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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Wells Fargo & Company
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Proxy Statement Wells Fargo & Company | 2019 annual meeting of shareholders
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Letter to our Shareholders from
our Chair and our Chief Executive Officer
March 13, 2019
Dear Fellow Shareholders,
Thank you for your continued support of Wells Fargo. In 2018, we further strengthened the foundation of our Company through new products and services, improvements in the customer experience, greater operational efficiency, and deepened commitments to our communities and our team members. We continued our work to assess and shape the Company’s culture, make progress in our efforts to address past issues, meet the expectations of our regulators, and rebuild trust with all of our stakeholders.
We are learning from the past and transforming for the future, which happens to be the title of our Business Standards Report published in January 2019. As discussed in that report, we have made – and continue to make – fundamental changes as we transform the Company. We have centralized many aspects of our organizational structure, strengthened risk management, and improved governance practices and oversight. While we have more work to do, we believe we are on the right path and are making real progress.
Our Company and Board of Directors look and operate very differently today. Over the past year, the Company has hired several new leaders, including our chief risk officer, head of human resources, head of technology, and chief auditor. In addition, our Board has added more directors with expertise in financial services, risk management, technology/cyber, regulatory, human capital management, finance, consumer, business process and operations, and social responsibility matters; adjusted committee structures, charters, and membership; enhanced agenda planning; and worked with management to better focus materials provided to the Board. While the Board and its committees have experienced much change, we remain focused on responding to stakeholders, enhancing oversight, and creating long-term value for shareholders.
We are confident that Wells Fargo is well-positioned for the future, with the right vision and strategy to achieve our goals. The changes we are making are showing positive signs. We will continue working to build the most customer-focused, efficient, and innovative Wells Fargo ever – characterized by a strong financial foundation, a leading presence in the markets we serve, focused growth within a strong risk management framework, operational excellence, and highly engaged team members.
On behalf of our Board and management team, we are pleased to invite you to attend our 2019 Annual Meeting of Shareholders on April 23, 2019, at 10:00 a.m., Central Daylight Time, at the Grand Hyatt DFW, 2337 South International Parkway, Dallas, Texas 75261. A notice of the meeting and our 2019 Proxy Statement containing important information about the matters to be voted upon and instructions on how you can vote your shares follow this letter.
Your vote is important to us. Please vote as soon as possible even if you plan to attend the annual meeting. Thank you for your interest in and support of Wells Fargo.
Sincerely,
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Elizabeth A. Duke Chair |
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Timothy J. Sloan |
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Notice of 2019 Annual |
Meeting Information
Date & Time Tuesday, April 23, 2019 10:00 a.m., CDT
Location Grand Hyatt DFW 2337 South International Pkwy
Record Date February 26, 2019
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How to Vote
Your vote is important! Please vote your shares in person or in one of the following ways:
| By Internet Visit the website listed in your notice of internet availability of proxy materials or your proxy or voting instruction form |
By Phone Call the toll-free voting number in your voting materials |
By Mail Mail your completed and signed proxy or voting instruction form |
By Mobile Device Scan the QR Barcode on your voting materials |
Items of Business
| 1 | Elect as directors the 12 nominees named in our proxy statement | |
| 2 | Vote on an advisory resolution to approve executive compensation | |
| 3 | Approve the Company’s Amended and Restated Long-Term Incentive Compensation Plan | |
| 4 | Ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2019 | |
| 5 | Vote on two shareholder proposals (Items 5 – 6), if properly presented at the meeting and not previously withdrawn | |
| 6 | Consider any other business properly brought before the meeting | |
| By Order of our Board of Directors, |
Anthony R. Augliera Deputy General Counsel and Corporate Secretary |
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on April 23, 2019: Wells Fargo’s 2019 Proxy Statement and Annual Report to Shareholders for the year ended December 31, 2018 are available at: www.proxypush.com/wfc (for record holders) or www.proxyvote.com (for street name holders and Company Plans participants).
This notice and the accompanying proxy statement, 2018 annual report, and proxy card or voting instruction form were first made available to shareholders beginning on March 13, 2019. You may vote if you owned shares of our common stock at the close of business on February 26, 2019, the record date for notice of and voting at our annual meeting.
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Proxy Summary
This summary highlights certain information contained in this proxy statement. You should read the entire proxy statement carefully before voting.
Our work is guided by our Vision, Values & Goals, which capture the fundamental beliefs of our Company. Our vision is foundational and is clearly focused on acting in the best interests of our customers to help them succeed financially. Our values express how we go about delivering on our vision, and our goals describe our aspirations and align priorities across our Company. We bring our vision and values to life through six goals established by our CEO, Timothy J. Sloan, in 2017. We aspire to be the financial services leader in each of those six areas, which are reflected below.
Our Consumer Strategy and How it Aligns with Our Culture
Our long-standing commitment to understand our customers’ financial needs and to help them achieve their financial goals has been foundational to our business since 1852.
Our Consumer Strategy
We have a single strategy for how we want to meet the needs of our customers, collaborating across businesses to provide offerings that allow customers to engage with us how, when, and where they choose. We designed our strategy based on customer research, analyzing current businesses in the context of shifting industry dynamics and reviewing competitive trends. Our strategy is guided by what our customers tell us they want: simplicity, ease, and speed; transparency, security, and control; relevant advice and guidance; convenience and access, wherever and however they choose; and differentiated value that recognizes their unique needs.
Based on customer input and our research, we are pursuing a three-pronged approach to our consumer strategy. The first is to elevate the baseline experience for all our customers to meet their rapidly evolving expectations. Second, and building on that work, we are enhancing our focus on defined consumer segments to ensure we meet the unique needs that matter most today and over time. Third, we are improving core enterprise capabilities to create the necessary operational infrastructure, enabling us to deliver on the other two elements of our consumer strategy.
Our Culture
Creating an intentional, healthy, and consistent culture, aligned to our values as a company, is central to our long-term success and viability. In alignment with our consumer strategy, we are transitioning to a more customer-centric, One Wells Fargo culture that is guided by our Vision, Values & Goals, that is clear and consistent, that drives accountability, and which leaders and team members can articulate and live every day. We continue to assess and shape our culture, including by aligning what we say with how we act, promoting accountability at all levels of the organization, and continuing to measure our progress (see Human Capital Management section starting on page 62).
| 2019 Proxy Statement | i |
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Deepening Commitments to our Team Members and Communities and Improving our Customer Experience
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Our Team Members
Our team members are our most valuable resource and we continue to listen to and invest in them and their well-being in many ways.
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• We have a continuous listening program through which we monitor team member engagement and experience and which includes collecting feedback from team members through pulse surveys, focus groups, company-wide assessments and surveys, and confidential exit surveys and interviews.
• Team members are the source of some of our best ideas, including ways that we can improve our team member and customer experiences.
• Diversity and inclusion is one of our five primary values and is essential to our success. Consistent with our core values, we promote diversity and inclusion in every aspect of our business. We are committed to increasing team member diversity and inclusion through inclusive policies and programs that attract, develop, engage, and retain the best talent, including by paying our team members fairly and competitively.
• We raised the minimum hourly wage to $15 per hour for 36,000 U.S.-based team members in March 2018. For team members already at or close to the minimum hourly wage, the Company reviewed their pay relative to the new $15 minimum. This additional review resulted in approximately 50,000 pay adjustments in April 2018.
• We granted restricted share rights to approximately 250,000 eligible team members in first quarter 2018. All eligible full-time team members in the U.S., and eligible team members outside the U.S., received the equivalent of 50 shares of Wells Fargo stock. All eligible part-time team members in the U.S. received the equivalent of 30 shares of Wells Fargo stock.
• We increased the number of paid holidays for U.S.-based team members from 8 to 12, including adding personal holidays that can be used for religious, family, cultural, patriotic, community, or diversity observances.
• Wells Fargo has long been committed to market competitive compensation, career-development opportunities, a broad array of benefits, and strong work-life programs. Each year Wells Fargo invests approximately $13,000 per team member in our benefits programs.
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Our Customers
We are making changes to better serve our customers, as we continue to put them at the center of everything we do.
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Our Communities
We want to help people and communities succeed financially in all of the places where we live and do business.
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• Our team members are committed to serving our customers.
• We serve one in three U.S. households.
• We offer a broad range of products to meet our customers needs and are among the largest lenders in the U.S.
• We have industry-leading distribution, both physical and digital, in order to allow our customers to interact with us in the ways that are most convenient to them.
• We continue to innovate for our customers and clients, resulting in expansion of our services to meet customer needs.
