feedback. Recent changes in our Board committee risk oversight responsibilities include the following:

 

   

The Corporate Responsibility Committee’s charter was amended to enhance the committee’s oversight responsibilities for the Company’s reputation generally, including with customers, by clarifying that the Committee’s oversight of customer service and complaint matters includes matters relating to the Company’s culture and its team members’ focus on serving customers;

 

   

The Company increased reporting provided to the Board’s Corporate Responsibility Committee on political and lobbying activities to include at least annually information on lobbying payments and payments made to trade associations, as part of the committee’s existing oversight responsibilities for the Company’s government relations activities and public advocacy policies and programs; and

 

   

To enhance Board-level oversight and avoid duplication, the Audit and Examination Committee began to hold periodic joint meetings with the Risk Committee in 2016 to focus on oversight of information security risk (including cyber) and technology risk.

 

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The following chart summarizes key risk oversight responsibilities of our Board and its committees.

 

Board of Directors

Annually approves overall enterprise statement of risk appetite

 

       
Risk Committee

Oversight includes:

•          Enterprise-wide risk management framework and structure, including through the approval of the risk management framework which outlines the Company’s approach to risk management and the policies, processes, and governance structures necessary to execute the risk management program

•          Risk functional framework and oversight policies, which outline roles and responsibilities for managing key risk types and the most significant cross-functional risk areas, including counterparty credit risk

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

•          Risk coverage statement

•          Aggregate enterprise-wide risk profile and alignment of risk profile with the Company’s strategy, 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 other selected risk topics and enterprise-wide risk issues, including model risk

•          Volcker compliance program

•          Through joint meetings with the AEC, information security risk (including cyber) and technology risk

 

       
AEC   Credit   CRC   Finance   GNC

Oversight includes:

•     Internal control over financial reporting

•     Disclosure framework for financial and risk reports prepared for the Board, management and bank regulatory agencies

•     External auditor performance

•     Internal audit function, including performance and compensation of the Chief Auditor

•     Operational risk, compliance with legal and regulatory requirements, financial crimes risk (BSA/AML), information security risk (including cyber), and technology risk, including through approval (and recommendation to the Risk Committee) of the relevant functional framework and oversight policies

•     Ethics, business conduct, and conflicts of interest program

•     Resolution planning

 

Oversight includes:

•     Credit risk, including through approval (and recommendation to the Risk Committee) of the credit risk functional framework and oversight policy

•     Allowance for credit losses, including governance and methodology

•     Adherence to enterprise credit risk appetite metrics and concentration limits

•     Credit quality plan

•     Compliance with credit risk framework, policies and underwriting standards

•     Credit stress testing framework and results (including credit modeling issues)

•     Credit aspects of Basel Capital Accords

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

 

Oversight includes:

•     Reputation risk, including through approval (and recommendation to the Risk Committee) of the reputational risk functional framework and oversight policy

•     Customer service and complaint matters, including related to the Company’s culture and its team members’ focus on serving customers

•     Fair and responsible mortgage and other consumer lending reputational risks

•     Social responsibility, political, and environmental risks

 

Oversight includes:

•     Interest rate risk, including mortgage servicing rights

•     Market risk, including trading and derivative activities

•     Approval (and recommendation to the Risk Committee) of the interest rate risk and market risk functional framework and oversight policies

•     Investment risk, including fixed-income and equity portfolios

•     Capital position and planning, including capital levels relative to budgets and forecasts and the Company’s risk profile, capital adequacy assessment and planning, and stress testing activities

•     Financial risk management policies used to assess and manage above market, interest rate, liquidity and investment risks

•     Annual financial plan

•     Recovery planning

 

 

Oversight includes:

•     Corporate governance compliance

•     Board and committee performance

 

        HRC
       

Oversight includes:

•     Overall incentive compensation strategy and incentive compensation practices

•     Compensation risk management

•     Talent management and succession planning

 

 

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 the Company has established several management-level committees to support Wells Fargo leaders in carrying out their risk management responsibilities. 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 reports to the Board’s Risk Committee. The Enterprise Risk Management Committee serves as the focal point for risk governance and oversight at the management level. A number of governance committees that are responsible for issues specific to an individual risk type report to the Enterprise Risk Management Committee.

 

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Management’s Corporate Risk organization is headed by the Company’s Chief Risk Officer who, among other things, is responsible for setting the strategic direction and driving execution of the Company’s risk management activities. The Chief Risk Officer is appointed by and reports to the Board’s Risk Committee. The Chief Risk Officer, as well as the Chief Risk Officer’s direct reports, works closely with the Board’s committees and frequently provides 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 Board 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.

 

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 Board’s 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. As part of its management succession planning process, the Board elected Timothy J. Sloan as President and Chief Operating Officer in November 2015.

 

Communications with our Directors

 

Stockholders and other interested parties who wish to communicate with the Board, including the Lead Director or the non-employee or independent directors as a group, may send an e-mail to BoardCommunications@wellsfargo.com or 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/governance.

 

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Additional Information

 

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 2015. During 2015, no member of the HRC was an employee, officer, or former officer of the Company. None of our executive officers served in 2015 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 chair 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.

 

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/governance.

 

The HRC and GNC retained Cook & Co., a nationally recognized compensation consulting firm, and its CEO, George Paulin, to provide independent advice on executive and non-employee director compensation matters for 2015. Cook & Co.’s business is limited to providing independent 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 2015. In November 2015, 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 2015 was $152,993, 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 2015 compensation for our non-employee directors. 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.

 

2015 Director Compensation Table

 

Name

   Fees
Earned
or Paid
  in Cash  
($)(1)(2)
   Stock
Awards
($)(3)
   Option
Awards
($)(4)
   Non-Equity
Incentive
Plan
Compensation
($)
   Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
   All
Other
Compen-
sation
($)(5)
      Total   
($)
(a)    (b)    (c)    (d)    (e)    (f)    (g)    (h)

John D. Baker II

       181,000          180,027                            361,027  

Elaine L. Chao

       111,000          180,027                            291,027  

John S. Chen

       99,000          180,027                            279,027  

Lloyd H. Dean

       166,000          180,027                            346,027  

Elizabeth A. Duke

       121,000          233,414                            354,414  

Susan E. Engel

       151,000          180,027                            331,027  

Enrique Hernandez, Jr.

       217,000          180,027                   5,000          402,027  

Donald M. James

       113,000          180,027                            293,027  

Cynthia H. Milligan

       172,000          180,027                            352,027  

Federico F. Peña

       135,000          180,027                   5,000          320,027  

James H. Quigley

       202,000          180,027                            382,027  

Judith M. Runstad

       204,000          180,027                            384,027  

Stephen W. Sanger

       202,000          180,027                            382,027  

Susan G. Swenson

       129,000          180,027                            309,027  

Suzanne M. Vautrinot

       104,750          220,060                            324,810  

 

(1)   Includes fees earned, whether paid in cash or deferred, for service on the Company’s Board in 2015 (including any such amounts paid in 2016) as described under Cash Compensation below. Also includes fees paid to non-employee directors who serve on the board of directors of Wells Fargo Bank, N.A. (“Bank”), a wholly owned subsidiary of the Company, or are members of one or more special purpose committees. Messrs. Dean, Hernandez, Quigley, and Sanger and Mses. Milligan and Runstad, as directors of the Bank, received an annual cash retainer of $10,000, payable quarterly in arrears, and a fee of $2,000 for any separate meeting of the Bank Board not held concurrently with or immediately prior to or following a Company Board or committee meeting. In 2015, all Bank Board meetings were held concurrently with or immediately prior to or following a Company Board or standing committee meeting. A fee of $2,000 was paid for the following number of special purpose committee meetings attended which were not held concurrently with or immediately prior to or following a Company Board or committee meeting: Mr. Baker—19 meetings; Ms. Duke and Mr. Quigley—3 meetings; Ms. Engel—12 meetings; Mr. Hernandez—5 meetings; Messrs. James, Peña, and Sanger—1 meeting; and Ms. Runstad—18 meetings.

 

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(2)   Includes fees earned in 2015 but deferred at the election of the director. The following table shows the number of stock units credited on a quarterly basis to our non-employee directors under our deferral program for deferrals of 2015 cash compensation paid quarterly in arrears 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

   829.6255    44,750
   856.6157    48,750
   831.0653    42,750
   823.2156    44,750

Lloyd H. Dean

   440.3040    23,750
   364.6108    20,750
   345.0623    17,750
   381.7144    20,750

Elizabeth A. Duke

   532.9996    28,750
   470.0404    26,750
   675.5443    34,750
   565.6733    30,750

Donald M. James

   570.0779    30,750
   470.0404    26,750
   520.0233    26,750
   528.8815    28,750

Stephen W. Sanger

   1,028.9210       55,500
   869.7944    49,500
   923.4059    47,500
     910.5960    49,500

 

(3)   We granted 3,249 shares of our common stock to each non-employee director elected at the 2015 annual meeting of stockholders on April 28, 2015. In addition, we granted 976 shares to Ms. Duke on January 2, 2015 following her election to the Board effective January 1, 2015 and 723 shares of our common stock to Ms. Vautrinot upon her election to the Board on February 24, 2015. The grant date fair value of each award is based on the number of shares granted and the NYSE closing price of our common stock on the grant date.
(4)   The table below shows for each non-employee director with outstanding options, the aggregate number of shares of our common stock underlying unexercised options at December 31, 2015. All options were fully exercisable at December 31, 2015. Directors who are not reflected in the table below do not hold any outstanding options with respect to our common stock.

 

Name

   Number of
  Securities Underlying  
Unexercised Options

John D. Baker II

   22,570

John S. Chen

   37,784

Lloyd H. Dean

   32,112

Susan E. Engel

   41,198

Enrique Hernandez, Jr.

   44,442

Donald M. James

   22,570

Cynthia H. Milligan

   44,442

Judith M. Runstad

   44,442

Stephen W. Sanger

   44,442

Susan G. Swenson

   37,784

 

(5)   The amount under “All Other Compensation” for each of Messrs. Hernandez and Peña represents a Company matching contribution during 2015 under the Company’s charitable matching contribution program, which for 2015 matched charitable donations to qualified schools and educational institutions of up to $5,000 per year, on a dollar-for-dollar basis, per employee and non-employee director of the Company.

 

Wells Fargo & Company 2016 Proxy Statement            27


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Structure of our Director Compensation Program

 

Cash Compensation

 

The following table shows the components of cash compensation paid to non-employee directors in 2015. Cash retainers and fees are paid quarterly in arrears. Directors who join the Board during the year receive a prorated annual cash retainer. Effective January 1, 2016, the annual Lead Director fee was increased to $60,000 and the AEC and Risk Committee Chair fees were increased to $40,000.

 

2015 Component

     Amount ($)  

Annual Cash Retainer

       75,000  

Annual Lead Director Fee

       40,000  

Annual Committee Chair Fees

    

AEC and Risk Committee

       35,000  

CRC, Credit Committee, Finance Committee, GNC and HRC

       25,000  

Regular or Special Board or Committee Meeting Fee1

         2,000  
  (1)   Includes standing committee meetings as well as special purpose committee meetings not held concurrently with or immediately prior to or following a Company Board or standing committee meeting.  

 

Equity Compensation

 

For 2015, 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 $180,000. 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 $180,000 prorated to reflect the number of months (rounded up to the next whole month) until the next annual meeting of stockholders. The dollar value of each stock award is converted to a number of shares of Company common stock using the closing price on the grant date, rounded up to the nearest whole share.

 

Deferral Program

 

A non-employee director of the Company or the Bank 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 2015 on interest-bearing accounts was 2.54%. 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, 2015, and each director who has served less than five years is on track to meet this ownership level.

 

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INFORMATION ABOUT RELATED PERSONS

 

 

Related Person Transactions

 

 

Lending and Other Ordinary Course Financial Services Transactions

 

During 2015 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, 2015 (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, 2015:

 

Executive Officer

  Original
Loan
Amount
  Highest
Principal
Balance
During
2015
  12/31/15
Balance
  Principal
and
Interest
Paid
During
2015
  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.

 

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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 2015, 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 2015 to Inter-Con under this contract did not exceed 1% of Inter-Con’s or the Company’s 2015 consolidated gross revenues, and each year since this contractual relationship began the Board has determined that our relationship with Inter-Con does not impair Mr. Hernandez’s independence under our Director Independence Standards. In 2015, we paid Inter-Con approximately $1.9 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 employed Cynthia H. Milligan’s brother, James A. Hardin, as a wealth management advisor until November 2015, when he ceased employment with the Company. In 2015, James Hardin received compensation of approximately $217,000, including sales commissions. We established the compensation paid to Mr. Hardin in 2015 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 did not have an interest in his prior employment relationship. Mr. Hardin was not an executive officer of the Company and did not directly report to an executive officer of the Company. We believe that this prior employment relationship does not and did 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 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.” Any potential Interested Transactions that are brought to the Company’s attention are analyzed by the Company’s Law Department, in consultation with management and with outside counsel, as appropriate, to determine whether the transaction or relationship does, in fact, constitute an Interested Transaction requiring compliance with the Related Person Policy. The Board 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;

 

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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);

 

   

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, as applicable, annually reviews all ongoing Interested Transactions.

 

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OWNERSHIP OF OUR COMMON STOCK

 

 

Directors and Executive Officers

 

 

Stock Ownership Requirements and Other Policies

 

Stock Ownership Requirements

 

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 cash salary.

 

Shares counted toward ownership include shares a non-employee director has deferred pursuant to the Directors Stock Compensation and Deferral Plan (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, Direct Purchase and Dividend Reinvestment 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 requirements prohibit all team members, including our executive officers, and directors from engaging in derivative or hedging transactions involving any Company securities, including our common stock.

 

No Pledging Policy

 

Our Board of Directors has 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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Director and Executive Officer Stock 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 24, 2016, 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 24, 2016, the number of common stock units credited to the accounts of our non-employee directors, named executives, and all directors and executive officers as of that date as a group under the terms of the benefit and deferral plans in which they participate. 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 2/24/16
(4)
  Common
Stock Units
(5)(6)
  Total (7)

Non-Employee Directors

       (a)         (b)         (c)         (d)  

John D. Baker II

       38,139         22,570         67,058         127,767  

Elaine L. Chao

       150         –               20,671         20,821  

John S. Chen

       32,664         37,784         12,144         82,592  

Lloyd H. Dean

       36,778         32,112         21,676         90,566  

Elizabeth A. Duke

       4,325         –               2,266         6,591  

Susan E. Engel

       13,433         41,198         98,264         152,895  

Enrique Hernandez, Jr.