• We are focused on operational excellence throughout our businesses to reduce the number of processes we have and make them more efficient and are investing in technology tools and capabilities. These efforts should allow us to improve our customer experience and do a better job serving our customers’ existing and emerging needs.
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• Our team members are committed to making the communities where they live and work stronger, including through their own philanthropy and volunteerism.
• Wells Fargo has taken a comprehensive approach to increasing access to economic opportunities in disadvantaged neighborhoods, combining philanthropy with our market-leading lending business.
• We have reduced our Company’s environmental footprint and are helping to accelerate the transition to a low-carbon economy through our commitment to finance sustainable businesses and projects, including those focused on clean technology and renewable energy.
• We have concentrated our philanthropy on addressing five community issues: affordable housing, small business growth, equity and economic inclusion, education and minimizing impacts of climate change.
• We surpassed our $400 million philanthropy target for 2018, donating $444 million to nearly 11,000 nonprofits helping communities and people in need.
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| ii | Wells Fargo & Company |
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Year Round Investor Engagement Through Board-Led Program
Since 2010, we have had an investor engagement program with independent director participation to help us better understand the views of our investors on key corporate governance topics. In addition to engagement with our largest institutional investors, we have enhanced our engagement efforts with additional investors and stakeholders to hear their perspectives and help identify focus and priorities for the coming year. The constructive and candid feedback we receive from our investors and other stakeholders during these meetings continues to be important and helps us inform our priorities, assess our progress, and enhance our corporate governance practices and disclosures each year.
More than 35% outstanding shares represented Held in-person meetings and calls with institutional investors representing a significant number of shares outstanding Over 50 engagement calls and meetings Continued to hold substantial number of engagement meetings throughout the year to discuss governance and other topics Over 25 engagement meetings with Board Chair Held a significant number of engagement meetings and calls with independent chair participation Board-led engagement program conducted year round
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Shareholder Engagement Topics – Feedback Shared with the Full Board and Other Board Committees | ||||
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• Board skills and experience and Board matrix
• Board composition and diversity
• Board size and tenure
• Board oversight of risk, including committee responsibilities
• Board-level engagement and oversight of management
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• Recent changes in the Company’s senior leadership
• Company performance and progress
• Regulatory relationships and status of satisfying consent order requirements
• Status of Company reviews of its businesses |
• Culture and team member engagement
• Executive compensation and compensation metrics
• Shareholder proposals
• Environmental, Social, and Governance practices and reporting
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Governance Practices Year Enhanced Transparency and Disclosures Enhanced Board qualifications and experience, by electing an additional director in Jan. 2019 Continued to implement formal and thoughtful Board and committee succession plans, including for the Chair of the Risk Committee Continued implementation of risk management framework, including enhanced reporting, management-level governance committee structure, and escalation processes in support of the Board's risk oversight Published our Business Standards Report, titled "Learning from the past, transforming for the future," which addresses actions our Company has taken - and continues to take - to improve our culture, make things right for customers who were harmed, reconstitute our organizational structure, and strengthen risk management and controls Enhanced Board experience matrix to include diversity information as self-identified by Board members Increased disclosure about our performance management program and compensation practices, including efforts and metrics to promote diversity and inclusion in our workforce Enhanced existing shareholder right to call a special meeting by reducing required ownership threshold from 25% to 20% of outstanding shares Continued Board refreshment process begun in 2017; six of seven standing Board committee chair roles rotated since 2017 Enhanced Corporate Governance Guidelines to more fully articulate the role of the Board and work it is doing to enhance governance and oversight practices Disclosed our Company's gender and racial/ethnic pay gaps in the U.S. Introduced Board qualifications and experience matrix disclosures in 2018 proxy statement, including definitions of qualifications and experience identified by the Board as important in light of our Company's strategy, risk profile, and risk appetite Significantly enhanced culture and human capital management disclosures in 2018 proxy statement Continued to enhanced disclosure about incentive compensation risk management program, including incentive plans, risk takers, and financial and other risk covered
* See page 18 for extended timeline
| 2019 Proxy Statement | iii |
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Results of Recent Board Refreshment and Current Board Composition
Over the past two years, the Board has focused on enhancing its composition, oversight, and governance practices. Changes the Board has made have been informed by its own comprehensive self-evaluation of Board performance and effectiveness and feedback provided by investors since our 2017 annual meeting. The Board’s succession planning process has enabled the Board to maintain Board composition and structure that is appropriate in light of the Company’s strategy, risk profile, and risk appetite. These processes also enable the Board to adapt its composition in response to the changing needs of the Board and our Company over time.
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Board Diversity Highlights |
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While our Board does not have a specific policy on diversity, our Corporate Governance Guidelines and the Governance and Nominating Committee’s charter specify that the Board and Governance and Nominating Committee incorporates a broad view of diversity into its director nomination process. In addition, the Board has a diverse candidate pool for each director search the Board undertakes. The current composition of our Board reflects those efforts and the importance our Board places on diversity on the Board.
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| iv | Wells Fargo & Company |
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Our Director Nominees
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Our Board recommends that you vote FOR each of these director nominees for a one-year term
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| John D. Baker II Independent |
Celeste A. Clark Independent |
Theodore F. Craver, Jr. Independent |
Elizabeth A. (“Betsy”) Duke Independent Chair | |||||||||||
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Executive Chairman and CEO, FRP Holdings, Inc.
Age: 70 Director Since: 2009 Committees: AEC, CC* Other Public Boards: 1 |
Principal, Abraham Clark Consulting, LLC; retired Sr. VP, Global Public Policy and External Relations, and Chief Sustainability Officer, Kellogg Company
Age: 65 Director Since: 2018 Committees: CRC*, CC, GNC Other Public Boards: 1
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Retired Chairman, President, and CEO, Edison International
Age: 67 Director Since: 2018 Committees: AEC, FC* Other Public Boards: 1 |
Former member of the Federal Reserve Board of Governors
Age: 66 Director Since: 2015 Committees: CC, FC, GNC, RC Other Public Boards: 0 | |||||||||||
| Wayne M. Hewett Independent |
Donald M. James Independent |
Maria R. Morris Independent |
Juan A. Pujadas Independent | |||||||||||
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Senior Advisor, Permira; Chairman, DiversiTech Corporation
Age: 54 Director Since: 2019 Committees: CRC, HRC, RC Other Public Boards: 1 |
Retired Chairman and CEO, Vulcan Materials Company
Age: 70 Director Since: 2009 Committees: FC, GNC*, HRC Other Public Boards: 1 |
Retired Executive Vice President and head of Global Employee Benefits business, MetLife, Inc.
Age: 56 Director Since: 2018 Committees: HRC, RC* Other Public Boards: 1 |
Retired Principal, PricewaterhouseCoopers LLP, and former Vice Chairman, Global Advisory Services, PwC Intl.
Age: 57 Director Since: 2017 Committees: CC, FC, RC Other Public Boards: 0 | |||||||||||
| James H. Quigley Independent |
Ronald L. Sargent Independent |
Timothy J. Sloan CEO & President |
Suzanne M. Vautrinot Independent | |||||||||||
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CEO Emeritus and a retired Partner of Deloitte
Age: 67 Director Since: 2013 Committees: AEC*, RC Other Public Boards: 2 |
Retired Chairman and CEO, Staples, Inc.
Age: 63 Director Since: 2017 Committees: AEC, CRC, GNC, HRC* Other Public Boards: 2 |
CEO and President, Wells Fargo & Company
Age: 58 Director Since: 2016 Committees: None Other Public Boards: 0 |
President, Kilovolt Consulting Inc.; Major General (retired), U.S. Air Force
Age: 59 Director Since: 2015 Committees: CRC, CC, RC Other Public Boards: 2 | |||||||||||
| AEC | Audit and Examination Committee | FC | Finance Committee | HRC | Human Resources Committee | |||||
| CRC | Corporate Responsibility Committee | GNC | Governance and Nominating Committee | RC
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Risk Committee
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| CC | Credit Committee | |||||||||
| * | Committee Chair | |||||||||
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Highlights of Qualifications and Experience of our Director Nominees |
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92% are independent |
63 years average age of independent director nominees |
6 of 11 current independent directors since 2017
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42% of director nominees financial services experience |
67% of director nominees risk management experience |
33% of director nominees human capital management experience
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67% have CEO experience |
| 2019 Proxy Statement | v |
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Guided by Our Four Compensation Principles and Enhanced Performance Objective Framework
Compensation Principles
The Board’s Human Resources Committee, in making compensation decisions for our executive officers named in the Summary Compensation Table (named executives), applies its discretion within a governance framework that is based on the following four compensation principles and includes consideration of risk management, absolute and relative Company performance, business line performance for business line leaders, individual performance, and independent advice.
| • | Pay for Performance |
| • | Attract and Retain Top Executive Talent |
| • | Foster Risk Management Culture |
| • | Encourage Creation of Long-Term Shareholder Value |
Enhanced 2018 Annual Incentive Performance Objective Framework
We are committed to designing and implementing incentive compensation arrangements that align with and reinforce our Vision, Values & Goals. For 2018, the Human Resources Committee introduced an enhanced performance objective framework for annual incentives for senior leaders that focuses on pre-established financial, strategic, and risk management objectives. The new framework, which is reflected in the chart below, covers expectations for both “what” is achieved and “how” it is achieved, and includes an evaluation of performance consistent with the Company’s leadership and risk accountability expectations.