       17,949         44,442         70,666         133,057  

Donald M. James

       3,863         22,570         64,147         90,580  

Cynthia H. Milligan

       98,728         37,784         27,435         163,947  

Federico F. Peña

       19,531         –               –               19,531  

James H. Quigley

       150         –               8,873         9,023  

Judith M. Runstad

       73,850         44,442         32,135         150,427  

Stephen W. Sanger

       19,262         44,442         103,444         167,148  

Susan G. Swenson

       95,154         37,784         36,632         169,570  

Suzanne M. Vautrinot

       100         –               4,055         4,155  

Named Executives

                

David M. Carroll

       359,669         327,379         –               687,048  

Avid Modjtabai

       310,033         520,445         15,743         846,221  

John R. Shrewsberry

       224,877         220,255         23,573         468,705  

Timothy J. Sloan

       522,191         1,004,864         39,835         1,566,890  

John G. Stumpf*

       1,618,474         3,777,328         75,792         5,471,594  

Carrie L. Tolstedt

       835,200         1,655,462         31,541         2,522,203  
All directors and executive officers as a group (26 persons)        5,111,381         8,841,392         808,596         14,761,369  
*   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 24, 2016.
(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 in a trust by 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, 356,964 shares held in a trust of which he is a co-trustee;
    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., 17,949 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, 19,531 shares held in a trust;
    Judith M. Runstad, 40,000 shares held by spouse;
    Stephen W. Sanger, 19,262 shares held in a trust of which he is a co-trustee;
    John R. Shrewsberry, 218,185 shares held in a trust of which he is a co-trustee;
    Timothy J. Sloan, 521,408 shares held in a trust of which he is a co-trustee;

 

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    John G. Stumpf, 1,111,024 shares held in trusts of which he is a co-trustee, and 5,387 shares held by spouse in an IRA account;
    Carrie L. Tolstedt, 817,661 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, 3,688,692 shares.
(4)   Includes the following number of RSRs and 2013 Performance Shares (including whole share dividend equivalents credited as of February 24, 2016) that will vest within 60 days of February 24, 2016: Mr. Stumpf—23,573 RSRs and 553,755 Performance Shares; Mr. Shrewsberry—19,452 RSRs and 108,573 Performance Shares; Mr. Carroll—3,767 RSRs and 243,652 Performance Shares; Ms. Modjtabai—3,563 RSRs and 243,652 Performance Shares; Mr. Sloan—4,752 RSRs and 243,652 Performance Shares; and Ms. Tolstedt—3,692 RSRs and 243,652 Performance Shares; and all executive officers as a group—76,101 RSRs and 2,104,695 Performance Shares.
(5)   For executive officers, includes the following whole common stock units credited to their accounts as of February 24, 2016 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

     15,519         224

John R. Shrewsberry

     10,315    13,258

Timothy J. Sloan

     39,835   

John G. Stumpf

     75,792   

Carrie L. Tolstedt

     31,541   

All executive officers as a group

   224,768    14,362

 

(6)   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 24,225 shares in the aggregate, which will be paid in cash.
(7)   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 24, 2016) granted under the Company’s LTICP that were not vested as of February 24, 2016, or expected to vest within 60 days after February 24, 2016. 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

     36,069       382,463

Avid Modjtabai

     35,659       382,463

John R. Shrewsberry

     58,249       321,037

Timothy J. Sloan

     53,326       463,272

John G. Stumpf

     37,201       857,894

Carrie L. Tolstedt

     35,444       382,463

All executive officers as a group

   351,235    3,559,899

 

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 2015. 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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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, 2015.

 

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 (1)(2)(3)            
(a)    (b)    (c)

Warren E. Buffett

Berkshire Hathaway Inc.

3555 Farnam Street

Omaha, Nebraska 68131

   506,308,470    9.9%

BlackRock, Inc.

55 East 52nd Street

New York, New York 10055

   286,880,914    5.6%

The Vanguard Group, Inc.

100 Vanguard Boulevard

Malvern, Pennsylvania 19355

   274,621,069    5.4%
(1)   Based on a Schedule 13G/A filed on February 16, 2016 with the SEC by Warren E. Buffett and 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 504,299,470 reported shares, which include shares beneficially owned by certain subsidiaries of Berkshire Hathaway. Mr. Buffett reports sole voting and dispositive power over 2,009,000 of the shares.
(2)   Based on a Schedule 13G/A filed on February 10, 2016 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 246,143,826 and shared voting power over 54,405 of the shares. Each of BlackRock and its subsidiaries has sole dispositive power over 286,826,509 and shared dispositive power over 54,405 of the shares.
(3)   Based on a Schedule 13G/A filed on February 11, 2016 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 8,669,364 of the shares and shared voting power over 485,700 of the shares. The Vanguard Group has sole dispositive power over 265,398,879 of the shares and shared dispositive power over 9,222,190 of the shares.

 

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EXECUTIVE COMPENSATION

 

 

Item 2 – Advisory Resolution to Approve Executive Compensation

 

 

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 our 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 (which will occur at our 2017 annual meeting). The next advisory vote on executive compensation will occur at our 2017 annual meeting unless our Board determines otherwise.

 

We are asking our stockholders to approve an advisory resolution to approve 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 2015 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 2015 compensation principles, governance, and decisions for our 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 2015, 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 risk taking by requiring executives to bear the long-term risk of their activities.

 

Advisory Resolution (Say on Pay)

 

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.

 

Voting and Effect of Vote

 

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 making future executive compensation decisions for named executives.

 

Board Recommendation

 

As noted in the CD&A, the HRC believes that its 2015 compensation decisions were consistent with our compensation principles and will benefit stockholders for short-term and long-term Company performance, and that the compensation paid to the named executives for 2015 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).

 

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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, 2015 for filing with the SEC.

 

Members of the Human Resources Committee:                

Lloyd H. Dean, Chair        

John S. Chen

Susan E. Engel

  

Donald M. James

Stephen W. Sanger

  

 

Compensation Discussion and Analysis

 

 

Topic

                        Page                    

2015 Performance and Compensation Overview

   38

•    2015 Company Performance Highlights

   38

•    2015 Compensation Highlights

   38

•    2015 Compensation Decisions

   39

How the HRC Considers Prior Say on Pay Votes and Investor Feedback

   40

2015 Compensation Governance Highlights

   41

Compensation Elements

   42

•    Annual Compensation

   42

•    Long-Term Compensation

   42

•    Plans and Programs

   42

Governance Framework for Compensation Decisions

   43

•    Company Performance

   43

•    Peer Group Analysis

   43

•    Business Line Performance

   44

•    Individual Performance

   45

•    Independent Compensation Consultant Advice

   45

•    Risk Management

   46

•    HRC Discretion

   47

Clawback and Recoupment Policies and Provisions

   47

2015 Compensation Decisions for Named Executives

   48

•    2015 Annual Base Salaries

   48

•    2015 Annual Incentive Compensation

   48

•    2015 Long-Term Incentive Compensation

   52

Long-Term Incentive Compensation Program

   55

Other Compensation Components

   55

•    Participation in Retirement and Other Benefit Programs

   55

•    Perquisites and Other Compensation

   56

•    Post-Retirement Arrangements

   56

Tax Considerations

   56

Conclusion

   56

 

Wells Fargo & Company 2016 Proxy Statement            37


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Our Compensation Discussion and Analysis, or CD&A, describes our executive compensation philosophy and the 2015 compensation decisions for our executive officers below who are named in our Summary Compensation Table:

 

Named Executive Officer        

  

Position(1)

John G. Stumpf

  

Chairman and CEO

Timothy J. Sloan

  

President and COO

John R. Shrewsberry

  

Senior Executive Vice President and CFO

David M. Carroll

  

Senior Executive Vice President, Wealth and Investment Management

Avid Modjtabai

  

Senior Executive Vice President, Consumer Lending

Carrie L. Tolstedt

  

Senior Executive Vice President, Community Banking

(1)   Prior to November 17, 2015, Mr. Stumpf was Chairman, President and CEO and Mr. Sloan was Senior Executive Vice President, Wholesale Banking.

 

2015 Performance and Compensation Overview

 

2015 Company Performance Highlights

 

We generated solid financial results in 2015 despite a challenging interest rate environment, as we continued to benefit from our diversified business model. We grew revenue by 2% from 2014 on stronger net interest income, driven by growth in earning assets. Our mix of revenue remained balanced between net interest income and noninterest income. Although net income was down slightly from 2014, earnings per share increased as we repurchased more shares than we issued. We grew deposits by 5% and loans by 6% from 2014, as we focused on building and maintaining customer relationships while adhering to our credit and other risk management principles. We continued to have strong credit performance, with lower credit losses and nonperforming assets compared with 2014. Our provision for credit losses increased from 2014, reflecting a $1.1 billion lower reserve release in 2015. We grew capital and liquidity, and for the fifth consecutive year returned more capital to stockholders in dividends and net share repurchases than the prior year. Highlights of our 2015 performance include:

 

   

Company

Performance

Highlights

  

•        Net income of $22.9 billion, compared with $23.1 billion for 2014

•        Diluted earnings per share of $4.12, compared with $4.10 for 2014

•        Revenue of $86.1 billion, compared with $84.3 billion for 2014

•        Noninterest expense of $50.0 billion, compared with $49.0 billion for 2014

•        Return on assets of 1.31%, compared with 1.45% for 2014

•        Return on equity of 12.60%, compared with 13.41% for 2014

•        Returned $12.6 billion to stockholders through dividends and net share repurchases

•        Strong capital position – Common Equity Tier 1 ratio (fully phased-in) well above the regulatory minimum and our internal buffer

•        Efficiency ratio of 58.1%, consistent with 2014

•        Loans of $916.6 billion, compared with $862.6 billion at year end 2014

•        Deposits of $1,223.3 billion, compared with $1,168.3 billion at year end 2014

•        Total stockholder return of 1.9%, 19.9%, and 14.7%, respectively, for the 1-, 3- and 5-year periods ended December 31, 2015

 

 

2015 Compensation Highlights

 

In deciding 2015 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 prudent risk management consistent with the Company’s Vision and Values

 

  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 2015: base salary, annual incentive, and long-term equity-based incentive.

 

38            Wells Fargo & Company 2016 Proxy Statement


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2015 Compensation Decisions

 

During 2015, 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 over $1 million in Restricted Share Rights (RSRs) that vest over three years;

 

   

Awarded long-term equity compensation primarily in the form of Performance Shares granted in February 2015 that “cliff” vest at the end of three years based on Company Return on Realized Common Equity (RORCE) performance during that period; and

 

   

Granted additional long-term equity compensation in July 2015 in the form of RSR awards 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 their strong and effective leadership, following a mid-year evaluation of their compensation and their contributions to the Company’s strong performance.

 

The table below shows the 2015 compensation decisions made by the HRC for each named executive. The table is not a substitute for, and should be read together with, the Summary Compensation Table on page 57 which presents named executive compensation paid, accrued, or awarded for 2015 in accordance with SEC disclosure rules and includes additional compensation elements and other important information.

 

Named Executive

     Base Salary  
Rate
($)(4)
   Annual
    Incentive     

Award
($)
  Long-Term Equity  Incentives                 Total            
($)
          Performance  
Share Award
($)(2)
     RSR Award  
($)(3)
  

John G. Stumpf

   2,800,000    4,000,000(1)   12,500,000      -    19,300,000  

John R. Shrewsberry

   1,700,000    850,000   5,500,000    1,000,000    9,050,000

Timothy J. Sloan

   2,000,000    1,000,000       6,500,000    1,500,000    11,000,000  

David M. Carroll

   1,700,000    850,000   5,500,000    1,000,000    9,050,000

Avid Modjtabai

   1,700,000    850,000   5,500,000    1,000,000    9,050,000

Carrie L. Tolstedt

   1,700,000    850,000   5,500,000    1,000,000    9,050,000
(1)   A portion of the annual incentive award amount for our CEO was paid in RSRs that vest over three years. See pp. 48-50.
(2)   Dollar value on date of grant of 2015 Performance Shares at “target.” Actual pay delivered or realized for Performance Shares will be determined in the first quarter of 2018 and may range from zero to 150% of the target shares, depending on Company performance. See pp. 53-54.
(3)   Dollar value on date of grant of July 2015 RSR grants vesting over four years beginning on the first anniversary of the grant date. See pp. 54-55.
(4)   Effective March 6, 2016, the base salary of Mr. Sloan was increased to $2,400,000 and the base salary of each of Messrs. Shrewsberry and Carroll and Mses. Modjtabai and Tolstedt was increased to $1,750,000. The increase in base salary for Mr. Sloan reflects his additional responsibilities as President and COO. Mr. Sloan retained his responsibilities as head of Wholesale Banking following his election as President and COO.

 

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 tied to performance. In addition, the Company’s executive compensation program provides a high proportion of pay for our named executives in the form of long-term equity awards that are subject to cancellation upon occurrence of specified performance conditions which discourage excessive risk taking and 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 2015 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%           31%     69%    

Other NEO Average

    19%     81%           28%     72%    
(1)   Includes Performance Shares that vest subject to RORCE performance criteria over a three-year performance period, RSRs granted as a portion of the annual incentive award for our CEO that vest over three years, and RSRs granted in July 2015 to named executives, other than our CEO, that vest over four years.

 

Wells Fargo & Company 2016 Proxy Statement            39


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The following table illustrates how our compensation principles were reflected in the HRC’s 2015 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

 

How the HRC Considers Prior Say on Pay Votes and Investor Feedback

 

At the Company’s 2015 annual meeting, our stockholders approved the advisory resolution on the 2014 compensation of our named executives by 96.7% of shares present at the meeting and entitled to vote on the advisory resolution. 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 2015, 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 2015. That feedback was reflected in the decision to continue to maintain the overarching framework and balance for our named executives’ compensation for 2015, but not for specific pay-level decisions.