Company Performance The Human Resources Committee considers Company performance in its determination of annual incentive awards What is Achieved? How is it Achieved? Focuses on financial, strategic, and risk management objectives Focuses on how the executive performed his or her role and acts as an overlay that can increase, reduce, or eliminate the final award Performance is based on an evaluation of Company results taking into account quantity (financial outcomes), quality (consistency with strategic plan, risk appetite), degree of difficulty (accounting for environmental factors), and execution of key initiativesEffective Management and Business Performance Effective Management is based on strategic deliverables, initiatives, and expenses the business or functional area Business Performance is determined based on an evaluation of business line results (if applicable) taking into account quantity (consistency with strategic plan, risk appetite) and degree of difficulty (accounting for environmental factors) Risk Management Risk management is evaluated on effectiveness across all risk types, including compliance, operational, financial, strategic, and reputation Leadership Based on upholding the Vision, Values & Goals of Wells Fargo through the behaviors set forth in our comprehensive Leadership Success Criteria Risk Accountability Leaders are accountable for fostering a sound risk environment and setting the tone at the top
This enhanced annual performance objective framework, along with other features of our executive compensation structure, enables the Human Resources Committee to assess performance against set objectives, to reward senior leaders when expectations are met or exceeded, and to hold them accountable for both what they achieve and how they achieve it.
| vi | Wells Fargo & Company |
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Executive Compensation Decision Highlights
Continuing to Strengthen Performance Share Award Design
The Human Resources Committee has continued to make performance, risk management, and governance enhancements to the Performance Share award design for executives since we first introduced this award type in 2009. The following chart reflects the key forfeiture and adjustment provisions applicable to Performance Share awards granted in each of 2019, 2018, and 2017. For more information on these provisions and awards, see 2018 Long-Term Incentive Compensation, 2019 Long-Term Incentive Compensation, and Executive Accountability Actions Taken in Recent Years.
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2019 Performance Share Awards
Absolute and Relative Return on Realized Common Equity (RORCE)
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2018 Performance Share Awards
Absolute and Relative RORCE Performance
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1. New regulatory performance condition incorporated in Performance Share awards granted in 2019 that gives the HRC discretion to forfeit all or a portion of an unpaid award based on the executive’s role and responsibility for the Company’s progress in resolving outstanding regulatory matters
2. Total Shareholder Return (TSR) governor added to Performance Shares awarded to our executives beginning in 2018 that reduces the maximum payout from 150% to 125% if our TSR for the performance period is not in the top quartile of our Financial Performance Peer Group
3. Forfeiture conditions giving the HRC discretion to forfeit all or a portion of unpaid awards upon the occurrence of specified conditions, including behavior that may have caused material reputation harm to the Company
4. Net Operating Loss (NOL) adjustor that reduces the target number of Performance Shares awarded by one-third for any year in the three-year performance period that our Company incurs a NOL |
1. TSR governor
2. Forfeiture conditions
3. NOL adjustor | |||||
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2017 Performance Share Awards
Absolute and Relative RORCE Performance Criteria for Vesting
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1. Forfeiture conditions | ||||||
| 2. NOL adjustor
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CEO Compensation Decision Highlights
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The Board’s and the Human Resources Committee’s compensation decisions for our CEO reflect the following:
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Continued Enhancement of Performance Share Award Design |
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76% of CEO’s 2018 Compensation in Long-Term, Performance-Based Equity Award |
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No Salary Increase |
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No Annual Incentive Was Awarded for 2017 or 2016
Annual Incentive Award Granted for 2018
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• New regulatory performance condition added in 2019
• TSR modifier added in 2018
• Vesting of awards continue to be tied to absolute and relative RORCE performance, which focuses on the creation of long-term shareholder value |
• CEO compensation continues to be substantially in the form of long-term, performance-based equity that vests over 3 years
• Awards are contingent on longer-term financial performance and risk assessments, and have substantial holding requirements
• Performance Share Award for Mr. Sloan was $1 million less in 2018 compared with 2017 |
• CEO has not received a salary increase since March 2016
• Mr. Sloan’s last salary increase occurred prior to his becoming CEO in October 2016 |
• The HRC and the Board awarded Mr. Sloan a 2018 annual incentive award of $2 million based on the Company’s financial performance, Mr. Sloan’s continued leadership on the Company’s top priority of rebuilding trust, and his performance against his 2018 individual qualitative performance objectives
• He did not receive an annual incentive award for 2017 or 2016 |
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See pages 81-82; 95-96 |
See pages 93-94 |
See page 88 |
See pages 88-92 |
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| 2019 Proxy Statement | vii |
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2018 Executive Compensation Decisions
The Human Resources Committee maintained the same overarching framework for our named executives’ 2018 compensation that it used in 2017. The following table summarizes the Human Resources Committee’s compensation decisions for our named executives. It is not a substitute for, and should be read together with, the Summary Compensation Table, which presents compensation paid, accrued, or awarded for 2018 in accordance with Securities and Exchange Commission (SEC) disclosure rules and includes additional compensation elements and other important information.
| Named Executive and Position |
Base Salary ($) | Annual Incentive Award ($) |
Long-Term Performance Share Award ($) |
Total ($) | ||||||||||||
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Timothy J. Sloan Chief Executive Officer and President |
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2,400,000 |
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2,000,000 |
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14,000,000 |
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18,400,000 |
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John R. Shrewsberry Senior Executive Vice President and Chief Financial Officer |
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2,000,000 |
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1,250,000 |
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9,250,000 |
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12,500,000 |
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Mary T. Mack Senior Executive Vice President, Consumer Banking |
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1,413,793 |
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1,650,000 |
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5,500,000 |
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8,563,793 |
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Avid Modjtabai Senior Executive Vice President, Payments, Virtual Solutions, and Innovation |
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1,750,000 |
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1,350,000 |
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7,250,000 |
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10,350,000 |
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Perry G. Pelos Senior Executive Vice President, Wholesale Banking |
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1,456,896 |
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1,000,000 |
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6,500,000 |
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8,956,896 |
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2018 Pay Mix
The charts below summarize the percentage of each element of pay above, based on the actual annual incentive awards earned and the value of the long-term performance shares (at target) at the time of grant for our CEO and for our other named executives as a group.
CEO PAY MIX OTHER NAMED EXECUTIVE PAY MIX 86% 85% At Risk At Risk
| viii | Wells Fargo & Company |
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Long-Term Incentive Compensation Plan Highlights
| Our Board recommends that you vote FOR the approval of the Amended and Restated Long-Term Incentive Compensation Plan
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Purpose of our LTICP
The Company’s equity plan, our Long-Term Incentive Compensation Plan (LTICP), is an important way to attract, retain, and motivate key team members to produce growth in shareholder value and provide incentive compensation. The LTICP also allows us to deliver compensation aligned with our compensation principles focused on fostering a risk management culture and encouraging the creation of long-term shareholder value.
In addition, in 2018 the Human Resources Committee used approximately 23,703,940 shares of the LTICP share reserve (taking into account that restricted share rights count as two shares against the LTICP share reserve) to grant restricted share rights to approximately 250,000 eligible team members in first quarter 2018. All eligible full-time team members in the U.S., and eligible team members outside the U.S., received the equivalent of 50 shares of Wells Fargo stock. All eligible part-time team members in the U.S. received the equivalent of 30 shares of Wells Fargo stock. This grant was given to team members for the important role they play in the Company’s efforts to rebuild trust and to show team members that we value their contributions to our long-term success.
Amendments to LTICP
On February 26, 2019, the Board approved an amendment and restatement (Plan Amendment) of our LTICP. The primary purposes of the Plan Amendment are as follows:
| Share Increase 200 million shares
Estimated to allow for the grant of equity awards over the next four to five years |
Plan Extension 10 years subject to share limitations |
Other Best Practice Changes Accumulated dividends and dividend equivalents will not be paid on unvested awards
At least 95% of awards must have at least a one year vesting period | ||||||
The Plan Amendment will not take effect unless shareholders approve it at our 2019 annual meeting. We are asking shareholders to approve the LTICP in the form included at the end of this proxy statement as Appendix A.
Potential Dilution
Based on shares of our common stock outstanding as of December 31, 2018, if all shares subject to outstanding awards and all shares available for future awards as of December 31, 2018 are ultimately issued, the shareholder dilution would be approximately 3.3%. If all of the additional 200 million shares authorized by the Plan Amendment are also ultimately issued, the shareholder dilution would be approximately 7.7%. Both dilution percentages assume that shares subject to awards will be issued on a one-for-one basis even though since March 1, 2009 each share issued under awards other than options or stock appreciation rights (SARs) counts as two shares against the LTICP share reserve.
Recommendation for Approval
The Board believes the additional 200 million shares for which we are requesting approval will provide a reasonable pool of equity awards that will allow us to continue using equity awards as a fundamental part of our compensation framework in alignment with our compensation principles.
For additional information, see Item 3 — Approve the Company’s Amended and Restated Long-Term Incentive Compensation Plan beginning on page 116.
| 2019 Proxy Statement | ix |
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Compensation Best Practices
The Board’s Human Resources Committee (HRC) has adopted and continues to enhance numerous best practices that are consistent with our Vision, Values & Goals, reinforce our pay-for-performance compensation philosophy, and are aligned with the long-term interests of our shareholders.
| Strong and Independent Board Oversight |
Independent Board oversight through the HRC of the Company’s culture, human capital management, ethics and conflicts of interest program, performance management and compensation programs, and annual pay equity reviews
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| Strong Tie to Performance | Pay-for-performance compensation philosophy and approach consistent with compensation philosophy approved by the HRC
Annual consideration of financial performance and labor market peer group information, including financial performance and compensation practices
Overall executive compensation design and structure is weighted heavily toward long-term, performance-based equity that vests over three years, and is contingent on longer-term financial performance and risk assessments
Use of multiple financial metrics (RORCE performance metric and Relative TSR modifier) tied to our long-term strategy in our long-term performance share awards to strengthen alignment with long-term performance and shareholder interests
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| Focus on Risk Management and Risk Outcomes |
How an executive officer leads and manages risk can reduce or eliminate incentive compensation for outcomes that are inconsistent with the HRC’s expectations or increase awards for exceptional risk management
The design and risk management features of our incentive compensation programs provide for the use of discretion, including HRC discretion in the case of the Company’s executive compensation program, to account for risk outcomes
The HRC and the Board have exercised their discretion, as they determined appropriate, to adjust compensation based on risk management outcomes
| |
| Substantial Stock Ownership and Retention Policies |
Substantial holding requirements (both stock ownership and retention policies) for our non-employee directors and executive officers to further support long-term focus, strong risk management, and accountability
Stock retention requirements extend beyond retirement
| |
| Multiple Forfeiture and Clawback Policies and Provisions |
Multiple executive compensation clawback and recoupment policies, including provisions that allow for forfeiture of compensation without a financial restatement, including the reduction or forfeiture of equity awards if the Company or the executive’s business group suffers a material failure of risk management
| |
| Dividend Policy | No cash dividends on unearned restricted share rights or performance share awards
| |
| No Repricing | No repricing of stock options without shareholder approval
| |
| No Pledging | No pledging of Company securities by directors or executive officers under the Board’s Corporate Governance Guidelines
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| No Hedging | No hedging of Company securities by directors, executive officers, or other employees under our Code of Ethics and Business Conduct
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| No Employment Contracts | No executive employment, severance, or change in control agreements
| |
| No Gross Ups | No tax gross-ups for named executives
| |
| No Additional Service Credit in Pension Plans |
No additional retirement benefits or additional years of credited service other than investment or interest credits provided under applicable pension plans since July 1, 2009
| |
| Limited Perquisites | Limited perquisites for executive officers
| |
| Leading Independent Compensation Consultant Advice |
The HRC has engaged a leading independent compensation consultant to advise it in determining executive compensation and evaluating program design and structure
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| x | Wells Fargo & Company |
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You should read the entire proxy statement carefully before voting. We also encourage you to read the 2018 annual report accompanying this proxy statement, including the letters from our independent Chair and our CEO contained in that report.
Voting Matters
| Items for Vote |
Board Recommendation | |||
| Management Proposals | ||||
| 1 | Elect 12 directors | For all nominees | ||
| 2 | Advisory resolution to approve executive compensation (Say on Pay) | For | ||
| 3 | Approve the Company’s Amended and Restated Long-Term Incentive Compensation Plan | For | ||
| 4 | Ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2019 | For | ||
| Shareholder Proposals | ||||
| 5-6 | Vote on two shareholder proposals, if properly presented at the meeting and not previously withdrawn |
Against | ||
| 2019 Proxy Statement | 1 |
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for the Future
In 2018, we further strengthened the foundation of our Company through new products and services, improvements in the customer experience, greater operational efficiency, and deepened commitments to our communities and our team members. We continued our work to assess and shape the Company’s culture, make progress in our efforts to address past issues, meet the expectations of our regulators, and rebuild trust with stakeholders. While we have more work to do, we have learned from our mistakes and are making fundamental changes as we transform Wells Fargo for the future.
Our work is guided by our Vision, Values & Goals, which capture the fundamental beliefs of our Company. Our vision is foundational and is clearly focused on acting in the best interests of our customers to help them succeed financially. Our values express how we go about delivering on our vision, and our goals describe our aspirations and align priorities across our Company. We bring our Vision and Values to life through six goals our CEO, Timothy J. Sloan, established in 2017. We aspire to be the financial services leader in each of those six areas, which are reflected below.
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Our Vision
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We want to satisfy our customers’ financial needs and help them succeed financially.
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Our Values |
• What’s right for customers. We place customers at the center of everything we do. We want to exceed customer expectations and build relationships that last a lifetime.
• People as a competitive advantage. We strive to attract, develop, motivate, and retain the best team members – and collaborate across businesses and functions to serve customers.
• Ethics. We’re committed to the highest standards of integrity, transparency, and principled performance. We do the right thing, in the right way, and hold ourselves accountable.
• Diversity and inclusion. We value and promote diversity and inclusion in all aspects of business and at all levels. Success comes from inviting and incorporating diverse perspectives.
• Leadership. We’re all called to be leaders. We want everyone to lead themselves, lead the team, and lead the business – in service to customers, communities, team members, and shareholders.
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Our Goals |
We want to become the financial services leader in these areas:
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Customer service and advice
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Team member engagement
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Innovation
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Risk management
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Corporate citizenship
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Shareholder value
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As discussed under Human Capital Management – Our Culture, we have introduced a clear set of behavioral expectations for our team members that are aligned with our Vision, Values & Goals, and we measure performance against the expectations through a new common leadership objective that all team members have as part of their 2018 performance plans.
| 2 | Wells Fargo & Company |
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Transforming Wells Fargo for the Future
Our Business Groups
Wells Fargo & Company is a diversified, community-based financial services company with $1.9 trillion in assets. Founded in 1852 and headquartered in San Francisco, we provide banking, investment and mortgage products and services, as well as consumer and commercial finance, through 7,800 locations, more than 13,000 ATMs, digital (online, mobile, and social), and contact centers (phone, email, and correspondence), and we have offices in 37 countries and territories to support customers who conduct business in the global economy. With approximately 260,000 active, full-time equivalent team members, we serve one in three households in the United States.
Wells Fargo operates the following four primary business groups:
| Consumer Banking
|
Payments, Virtual
Solutions,
|
Wealth and Investment
|
Wholesale Banking
| |||
| • Community Banking
• Home Lending
• Wells Fargo Auto
• Personal Lending and Small Business |
• Payments businesses
• Virtual Channels
• Operations
• Innovation
• Merchant Services
• Deposit Products |
• Wells Fargo Advisors
• Institutional Retirement and Trust
• Wells Fargo Asset Management
• Wells Fargo Private Bank
• Abbot Downing
• Wells Fargo Investment Institute
|
• Wells Fargo Commercial Banking
• Commercial Capital
• Commercial Real Estate
• Corporate and Investment Banking
• Investment Portfolio
|
Our Strategy
Two major components of our transformation are learning from our challenges and becoming more customer-focused than ever before. These are core to our enterprise strategy which includes delivering excellent customer experiences through collaborating across business lines, becoming more customer-centric, simplifying our businesses and offerings, improving operational excellence, and strengthening our risk oversight and controls.