 

40            Wells Fargo & Company 2016 Proxy Statement


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2015 Compensation Governance Highlights

 

In making 2015 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 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 2015 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

 

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

 

§      Three-year RORCE performance metric for 2015 Performance Share awards was chosen as a measure that focuses on long-term stockholder value creation

 

§      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. 53)

 

–      Granted RSR awards in July 2015 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 their strong and effective leadership

 

–      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 our CEO’s 2015 annual incentive award over $1 million in RSRs that vest over three years and are subject to the HRC’s full discretion to cancel all or a portion of this award 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:

 

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

 

§      Robust stock ownership requirement through one year after retirement

 

§      Prohibition on hedging and speculative trading in Company stock

 

§      Prohibition on our directors and executive officers pledging Wells Fargo equity securities in connection with a margin loan or similar transaction

 

Wells Fargo & Company 2016 Proxy Statement            41


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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 2015, the elements of direct compensation included base salary, annual incentive, and long-term equity incentives in the form of Performance Shares vesting following a three-year performance period 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

•     Threshold performance criteria established annually by the HRC

 

•     Payout determined and awarded after end of fiscal year

•     Based on size of award, a portion may vest 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

•     2015 grants tied to Company’s RORCE ranking compared with peer group subject to absolute performance levels

•     2015 grants may vest from zero to 150% of target shares

•     2015 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

 

42            Wells Fargo & Company 2016 Proxy Statement


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Governance Framework for Compensation Decisions

 

In making compensation decisions for named executives, the HRC operates within a governance framework that is 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 include:

 

LOGO

 

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. This focus is demonstrated by the HRC’s decision to tie long-term incentive compensation to Company performance over time. Further, 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% 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 2015, 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 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.

 

Wells Fargo & Company 2016 Proxy Statement            43


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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 2015, 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, and price-earnings ratio;

 

   

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 regulatory capital ratios.

 

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 2015 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. In making its compensation decisions, the HRC reviewed total compensation levels for the Labor Market Peer Group, including at the estimated median and 75th percentile. Total compensation, including long-term compensation, is intended to be competitive with total compensation for comparable positions and performance at peers.

 

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

 

44            Wells Fargo & Company 2016 Proxy Statement


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business line performance; the HRC believes they must also have a significant stake in the Company’s overall performance to encourage collaboration among business lines and as a check against unnecessary or excessive risk-taking at the individual business line level. Because of differences in organizational structure and external business segment reporting, our business lines rarely correspond perfectly to the business lines of Peer Group members. Therefore, the HRC does not compare business unit financial performance with the Financial Performance Peer Group. The HRC may consider the effects of acquisitions, divestitures, internal reorganizations or other changes in reporting relationships during the year. Although the HRC considers a business line’s financial results, achievement of specific business line performance goals may not be material in the context of the executive compensation decisions for these named executives. Business line performance goals nonetheless serve valuable additional purposes for the Company, including resource allocation, capital planning 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 2015, 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 performance for those executive officers who reported to him during the year, providing his assessment of each officer’s individual performance, as well as his perspective on his individual performance, the Company’s overall performance and the contributions of each business line to Company performance. Our COO provides input to the CEO on the individual performance of those executive officers who reported to him during the year. Our CEO 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 2015 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 2015 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.

 

Wells Fargo & Company 2016 Proxy Statement            45


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Risk Management

 

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

 

LOGO

See also “Executive Compensation—Compensation Governance and Risk Management.”

 

46            Wells Fargo & Company 2016 Proxy Statement


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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.

 

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 award less than the maximum amount 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.

 

Clawback and Recoupment Policies and Provisions

 

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 adversely impact the Company. The Company has multiple recoupment or clawback policies and provisions in place that are applicable to our executive officers.

 

Policy/Provision    Trigger for Clawback or Recoupment   

Compensation

Subject to Recovery

  

Impacted

Population

Unearned Compensation Recoupment Policy    Misconduct by an executive that contributes to the Company having to restate all or a significant portion of its financial statements    Any bonus or incentive compensation that was based on achievement of financial results that were restated downward    Executive Officers
Extended Clawback Policy    Incentive compensation was based on materially inaccurate financial information, whether or not the executive was responsible    Incentive compensation that was based on materially inaccurate financial information    Executive Officers and certain other highly compensated employees
Performance-Based Vesting Conditions   

•   Misconduct which has or might reasonably be expected to have reputational or other harm to the Company or any conduct that constitutes “cause,”

•   Misconduct or commission of 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,

•   Improper or grossly negligent failure, including in a supervisory capacity, to identify, escalate, monitor or manage, in a

   RSR awards and Performance Share awards granted to our named executives are subject to cancellation if the HRC determines that a trigger event has occurred   

Executive Officers

 

Other team members in receipt of RSRs as part of annual incentive/bonus awards

 

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Policy/Provision    Trigger for Clawback or Recoupment   

Compensation

Subject to Recovery

  

Impacted

Population

  

timely manner and as reasonably expected, risks material to the Company or the executive’s business group,

•   An 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

     
Clawback Provisions included in All Equity-Based Awards    In accordance with the terms of any recoupment or clawback policy or requirement from time to time maintained by Wells Fargo or required by law, as set forth in award agreements for equity-based compensation grants since 2009. The LTICP also provides that awards are subject to any Company recoupment policy or any recoupment requirement imposed under applicable laws    All equity awards granted under the LTICP, whether vested or unvested, for which the applicable Company clawback or recoupment policy or legal requirement is triggered    All team members who receive Wells Fargo equity awards under the LTICP

 

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.

 

2015 Compensation Decisions for Named Executives

 

The HRC took the compensation actions described below for the named executives in 2015. The HRC’s decision-making was conducted within the compensation governance framework described above.

 

2015 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.

 

No changes were made to named executives’ base salaries during 2015. Effective March 6, 2016, the base salary of Mr. Sloan was increased to $2,400,000 and the base salary of each of Messrs. Shrewsberry and Carroll and Mses. Modjtabai and Tolstedt was increased to $1,750,000. The increase in base salary for Mr. Sloan reflects his additional responsibilities as President and COO. Mr. Sloan retained his responsibilities as head of Wholesale Banking following his election as President and COO.

 

2015 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 2015 annual incentive awards for our named executives:

 

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 2015 with EPS of $4.12 and RORCE of 12.8%, which is above the median RORCE in the Financial Performance Peer Group (8.4%). As a result, the 2015 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 2015 incentive compensation of up to $45.8 million for each named executive (i.e., based on 0.2% of the Company’s 2015 net income of $22.9 billion), or such lesser amount as the HRC in its discretion determines.

 

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

 

In determining 2015 annual incentive awards for the named executives, the HRC considered information pertaining to the factors described above under Governance Framework for Compensation Decisions.” 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 a portion of any 2015 annual incentive award over $1 million in RSRs that vest ratably over three years. The HRC structured the payment 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 our CEO’s annual incentive award over $1 million in the form of an RSR award that vests over time and is subject to performance-based vesting conditions, as well our stock ownership policy, helps mitigate risks inherent in annual incentive compensation.

 

2015 Annual Incentive Compensation Decisions for Individual Named Executive Officers.

 

 
John G. Stumpf, Chairman and CEO

Individual Performance.    In making the 2015 annual incentive compensation award determination for Mr. Stumpf, the HRC considered, among other factors:

 

¡        Company Financial Performance

 

•       the Company’s 2015 net income of $22.9 billion, diluted EPS of $4.12, and RORCE of 12.8%;

 

•       the Company’s relative performance compared with the Financial Performance Peer Group in the financial metrics discussed above under “—Governance Framework for Compensation Decisions—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 continued strong credit performance, with credit losses and nonperforming assets down 2% and 17%, respectively, from 2014;

 

•       the Company’s return of $12.6 billion to stockholders in dividends and net share repurchases, the fifth consecutive year of returning more capital to stockholders than the prior year; and

 

•       the Company’s strong capital position, with a Common Equity Tier 1 ratio at year end well above the regulatory minimum and our internal buffer.