Our long-standing commitment to understand our customers’ financial needs and to help them achieve their financial goals has been foundational to our business since 1852.
Our Consumer Strategy
A key learning from our recent challenges is that – although Wells Fargo has a long history of helping customers – our focus in the past too often was product- and channel-centered. In the past two years, we have evolved toward an unified consumer strategy, which looks at how we serve consumers across all of our retail business lines and products in a way that recognizes their distinct needs. As a result, we now have a single strategy for how we want to meet the needs of our customers, collaborating across businesses to provide offerings that allow customers to engage with us how, when, and where they choose. We designed our strategy based on customer research, analyzing current businesses in the context of shifting industry dynamics and reviewing competitive trends.
Our strategy is guided by what our customers tell us they want:
| • | Simplicity, ease, and speed |
| • | Transparency, security, and control |
| • | Relevant advice and guidance |
| • | Convenience and access, wherever and however they choose |
| • | Differentiated value that recognizes their unique needs |
Based on customer input and our research, we are pursuing a three-pronged approach to our consumer strategy. The first is to elevate the baseline experience for all our customers to meet their rapidly evolving expectations. Second, and building on that work, we are enhancing our focus on defined consumer segments to ensure we meet the unique needs that matter most today and over time. Third, we are improving core enterprise capabilities to create the necessary operational infrastructure, enabling us to deliver on the other two elements of our consumer strategy.
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Transforming Wells Fargo for the Future
We are focusing on five key areas:
| • | Providing relevant and personalized financial advice, delivering guidance through an integrated experience supported with the right products and services |
| • | Personalizing the transaction and borrowing experience, empowering customers with options that are in line with their priorities and transactional needs |
| • | Offering simple and intuitive digital and cross-channel experiences that are consistent and centered on customer needs |
| • | Delivering timely issue resolution and improving our ability to prevent issues that are harmful to customers |
| • | Providing optimized offerings with transparent pricing, ensuring product offerings are simple and customer-centric with easy-to-understand terms |
All of our customer segments are important – but because they have different needs, we have distinct strategies for each one: Mass market, Student, Emerging affluent, Affluent, High net worth, and Small business. By understanding our customers across product lines and engaging them throughout their journey, we can anticipate their needs and proactively help them with financial decisions as they progress.
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Transforming Wells Fargo for the Future
How We Are Measuring Our Progress
In March 2017, our CEO and President Timothy J. Sloan announced six new goals for our Company. While our vision and values should guide every action we take and every decision we make, our goals are designed to clearly state our aspirations for the future, and to make sure that we are all focusing on activities that will build a better, stronger Wells Fargo. As we work to meet these goals, our vision and values come to life in the way we conduct business and the way we prioritize our day-to-day activities. These are important because they help keep the focus on what matters most.
We look at a variety of internal metrics, many of which are publicly disclosed, to measure our progress. Below are some examples. We also track a number of third-party rankings that you can find on our Wells Fargo Today quarterly fact sheet available at: www.wellsfargo.com on our “Who We Are” page under “About Wells Fargo.”
We want to become the financial services leader in the six areas below and the following chart summarizes our progress on these Goals:
|
Customer Service and Advice | |||
| • Continued to improve the customer experience within Consumer Banking with speed, convenience, and new digital offerings in retail banking: customer experience scores for “Customer Loyalty” and “Overall Satisfaction with Most Recent Visit” reached a 24-month high in December 2018.
• Sent an average of more than 37 million monthly zero-balance and customer-specific balance alerts to our customers.
• Helped more than 2.3 million customers avoid overdraft charges with our Overdraft Rewind® service.
• Created or updated financial plans for 70% of our affluent and high-net-worth customers to help those customers feel they have the guidance necessary to succeed financially.
• Introduced “predictive banking,” an in-app feature that provides consumer and small business deposit and credit card customers personalized insights into their spending and opportunities to save.
• Made changes to become better connected with our customers: between May and December 2018, our bankers reached out to 3.3 million customers to thank them for their business, respond to their questions, and make appointments for in-person consultations. | ||||
|
Team Member Engagement | |||
| • In 2018, voluntary team member attrition improved to its lowest level in six years.
• Introduced new behavioral expectations for all team members to deliver a disciplined and objective approach to defining, monitoring, and sustaining our culture.
• Increased the minimum base pay in the U.S. to $15 an hour, which benefitted approximately 36,000 team members, and reviewed pay for team members whose salaries were at or slightly above the new minimum wage that resulted in pay increases for approximately 50,000 team members.
• Granted broad-based restricted share rights awards to eligible team members; for full-time team members, equivalent to 50 shares of Wells Fargo stock that vests in two years (for part-time team members, 30 shares).
• Each year Wells Fargo invests approximately $13,000 per team member in our benefits programs.
• Invest $300 million annually in team member learning and development, which includes functional training, leadership and professional development, early talent programs, and tuition reimbursement.
• Introduced a new Manager Excellence learning program to provide new managers a consistent foundation and understanding of what is expected and the tools and resources available to them.
• Diversity and inclusion efforts recognized externally by the Bloomberg Gender Equality Index, DiversityInc, the Human Rights Campaign, and the National Organization for Disability. | ||||
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Transforming Wells Fargo for the Future
|
Innovation | |||
| • Creating digital account opening experiences for many products, including our online mortgage application, which increased in usage throughout 2018. Online mortgage applications represented 30% of our total retail applications in December 2018.
• Enhancing our payments capabilities so customers can easily make payments as well as gain more visibility into and control over their accounts.
• Launched CEO Mobile® for our wholesale customers – with half of the users now using biometrics to authenticate.
• Introduced a pilot of GreenhouseSM by Wells Fargo, our mobile-first banking experience that combines consumer bank accounts with money management tools to help customers plan and save.
• Launched Wells Fargo Propel American Express® Card, one of the most compelling rewards programs for no-annual-fee credit cards.
• Building capabilities and technologies that enable innovation, such as artificial intelligence, identity management, distributed ledger, and application programming interfaces. | ||||
|
Risk Management | |||
| • Introduced an updated and expanded risk management framework, a foundational document detailing the Company’s revised approach to achieving a global standard in risk management.
• Announced changes to how we organize ourselves to manage risk across our three lines of defense so that our lines of business have the appropriate structure to understand and manage their risk and to provide clear stature and authority for our independent risk management function.
• Focused on multiple transformative risk initiatives, including work related to our risk target operating state, compliance, operational risk, and regulatory consent orders.
• Added new leaders to the risk management team, through both internal and external hires, including more than 3,200 risk management team members hired from outside the Company over the past three years.
• Investing $1.8 billion on important initiatives as part of our total technology expense on cyber, data, and risk management.
• Continued emphasis on our “Raise Your Hand” program, in which every team member is encouraged to speak up if they need help or see something that does not look right. | ||||
|
Corporate Citizenship | |||
| • Increased our philanthropic impact by donating $444 million to nearly 11,000 nonprofits, surpassing our 2018 target of $400 million; beginning in 2019, we have increased our annual corporate philanthropy target to 2% of after-tax profits.
• Made a five-year commitment of $1.6 billion through philanthropy, investing and lending in disadvantaged areas of Washington, D.C., to help revitalize local neighborhoods that are most in need.
• Recognized as the No. 2 corporate cash giver in the U.S. and the top financial institution in overall giving, according to a ranking by The Chronicle of Philanthropy based on 2017 data.
• Named United Way Worldwide’s largest workplace giving campaign (U.S.) (10th consecutive year).
• Expanded NeighborhoodLIFT® program in 2018, financing 31,800 affordable rental units, establishing 3,900 homeowners and investing $75 million to revitalize communities and offer support and assistance to military service members and veterans, teachers, law enforcement officers, firefighters, and emergency medical technicians, in recognition of the service they provide to their communities.
• Spent more than $1 billion with diverse suppliers during 2018. | ||||
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Transforming Wells Fargo for the Future
|
• Team members volunteered 2 million hours in their communities.
• Met 100% of our electricity needs with renewable energy in 2017 and 2018.
• Announced our commitment to provide $200 billion in financing to sustainable businesses and projects by 2030, with more than 50% focused on clean technology and renewable energy transactions to help accelerate the transition to a low-carbon economy.
• Issued a comprehensive Business Standards Report detailing the many changes Wells Fargo has made since 2016 to address causes of past issues and transform the Company. | ||||
|
Shareholder Value | |||
| • Generated net income of $22.4 billion and diluted earnings per common share (EPS) of $4.28 in 2018, the highest EPS in the Company’s history.
• Return on assets of 1.19% and return on equity of 11.53% in 2018, both up from 2017.
• Strong credit quality and high levels of capital and liquidity.
• Continued disciplined focus on credit risk management with our net charge-off rate near historic lows, and our nonperforming assets declined 16% from a year ago.
• Returned $25.8 billion to our shareholders through common stock dividends and net share repurchases, up 78% from 2017.
• Reduced our period-end common shares outstanding by 6%, the sixth year in a row we have reduced our common share count.
• Increased our quarterly common stock dividend to 43 cents per share in July 2018, and in January 2019, we increased our quarterly common stock dividend to 45 cents per share.
• Continued focus on efficiency and reducing expenses; we achieved our 2018 expense target and remain committed to meeting expense targets for 2019 and 2020. | ||||
| 2019 Proxy Statement | 7 |
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Corporate Citizenship
Our Commitment and Strategic Priorities
Corporate citizenship is included among our Company’s Vision, Values & Goals
We understand our role as a community partner and the positive impact we can have on society, local, and global economies, and the environment. We strive to be the financial services leader in corporate citizenship by making positive contributions to every community we serve — through our products and services, operations and culture, and our philanthropy. A strong, thriving economy is good for our communities, our business, and our shareholders.
The Corporate Responsibility Committee of our Board of Directors has primary oversight for Wells Fargo’s policies, programs, and strategies regarding significant corporate citizenship matters and our relationship with stakeholders as outlined in the committee’s charter. Three key priorities guide our strategy:
| Diversity and social inclusion Help ensure that all people feel valued and respected and have equal access to resources, services, products, and opportunities to succeed |
Economic empowerment Strengthen financial self-sufficiency and economic opportunities in underserved communities |
Environmental sustainability Accelerate the transition to a low-carbon economy and help reduce the impacts of climate change on our communities | ||||||
For each of our three key priorities, we have made commitments to be accomplished by 2020. We are committed to being transparent with key stakeholders about our progress and performance, and disclose our progress annually through our Corporate Responsibility Report prepared in accordance with Global Reporting Initiative (GRI) Standards Sustainability Reporting Guidelines. Learn more at https://www.wellsfargo.com/about/corporate-responsibility/goals-and-reporting/.
Stakeholder Engagement
The constructive and candid feedback we receive from our key stakeholders is important and informs our priorities, strategy, and progress throughout the year. In 2017, the Company formed an external Stakeholder Advisory Council to provide insights to our Board and our Company. This advisory group includes individuals with expertise in a variety of areas affecting Wells Fargo, including expertise in serving the financial needs of underserved communities, diversity and social inclusion, climate change and sustainability, and governance matters. Since 2013, we have conducted periodic materiality assessments to obtain input and feedback from internal and external stakeholders to help us identify both asset- and company-level risks and prioritize topics with the highest importance to our business and our stakeholders. To learn more about our materiality assessment, and the methodology we employ to prioritize topics most relevant to our Company and our stakeholders, please view “Shaping our CSR Priorities” on our website at https://www.wellsfargo.com/assets/pdf/about/corporate-responsibility/corporate-social-responsibility-priorities.pdf.
Environmental and Social Risk Management (ESRM)
We seek to do business with customers who demonstrate responsible management of their environmental and social risks. We expanded our ESRM Policy and ESRM Framework, which supplement our traditional due diligence practices, across all lines of business to help us more deeply understand how customers in certain sectors are managing these risks. As a result of our enhanced ESRM Framework, in 2016 we began implementing an industry-leading, robust modular carbon risk tool to account for general portfolio emissions, percentage of coal generation, and related risk factors for all regulated corporate utility borrowers engaged in certain electricity and natural gas activities. To learn more about our ESRM Framework and our other environmental, social, and governance (ESG) initiatives, we encourage you to visit our ESG Guide at https://www.wellsfargo.com/about/investor-relations/environmental-social-governance-guide/.
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Our Commitment to Corporate Citizenship
Diversity and Social Inclusion Highlights
| Committed to Diversity and Inclusion CEO, Timothy J. Sloan, signed the Statement of Support for the National Guard and Reserve for the 15th year in a row, pledging to develop and promote supportive work environments for service members and ensure their jobs are protected while serving. |
Building an Inclusive Culture Approximately one-third of our team members actively participate in Company-sponsored business resource groups, based on shared backgrounds or interests, and offering career development, mentoring programs, networking, and community involvement activities. |
Advancing Economic Equity and Inclusion We donated $216 million in 2018 to nonprofits that directly serve diverse and historically underserved groups, including women, people of color, military veterans, and people with disabilities. | ||
| Top Military Employer and Top Military Spouse Friendly Employer (2018) Victory Media |
Perfect Score – 100 Disability Equality Index® (DEI®) Best Places to Work™ (2018, 3rd year) |
14th Top Company For Diversity (2018) DiversityInc. | ||
| Economic Empowerment Highlights
| ||||
| Revitalizing Neighborhoods In 2018, we expanded our |
Supporting Economic Opportunity In 2018, we launched
Where We Live in |
Growing Diverse Small Businesses During 2018, Wells Fargo
exceeded its | ||
| Increasing affordable housing In 2018, we financed 31,800 affordable rental units and created over 3,900 homeowners through NeighborhoodLIFT®. |
Improving Financial Health Reached 2.1 million people with financial education through our Hands on Banking® Program, including new content for veterans and people with disabilities. |
Supporting American Indian/ Alaska Native Communities Expanded philanthropy programs to help address the needs and challenges facing tribal communities in the U.S., including nearly $13 million in 2018 to support homeownership, energy sovereignty and workforce development on tribal lands, and the development of native-owned small businesses. | ||
| Environmental Sustainability Highlights
| ||||
| Commitment to Advancing Clean Technology and Renewable Energy Wells Fargo committed to providing $200 billion in financing to sustainable businesses and projects by 2030, with more than $100 billion set aside to promote clean technology and renewable energy and the remainder to fund sustainable projects and businesses. |
Expanding Access to Clean Energy In 2018, Wells Fargo co-founded the Tribal Solar Accelerator Fund with a $5 million commitment over three years to bring solar energy and job training opportunities to tribal lands. |
Increasing Team Member Commitment We continue to engage team members through our sustainable commitments initiative. As of December 31, 2018 we achieved 48% of our 2020 goal to reach 250,000 team member commitments. | ||
| Engaging Our Suppliers We achieved 52% participation on our inaugural Supplier Climate Change Survey distributed to more than 200 suppliers who were invited to provide information on their progress in reducing greenhouse gas emissions. |
Recognized Leadership in Operational Sustainability Ranked #4 on U.S. Environmental Protection Agency’s Green Power Partnership National Top 100, and ranked #1 among financial services firms. |
Met Aggressive Sustainability Goals Achieved 47% reduction in greenhouse gas emissions in 2017, beating our 2020 goal three years ahead of schedule and meeting 100% of our electricity needs with renewable energy in 2017 and 2018. | ||
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Our Commitment to Corporate Citizenship
Contributions to Our Communities
The following are ways that we give back to our communities through philanthropy, community outreach and volunteerism.
Philanthropy
Community Outreach
Team Member Volunteerism and Giving
| Select Awards and Recognition |
| Top 50 Most community-minded companies (2018) Points of Light |
Perfect Score 100 Corporate Equality Index (2018, 15th year) Human Rights Campaign |
A- CDP (2018) S&P 500 Climate Performance Leadership Index and Climate Disclosure Leadership Index
|
Largest Workplace Giving Campaign (U.S.) (2019, 10th consecutive year) United Way Worldwide |
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Corporate Governance Framework and Documents
Our Board is committed to sound and effective corporate governance principles and practices, and has adopted Corporate Governance Guidelines to provide the framework for the governance of our Board and our Company. These Guidelines address, among other matters, the role of our Board, Board membership criteria, director retirement and resignation policies, our Director Independence Standards, information about the committees and other policies and procedures of our Board, including the majority vote standard for directors, management succession planning, our Board’s leadership structure, and director compensation. Our Board reviews its Corporate Governance Guidelines annually as part of its Board self-evaluation process.