 

¡        Strategic Priorities – the Company’s progress on key strategic priorities, including

 

•       building and maintaining enduring relationships with our customers in furtherance of our vision to satisfy their financial needs and help them succeed financially, as reflected by

 

•     total loans and total deposits up 6% and 5%, respectively, from 2014,

 

•     primary consumer, small business and business banking checking customers up from 2014, and

 

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•      most U.S. Small Business Administration 7(a) loans both in number of loans and dollars;

 

•       growing revenue, as reflected by

 

•      total revenue of $86.1 billion, up 2% from 2014, on a balanced mix of net interest income (53%) and noninterest income (47%), and

 

•      continued ability of our diversified business model to perform consistently across business cycles;

 

•       managing risk, as reflected by

 

•      reinforcing a culture of risk management and accountability across the Company,

 

•      continued investments in risk management and information security, and

 

•      continued progress addressing increasing regulatory reform and oversight;

 

•       managing expenses, as reflected by

 

•      efficiency ratio of 58.1%, consistent with 2014, and within our target range, and

 

•      positive operating leverage as revenue growth slightly outpaced expense growth (2.0% vs. 1.9%);

 

•       connecting with communities, as reflected by

 

•      ranked by United Way Worldwide as largest workplace-giving campaign in the U.S. for the 7th consecutive year, with Wells Fargo team members in 2015 contributing $98.8 million to charities, community groups, schools and other nonprofits, and

 

•     one of the top corporate cash donors among U.S. companies in 2015; and

 

•       living our Vision and Values, as reflected by continued 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.

 

¡        Leadership – Mr. Stumpf’s continued strong and effective leadership, as reflected by

 

•       his success in instilling and reinforcing our Vision and Values and risk culture and our progress in achieving key long-term Company strategic goals such as:

 

•      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, and other key risks,

 

•      strategically positioning the Company to take advantage of revenue opportunities in existing and new businesses while managing our expenses by serving customers better and more efficiently, and

 

•      communicating the Company’s mission, strategic vision, and values to our team members, investors, communities, and other stakeholders; and

 

•       his development and mentoring of current and next generation leaders with the vision, passion, and skill to carry on the Company’s mission and preserve its culture, including Mr. Sloan who the Board elected in November 2015 as our President and Chief Operating Officer.

 

¡        The compensation of chief executive officers in the Labor Market Peer Group.

 

Annual Incentive Award Decision.    Upon consideration of Mr. Stumpf’s performance, including the factors set forth above, the HRC approved and the Board ratified a 2015 annual incentive compensation award for Mr. Stumpf of $4,000,000. The HRC also determined to pay $833,333 of Mr. Stumpf’s 2015 annual incentive award in RSRs that vest ratably over three years.

 

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John R. Shrewsberry, Senior Executive Vice President and CFO

Individual Performance.    In making the 2015 annual incentive compensation award determination for Mr. Shrewsberry, the HRC considered, among other things, the following:

 

•      the factors cited above for Mr. Stumpf under “Company Financial Performance” and “Strategic Priorities”;

 

•      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 2015 performance.

 

As CFO, Mr. Shrewsberry is responsible for the Company’s financial planning and financial risk management and for its relations with the investment community. In 2015, he played an integral part in the Company’s achievement of 2015 financial priorities, including submitting a successful capital plan as part of the Comprehensive Capital Analysis and Review, strengthening the Company’s capital and liquidity, which ended 2015 at record levels, 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.

Annual Incentive Award Decision.    Upon consideration of Mr. Shrewsberry’s performance, including the factors set forth above, the HRC approved a 2015 annual incentive compensation award for Mr. Shrewsberry of $850,000.

 

 
Business Line Leaders

In making the 2015 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 cited above for Mr. Stumpf under “Company Financial Performance” and “Strategic Priorities”;

 

¡       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 2015 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 creating deep and enduring relationships with our customers by understanding their needs and delivering the most relevant products, service and guidance,

 

•      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, and

 

•      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 2015, the HRC also considered each named executive’s success against his or her objectives for 2015, 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 2015 annual incentive award decisions for these named executives. Consistent with the process described above in “Governance Framework for Compensation Decisions,” 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 degree of collaboration and teamwork 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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David M. Carroll, Senior Executive Vice President (Wealth and Investment Management)

Individual Performance.    In addition to the factors outlined above, Mr. Carroll led the Wealth and Investment Management (“WIM”) (formerly Wealth, Brokerage and Retirement) businesses to achieve net income of $2.3 billion in 2015, up 12% from 2014, on revenue growth of 3% in 2015. Under his leadership, WIM achieved a number of important strategic objectives, including continued net customer asset inflows in Retail Brokerage, as well as growth in loan balances and deposits. WIM continued to leverage its partnership with Community Banking to provide brokerage and wealth management services to our retail bank customers.

 

Annual Incentive Award Decision.    Upon consideration of Mr. Carroll’s performance, including the factors set forth above, the HRC approved a 2015 annual incentive compensation award for Mr. Carroll of $850,000.

 
Avid Modjtabai, Senior Executive Vice President (Consumer Lending)

Individual Performance.    In addition to the factors outlined above, Ms. Modjtabai led Consumer Lending, which combined with Community Banking, achieved net income of $13.5 billion in 2015, down from $13.7 billion in 2014. Under Ms. Modjtabai’s leadership, in 2015 Consumer Lending originated $213 billion of residential mortgages, up 22% from 2014, and a record $31 billion of auto loans. Credit card penetration in retail banking households rose to 43.4%, from 41.5% in 2014. Consumer Lending continued to effectively manage the Company’s consumer credit exposure through improved credit quality in our consumer real estate portfolios and continued reduction of our non-strategic/liquidating consumer credit portfolios.

 

Annual Incentive Award Decision.    Upon consideration of Ms. Modjtabai’s performance, including the factors set forth above, the HRC approved a 2015 annual incentive compensation award for Ms. Modjtabai of $850,000.

 
Timothy J. Sloan, President and COO (and Head of Wholesale Banking)

Individual Performance.    In addition to the factors outlined above, under Mr. Sloan’s leadership, Wholesale Banking had net income of $8.2 billion in 2015, flat compared with 2014. Revenue increased by 2%, to $25.9 billion, on growth in a number of businesses, including treasury management, asset-backed finance, principal investing, commercial real estate brokerage, multi-family capital, reinsurance and municipal products. In 2015 Wholesale Banking increased deposits and had broad-based loan growth across many businesses while continuing to adhere to the Company’s credit risk discipline.

 

On November 17, 2015, Mr. Sloan was elected by the Board as the Company’s President and Chief Operating Officer, assuming organizational responsibility for our business lines, in addition to continuing to serve as head of Wholesale Banking. Mr. Sloan has provided strong and effective strategic, operational and financial leadership prior to and following his election as COO. The Board believes his leadership will continue to be critical to achieving the Company’s strategic priorities.

 

Annual Incentive Award Decision.    Upon consideration of Mr. Sloan’s performance, including the factors set forth above, the HRC approved a 2015 annual incentive compensation award for Mr. Sloan of $1,000,000.

 
Carrie L. Tolstedt, Senior Executive Vice President (Community Banking)
Individual Performance.    In addition to the factors outlined above, Ms. Tolstedt led Community Banking, which combined with Consumer Lending and other business lines, achieved net income of $13.5 billion in 2015, down from $13.7 billion in 2014. Under her leadership, Community Banking achieved a number of strategic objectives, including record deposit levels reflecting continued growth in primary checking customers, and continued success in increasing online and mobile banking customers. In 2015 Wells Fargo was the number one Small Business Administration 7(a) lender both in number of loans and dollar volume in the U.S.
Annual Incentive Award Decision.    Upon consideration of Ms. Tolstedt’s performance, including the factors set forth above, the HRC approved a 2015 annual incentive compensation award for Ms. Tolstedt of $850,000.