Our Corporate Governance Framework
In February 2018, our Board amended its Corporate Governance Guidelines to more fully articulate the role of the Board and work it is doing to enhance governance and oversight practices, including as part of our plans to satisfy the requirements of the consent order that the Company entered into with the Board of Governors of the Federal Reserve System on February 2, 2018. The following are fundamental aspects of our Board’s governance framework:
|
Board Oversight of
Strategic Plan, Risk Tolerance,
• Reviewing, monitoring and, where appropriate, approving the Company’s strategic plan, risk tolerance, risk management framework, and financial performance, including reviewing and monitoring whether the strategic plan and risk tolerance are clear and aligned and include a long-term perspective on risks and rewards that is consistent with the capacity of the Company’s risk management framework
|
|
Board Composition, Governance Structure, and Practices
• Maintaining a Board composition, governance structure, and practices that support the Company’s risk profile, risk tolerance, and strategic plans, including having directors with diverse skills, knowledge, experience, and perspectives, and engaging in an annual self-evaluation process of the Board and its committees |
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CEO and Other Senior Management Succession Planning and Performance
• Selecting, and engaging in succession planning for, the Company’s Chief Executive Officer and, as appropriate, other members of senior management
• Monitoring and evaluating the performance of senior management, and holding senior management accountable for implementing the Company’s strategic plans and risk tolerance and maintaining the Company’s risk management and control framework
• Monitoring and evaluating the alignment of the compensation of senior management with the Company’s compensation principles
|
Board Oversight of Independent Risk Management and Integrity and Reputation
• Supporting the stature and independence of the Company’s independent risk management (including compliance), legal, and internal audit functions
• Reinforcing a culture of ethics, compliance, and risk management, and overseeing the processes adopted by senior management for maintaining the integrity and reputation of the Company |
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|
Board Reporting and Accountability
• Working in consultation with management in setting the Board and committee meeting agendas and schedules
• Managing and evaluating the information flow to the Board to facilitate the Board’s ability to make sound, well-informed decisions by taking into account risk and opportunities and to facilitate its oversight of senior management
|
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Corporate Governance
Our Corporate Governance Documents
Information about our Board’s and our Company’s corporate governance, 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 Code of Ethics and Business Conduct applicable to our team members, including our executive officers, and directors |
| • | 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 |
| • | An overview of our Board Communication Policy, which describes how shareholders and other interested parties can communicate with the Board |
| • | Our By-Laws, which require that the Chair of our Board be independent |
Insight into the Boardroom and the Board’s Priorities
Agenda Planning and Information Flow to the Board
In addition to enhancing its corporate governance framework, the Board and management continue to improve information flow and escalation of matters to the Board as well as the reporting and analysis provided to the Board.
| • | The Board has set clear expectations for management for providing timely, accurate, candid, focused, appropriately detailed, and meaningful information and reporting to the Board in order to facilitate the Board’s understanding of and engagement on the Company’s strategy, business, operations, and risks, including its oversight of management. |
| • | The Board’s independent Chair is actively managing Board agendas to provide sufficient time for key business, strategy, risk, culture, and other discussions, and additional time for Board focus on strategic planning, risk appetite alignment, and talent planning |
| • | A two-day strategy review session was added to the Board’s meeting schedule beginning in 2018 |
| • | Board committee chairs are focused on setting and prioritizing Board and committee meeting agendas |
| • | The Board and Board committees are requiring detailed action plans with clearly defined milestones and management accountability in order to assess progress in addressing regulatory matters and other issues |
Enhanced Level of Board Engagement
While a substantial amount of work happens during meetings convened by the Board, its committees, and their subcommittees, there is a significant amount of engagement and interaction that occurs outside of Board and committee meetings. Our Board and its committees are deeply engaged in oversight of our business, strategy, and financial performance, our plans and progress to meet regulatory expectations, our risk transformation program, our culture and human capital management practices, and many other risks and areas. The following are some of the ways our directors are engaged with our CEO, other members of senior management, and other stakeholders.
| • | Engagement between Directors, the CEO, and Senior Management |
| ¡ | Independent Chair serves as the principal liaison among the independent directors and between the independent directors and the CEO and other members of senior management |
| ¡ | Independent Chair and Board committee chairs meet regularly with members of management as part of agenda planning for Board and committee meetings |
| • | Engagement Relating to Our Business and Strategy |
| ¡ | Board and Board committees hold “deep dive” sessions with members of management on various topics |
| ¡ | Directors attend off-site visits from time to time, including to our bank branches and other facilities such as our cyber threat fusion center |
| ¡ | Directors receive weekly or more frequent updates from management on recent developments, press coverage, and current events that relate to our business |
| • | Engagement with Team Members, Customers, and Regulators |
| ¡ | Directors, including our independent Chair, periodically attend CEO Town Halls and other business group and team member network engagement meetings |
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Corporate Governance
| ¡ | Directors meet with customers, including as part of a customer reception held in the fall each year in various markets |
| ¡ | Independent Chair, Board committee chairs, and other directors meet periodically with our primary regulators on various matters |
Board Priorities
The Board is focused on making progress across key priorities as we work to transform Wells Fargo, meet the expectations of our regulators, and rebuild trust with our stakeholders. Below are key priorities for the Board in connection with the continual enhancement of its governance practices and oversight of the Company’s operations and goals.
|
Meeting Regulatory Expectations
|
• Satisfying regulatory expectations and the requirements of the Company’s outstanding consent orders with its regulators
• Enhancing our risk and reporting systems to meet the heightened regulatory expectations for systemically important financial institutions and our own goal of industry leadership in risk management
• Engaging in frequent and open communication with our regulators about our progress
| |
| Enhancing Risk Management
|
• Remaining an industry leader in credit, market, and liquidity risk management
• Improving the Company’s risk management program
• Implementing plans to continue building our operational and compliance risk management systems to a level that matches our business, structure, and strategies
• Enhancing management-level governance committee structures, oversight, monitoring and controls, and escalation processes and procedures
| |
| Operational Excellence
|
• Strengthening operations across the organization, including progress on the Company’s project to inventory and map all of our business processes
• Improving control testing and monitoring functions and reducing the number and complexity of our business processes in order to offer the potential for improving the efficiency and effectiveness of core operations
| |
| Oversight of Culture and Human Capital Management
|
• Continuing to assess and shape the Company’s culture with an emphasis on ethics, training and development, and diversity and inclusion
• Focusing on human capital management practices, including talent management strategies such as plans to attract, retain, reward, develop, and care for the best talent
| |
| Technology
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• Consistent with the Company’s consumer strategy, meeting the needs of our customers by collaborating across businesses to provide offerings that allow customers to engage with us how, when, and where they choose
• Making sure all of our systems operate on up-to-date platforms, are able to process and protect massive amounts of data, and contribute to our vision of operational excellence and leadership in innovation
| |
| 2019 Proxy Statement | 13 |
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Corporate Governance
Comprehensive Annual Evaluation of Board Effectiveness
Recent Enhancements to Board Self-Evaluation Process
The following are some of the enhancements made to the self-evaluation process over the last few years:
| • | Evaluation of the individual contributions of directors to the Board and its committees |
| • | Annual assessment of the most effective format for the Board’s and each committee’s self-evaluation and that the Board may determine to engage a third party to facilitate the evaluation periodically |
| • | Coordinated review and assessment by the full Board of the results of both the Board’s and each committee’s and subcommittee’s self-evaluations |
| • | Review of progress made in implementing changes made based on feedback provided in connection with the Board’s prior year self-evaluation |
Board Self-Evaluation Process – How Candid Feedback is Obtained
The following chart reflects the key components of the Board’s annual self-evaluation process. Additional information on the topics covered in the scope of the evaluation is included below.
Evaluation Survey Form is approved by GNC and sent by the GNC Chair to each director to request feedback on various topics One-on-One Director Discussions Individual meetings (typically with the Chair and GNC Chair) held with each director to obtain candid feedback Executive Session Discussion of evaluation led by the Chair and GNC Chair in executive session and summary of assessment is provided to Board Feedback Communicated and Acted Upon Feedback is provided to management by the Chair and GNC Chair on areas for improvement and changes are implemented
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Corporate Governance
Topics Covered in the Scope of the Board Self-Evaluation
In 2018, the Board self-evaluation included an assessment of the following topics, among others:
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Overall Context for Assessment
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Evaluation of the Board’s efforts with respect to the following responsibilities:
• Setting clear, aligned, and consistent direction regarding strategy and risk tolerance,
• Actively managing information flow and board discussions,
• Holding senior management accountable,
• Supporting the independence and stature of independent risk management (including compliance and internal audit), and
• Maintaining a capable board composition and governance structure.