 

2015 Long-Term Incentive Compensation

 

As discussed below, the HRC awarded long-term incentive compensation under the LTICP in the form of Performance Shares granted in February 2015 to all named executives and RSRs granted in July 2015 to all named executives except Mr. Stumpf.

 

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2015 Performance Share Awards.    Similar to its approach since 2010, the HRC chose to grant 2015 long-term incentive compensation to named executives primarily in the form of Performance Shares, as follows:

 

Named Executive

  

Target Number of Performance
Shares Granted (subject to Net
Operating Loss reduction)

  

Number of Performance Shares

that May be Earned Based on

RORCE Performance Criteria

John G. Stumpf

   225,755    0 – 150% of Target Performance Shares Granted, plus dividend equivalents reinvested during the vesting period

John R. Shrewsberry

     99,332   

Timothy J. Sloan

   117,393   

David M. Carroll

     99,332   

Avid Modjtabai

     99,332   

Carrie L. Tolstedt

     99,332   

 

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 2015 Performance Share awards are scheduled to vest in the first quarter of 2018 based on the average of the Company’s RORCE1 over the three-year performance period ending December 31, 2017 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 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.   Absolute Performance Measure: If the Company’s 3-Year Average RORCE is equal to or greater than the specified maximum absolute performance level, the 2015 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% x NOL Adjusted Target Award Number (subject to Net Operating Loss Adjustment and Performance-Based Vesting Conditions)

 

2.   Relative Performance Measure: If the Company’s 3-Year Average RORCE is less than 15%, but equal to or greater than 2%, the 2015 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 %*

  

Final Award Number of

Performance Shares*

Top Quartile Ranking of 75% or more

   150%   

150% x NOL Adjusted Target Award Number

Second Quartile Ranking of 50% or more

   100% to < 150%    100% to <150% 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
  *   Final award number and percentage vesting are interpolated on a straight-line basis based on actual level of performance in each quartile.

 

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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In granting the 2015 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. Since 2013 the HRC has 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 specified performance-based vesting conditions, which are set forth in the chart on pages 47-48.

 

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 and with the intention that total compensation be competitive with total compensation for comparable positions and performance at peers. 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.

    

 

Why Three-Year RORCE

is appropriate as our

performance metric for

Performance Share Awards

 

•       It focuses on long-term stockholder value creation

 

•       It reflects our objective to achieve profitability with strong capital levels, capturing the importance of both performance and risk management

 

•       It measures the return generated on our stockholders’ investment

 

•       It is a profitability goal that can be accurately compared with the Financial Performance Peer Group

 

•       It has been approved by stockholders in the LTICP and so reflects our intent that the awards be tax-deductible under IRC Section 162(m)

 

 

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’ interests over the long-term and to mitigate compensation-related risk.

 

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

 

July 2015 RSR Awards. In July 2015 the named executives other than Mr. Stumpf were awarded the following RSRs:

 

Named Executive

  

Number of RSRs Granted

  

Vesting Criteria

John R. Shrewsberry

   17,422    Annual pro-rata vesting over four years, subject to cancellation in the HRC’s discretion upon the occurrence of performance-based vesting conditions.

Timothy J. Sloan

   26,133   

David M. Carroll

   17,422   

Avid Modjtabai

   17,422   

Carrie L. Tolstedt

   17,422   

 

The HRC granted these RSRs following a mid-year evaluation of the senior executives’ compensation and contributions to the Company’s strong performance as part of an overall, balanced mix of competitive pay and to provide an incentive for those executives to continue their strong and effective leadership, consistent with the Company’s compensation principles to pay for performance, to attract, retain, and motivate top executive talent, and to encourage the creation of long-term stockholder value.

 

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

 

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ownership requirements described above and to cancellation in the HRC’s discretion upon the occurrence of the performance-based vesting conditions described in the chart on pages 47-48.

 

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 long-term performance of our Company. The main features of the four Performance Share awards that our named executives had outstanding in 2015 and the amounts earned for a performance period ending in 2015 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 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

  

•     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 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

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

  150%2 of the target Performance Shares were earned based on the HRC’s certification in March 2016 of the Company’s average RORCE performance of 13.6% which resulted in a ranking equal to or greater than the 75th percentile compared with peers; in addition, the HRC determined that no downward adjustment was applicable pursuant to the NOL provision or performance-based vesting condition

Performance

Shares granted

February 2014

(2014-2016)

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

Performance

Shares granted

February 2015

(2015-2017)

        To be determined between 0% and 150% of target number by the HRC in first quarter 2018
(1)   Percentage vesting is interpolated on a straight-line basis based on actual level of performance within each quartile.
(2)   125% for performance shares granted to Mr. Shrewsberry in each of February 2012, 2013, and 2014, 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 2015 and, in January 2016, 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 2015 performance.

 

Certain of the named executives, together with team members whose covered compensation exceeds IRC limits for qualified plans, also participated in nonqualified 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

 

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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 Nonqualified Deferred Compensation table and related narratives.

 

Perquisites and Other Compensation

 

The HRC has intentionally limited perquisites to executive officers. For example, the Company does not provide executive officer benefits 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 2015, the Company paid for the cost of regular maintenance for the previously installed home security systems for certain of our executives. From time to time we may pay the cost for a named executive’s spouse to attend a Wells Fargo business-related event where spousal attendance is expected.

 

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 2015, 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.

 

In 2015, the Company paid an aggregate of approximately $5.6 million in base salary to its named executives in excess of the combined deduction limit for these executives. In addition, the Company incurred compensation expense in 2015 for RSR awards granted in July 2014 and July 2015 to our named executives other than our CEO that were not intended to qualify as “performance-based compensation” for purposes of Section 162(m). As a result, the Company forwent approximately $3.7 million in aggregate tax benefit related to the loss of deduction for named executives’ compensation in the form of base salary for 2015 and compensation expense recognized in 2015 for the July 2014 and July 2015 RSR grants, assuming a 35% corporate tax rate. Based on the Company’s 2015 income before taxes of approximately $33.6 billion, the amount of deduction lost represents approximately 0.01% of such income. The 2015 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 2015 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 2015 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 2015 was reasonable and appropriate.

 

56            Wells Fargo & Company 2016 Proxy Statement


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Executive Compensation Tables

 

 

2015 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(1)

  Year    Salary
($)
   Stock
Awards($)
(2)(3)(4)
   Non-Equity
Incentive
Compensation
($)(5)
   Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(6)(7)
   All Other
Compensation
($)(8)
   Total
($)
(a)   (b)    (c)    (e)    (f)    (g)    (h)    (i)

John G. Stumpf

Chairman & CEO

      2015           2,800,000           12,500,054           4,000,000                     18,550           19,318,604   
      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   

John R. Shrewsberry

Sr. Exec. VP & CFO

      2015           1,700,000           6,500,036           850,000           3,395           18,550           9,071,981   
      2014           991,188           4,800,036           1,600,000                     18,200           7,409,424   

Timothy J. Sloan

President & COO

      2015           2,000,000           8,000,084           1,000,000           20,054           18,550           11,038,688   
      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   

David M. Carroll

Sr. Exec. VP (Wealth and Investment Management)

      2015           1,700,000           6,500,036           850,000           25,620           18,550           9,094,206   
      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   

Avid Modjtabai

Sr. Exec. VP

(Consumer Lending)

      2015           1,700,000           6,500,036           850,000           9,254           18,550           9,077,840   
      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   

Carrie L. Tolstedt

Sr. Exec. VP

(Community Banking)

      2015           1,700,000           6,500,036           850,000           23,095           18,550           9,091,681   
      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   

 

(1)   The listed positions were held as of December 31, 2015. Prior to November 17, 2015, Mr. Stumpf was Chairman, President and CEO and Mr. Sloan was Senior Executive Vice President, Wholesale Banking. Mr. Sloan retained his responsibilities as head of Wholesale Banking following his appointment as President and COO.

 

(2)   For 2015, the stock awards included in column (e) consist of (i) Performance Shares, which will vest, if at all, in the first quarter of 2018, subject to the Company’s achievement of certain performance conditions for the three-year period ending December 31, 2017, and (ii) RSRs granted on July 28, 2015 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 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 2015 Grants of Plan-Based Awards table and in our CD&A.

 

(3)   Under the applicable FASB ASC Topic 718 rules, the “grant date” will not be determined for the 2015 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 2015 financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015, regarding assumptions underlying the valuation of these awards.

 

       Accordingly, the amounts included in column (e) are (i) for the Performance Shares, the fair value of the award on February 24, 2015, the service inception date, calculated by multiplying the target number of shares subject to the award by $55.37, the NYSE closing price per share on that date, and (ii) for the RSRs, the fair value of the award on July 28, 2015, the service inception date, calculated by multiplying the full number of shares subject to the award by $57.40, the NYSE closing price on July 28, 2015. 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).

 

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Name

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

Mr. Stumpf

   2/24/2015    225,755  Performance Shares    55.37      12,500,054   

Mr. Shrewsberry

   2/24/2015      99,332  Performance Shares    55.37      5,500,013   
   7/28/2015      17,422  RSRs    57.40      1,000,023   

Mr. Sloan

   2/24/2015    117,393  Performance Shares    55.37      6,500,050   
   7/28/2015      26,133  RSRs    57.40      1,500,034   

Mr. Carroll

   2/24/2015      99,332  Performance Shares    55.37      5,500,013   
   7/28/2015      17,422  RSRs    57.40      1,000,023   

Ms. Modjtabai

   2/24/2015      99,332  Performance Shares    55.37      5,500,013   
   7/28/2015      17,422  RSRs    57.40      1,000,023   

Ms. Tolstedt

   2/24/2015      99,332  Performance Shares    55.37      5,500,013   
     7/28/2015      17,422  RSRs    57.40      1,000,023   

 

(4)   The Performance Shares included in column (e) for 2015 and discussed above are subject to adjustment upward (to a maximum of 150% of the target award) 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, 2015, 2016 and 2017 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 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—338,632 Performance Shares, $18,750,054; Mr. Shrewsberry—148,998 Performance Shares, $8,250,019; Mr. Sloan—176,089 Performance Shares, $9,750,048; Mr. Carroll—148,998 Performance Shares, $8,250,019; Ms. Modjtabai—148,998 Performance Shares, $8,250,019; and Ms. Tolstedt—148,998 Performance Shares, $8,250,019. Additional information about the Performance Shares appears in our CD&A and in the Grants of Plan-Based Awards table, footnotes, and related narrative.

 

(5)   Amounts shown in column (f) for 2015 reflect the 2015 annual incentive awards paid or awarded in February 2016 to the named executives. As discussed in our CD&A, a portion of the 2015 award for Mr. Stumpf was paid in RSRs (17,326 shares). 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 $48.10, the NYSE closing price of Company common stock on February 23, 2016, the grant date. These RSRs will vest in three equal annual installments, beginning on March 15, 2017. Although the RSRs were granted in 2016, they reflect compensation for 2015 performance.

 

       Similarly, amounts shown for 2014 reflect the 2014 annual incentive awards paid or awarded in February 2015 to the named executives. 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 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.

 

(6)   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, 2014 to December 31, 2015 as follows: Mr. Stumpf—($880,505); Mr. Shrewsberry—$3,395; Mr. Sloan—$20,054; Mr. Carroll—$14,559; Ms. Modjtabai—$9,254; and Ms. Tolstedt—$23,095. Pursuant to SEC rules, the amount of the decrease in the actuarial present value of Mr. Stumpf’s pension benefit is not reflected in the sum shown for him in column (h). The change in the present value amount results from the actuarial method used for financial accounting purposes to calculate the current value of a future pension benefit payout and does not reflect the accrual of additional pension benefits beyond investment credits on cash balance accounts. For 2015, the decrease in the actuarial present value of the pension benefit for Mr. Stumpf is primarily attributable to use of a higher lump sum interest rate and a higher discount rate assumed for purposes of calculating the present value of his expected lump sum benefit at retirement. For 2015, the increase in the actuarial present value of the pension benefit for the other named executives is attributable to each executive being one year closer to his or her normal retirement age and, with the exception of Mr. Carroll, use of a higher interest crediting rate assumed for purposes of calculating the expected cash balance account at retirement. For Mr. Carroll, the effect of the use of higher discount and lump sum interest rate assumptions (which caused a decrease in the actuarial present value of his expected benefit), was more than offset by the increase in the calculation attributable to his being one year closer to his normal retirement age. Information about the pension benefits for our named executives, and applicable discussion of investment credits for cash balance accounts, appears under “2015 Pension Benefits” below. See footnote (7) below for additional information regarding the amount shown in column (g) 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 2015 financial statements, and also in the narrative following the Pension Benefits table under “2015 Pension Benefits—Description of Pension Plans—Valuation of Accumulated Benefits under the Combined Plans.

 

(7)  

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, and Sloan and Mses. Modjtabai and Tolstedt do not include any earnings on deferred compensation. The amount shown for Mr. Carroll includes above-

 

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  market interest of $11,061 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.

 

(8)   For each named executive, “All Other Compensation” for 2015 includes a Company matching contribution of $15,900, and a profit sharing contribution of $2,650 under the Company’s 401(k) Plan in connection with the discretionary profit sharing contribution approved in January 2016 for all eligible 401(k) Plan participants based on the Company’s 2015 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 2015 did not exceed $10,000; therefore, “All Other Compensation” for 2015 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.

 

2015 Grants of Plan-Based Awards

 

The following table shows additional information about 2015 annual incentive awards and Performance Share awards and RSRs granted to our named executive officers in 2015.

 

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
   Closing
Price of
Stock
on Date
of

Grant
   Grant Date
Fair Value
of Stock
and Option
Awards
          ($)    ($)    ($)    (#)    (#)    (#)    (#)    ($/Sh)    ($)(4)
(a)    (b)    (c)    (d)    (e)    (f)    (g)(2)    (h)(2)    (i)(3)    (j)    (k)

John G. Stumpf

       2/24/2015                   4,000,000                                                             
       2/24/2015                                      225,755          338,632                   55.37          12,500,054  

John R. Shrewsberry

       2/24/2015                   850,000          1,700,000                                                
       2/24/2015                                      99,332          148,998                   55.37          5,500,013  
       7/28/2015                                                17,422          57.40          1,000,023  

Timothy J. Sloan

       2/24/2015                   1,000,000          2,000,000                                                
       2/24/2015                                      117,393          176,089                 &n