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Board Performance and Effectiveness
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• Board performance, including as a team, active engagement of management during and between Board meetings, exercising challenge when appropriate, and the quality of the Board decision-making process
• Individual director contributions to the work of the Board and its committees
• Quality and candidness of Board discussions and deliberations, including encouragement of diverse views
• Quality of committee reports to the full Board
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Board Composition, Structure, and Meetings
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• Board composition, including size and mix of skills, knowledge, experience, perspectives, tenure, background, and diversity
• Committee structure and functioning, including the number of committees and their roles and responsibilities
• Effectiveness of meeting structure, including the frequency and quality of Board meetings and executive sessions of independent directors
• Board agenda planning, including agenda content, organization, and time allocation
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Key Board Responsibilities
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• Communication with the CEO
• Knowledge of the Company
• Knowledge of and access to information regarding industry trends
• Strategic planning, including the process, format, and materials for the Board’s strategy review sessions
• Talent management and succession planning for the CEO and other senior management, including compensation decision-making process
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Management Interactions and Board and Committee Materials
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• Board materials and management reporting, including the quality of materials
• Access to management, including members of the Corporate Risk function, and quality and effectiveness of those interactions
• Responsiveness of senior management and other staff to Board feedback
• Level and performance of staff and related support for Board meetings and functions
| ||
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Tone at the Top
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• Board’s role in establishing the tone at the top
• Tone being set and embodied by senior management at the top of the organization and degree of absorption of the tone at all levels of the organization
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Effectiveness of Risk Management and Compliance
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• Communications with management related to the Company’s risk tolerance, risk management, and controls
• Board oversight of risk management and control functions, including compliance and operational risk, and quality of risk management reporting to the Board
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| 2019 Proxy Statement | 15 |
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Corporate Governance
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Board Leadership Structure
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• Board leadership structure
• Ideal characteristics of an independent chair, and potential successors for that role
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Individual Director’s Views and Preferences
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• Individual director’s views on her or her own role, performance, and contribution
• Identification of criteria in selecting new Board members
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Training and Orientation
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• Form of director training and effectiveness of past training sessions and programs
• Specific areas in which the Board and committees would benefit from additional training or education
• Quality of the orientation program for new Board and committee members
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Escalated Matters
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• Opportunities for enhancing Board practices of addressing escalated matters
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Access to Third-Party Advisors
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• Board access to third-party advisors and consultants
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Governance and best practices
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• Governance practices, including review of the Board’s Corporate Governance Guidelines
• Best practices for boards generally, including based on directors’ service on other boards
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| 16 | Wells Fargo & Company |
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Corporate Governance
Our Investor Engagement Program
As part of our commitment to effective corporate governance practices, since 2010 we have had an investor outreach program with independent director participation to help us better understand the views of our investors on key corporate governance topics. In addition to engagement with our largest institutional investors, we have enhanced our engagement efforts with additional investors and stakeholders to hear their perspectives and help identify focus areas and priorities for the coming year. The constructive and candid feedback we receive from our investors and other stakeholders during these meetings is important and helps us inform our priorities, assess our progress, and enhance our corporate governance practices and disclosures each year. The following chart highlights our investor engagement program and process for considering the feedback we receive.
|
Board-led Engagement Program
• Independent director participation since 2010
• Following the 2018 annual meeting, our Chair and members of management considered the annual meeting voting results and continued engaging with institutional investors
• Our independent Chair held in-person engagement meetings and calls with institutional investors representing more than 35% of our outstanding shares
• We also held engagement meetings and calls with other investors and stakeholders, including upon their request
• Our independent Chair leads our external Stakeholder Advisory Council which was formed to provide our
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Year-Round Engagement Process
• Our engagement occurs year round
• Active outreach to institutional investors during the year as well as engagement meetings with investors and other stakeholders at their request to understand their priorities and concerns in the areas of corporate governance, executive compensation, sustainability and corporate responsibility, and other matters
• Continual review of our governance practices and framework in light of best practices, recent developments, and regulatory expectations
• Provide institutional investors with courtesy copies of periodic updates, including news of significant corporate governance and Board changes, as part of our ongoing engagement process
• Coordinated engagement efforts with our Stakeholder Relations group, which includes Investor Relations, Government Relations and Public Policy, Corporate Communications, Corporate Philanthropy and Community Relations, and Sustainability and Corporate Responsibility
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Reporting and Evaluation of Investor Feedback
• Feedback from investor and other stakeholder engagement is summarized and shared with:
¡ the full Board
¡ the Board’s Governance and Nominating Committee, Human Resources Committee, and Corporate Responsibility Committee
¡ senior management
• Our Board conducts a comprehensive annual self-evaluation, which includes
consideration of investor and other stakeholder feedback on various matters such as our annual say-on-pay vote, other annual meeting
• Our Board reviews our governance practices annually, and more frequently when appropriate, and uses investor and other stakeholder feedback to identify
|
Topics Discussed Since 2018 Annual Meeting
• Board skills and experience and Board matrix
• Board composition, diversity, size, and tenure
• Board oversight of risk, including committee oversight responsibilities
• Board-level engagement and oversight of management
• Recent changes in the Company’s senior leadership
• Company performance and progress, including the status of Company reviews of its business
• Regulatory relationships and status of satisfying consent order requirements
• Culture and team member engagement
• Executive compensation and compensation metrics
• Shareholder proposals
• ESG practices and reporting
|
| 2019 Proxy Statement | 17 |
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Corporate Governance
Demonstrated Track Record of Responsiveness to Investors and Other Stakeholders
Our Board and our Company value and consider the feedback we receive from our investors and other stakeholders and have consistently acted to enhance our governance practices and transparency through our disclosures in response to those perspectives.
Governance Practices Enhanced Board composition, including qualifications, by electing an additional business operations director in Jan. 2019 Continued to implement formal and thoughtful Board and committee succession plans, including for the Chair of the Risk Committee Continued implementation of risk management framework, including enhanced reporting, management-level governance committee structure, and escalation processes in support of the Boards risk oversight Enhanced existing shareholder right to call a special meeting by reducing required ownership threshold from 25% to 20% of outstanding shares Continued Board refreshment process begun in 2017; six of seven standing Board committee chair roles rotated since 2017 Enhanced Corporate Governance Guidelines to more fully articulate the role of the Board and work it is doing to enhance governance and oversight practices Elected six new Board members and reconstituted the leadership and composition of key Board committees Launched external Stakeholder Advisory Council to provide feedback on current and emerging issues-Seven external experts and national thought leaders represent groups focused on consumer rights, fair lending, the environment, human rights, civil rights, and governance Adopted an over boarding policy applicable to the Companys directors which limits the number of boards on which our directors may serve to a total of 4 public company boards (total of 3 for public company CEOs), unless the GNC determines that such other board service would not impair the directors service to the Company Separated the roles of Chair and CEO Amended By-Laws to require that the Chair be an independent director Amended Corporate Governance Guidelines to reflect changes made in the Boards leadership structure and specify certain duties of the independent Chair Board took significant executive accountability actions in 2016 and early 2017, resulting in a total compensation impact of over $180 million Enhanced Transparency and Disclosures Published our Business Standards Report, which addresses actions our Company has taken -and continues to take - to improve our culture, make things right for customers who were harmed, reconstitute our organizational structure, and strengthen risk management and controls (https://www.wellsfargo.com/assets/pdf/ about/corporate/ business-standards-report.pdf) Enhanced Board experience matrix to include diversity information as self-identified by Board members Increased disclosure about our performance management program and compensation practices, including efforts and metrics to promote diversity and inclusion in our workforce Disclosed our Companys gender and racial/ethnic pay gaps in the U.S. on our website at http://stories.wf.com/ wells-fargo-releases-pay-equity-study-results/ Introduced Board qualifications and experience matrix disclosures in 2018 proxy statement, including definitions of qualifications and experience identified by the Board as important in light of our Companys strategy, risk profile, and risk appetite Significantly enhanced culture and human capital management disclosures in 2018 proxy statement Continued to enhanced disclosure about incentive compensation risk management program Increased environmental, social and governance (ESG) disclosures on our website at https://www. wellsfargo.com/about/investor-relations/ Added disclosure to our website relating to our commitment to gender and racial/ethnic pay equity, our annual pay equity analysis conducted by outside compensation experts, and oversight of our pay equity reviews by the Human Resources Committee Updated our Code of Ethics and Business Conduct to incorporate our standards related to our commitment on core ESG principles, such as supporting our communities, respecting human rights and protecting the environment Created online resources and a dedicated hotline (877-924-8697) to answer questions and address concerns for customers as part of our efforts to rebuild trust Disclosed significant executive accountability actions for certain of our executive officers and other members of senior management consistent with our commitment to consider disclosure of senior executive clawback actions
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Corporate Governance
Strong Independent Board Leadership
Our Board Leadership Structure
|
Elizabeth A. (“Betsy”) Duke Independent Chair of Wells Fargo’s Board of Directors
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“Looking back on my first year as chair of the Wells Fargo Board of Directors, I am encouraged by the progress the Company and our Board have made as we build Wells Fargo for the future. Our Board has made significant changes to its leadership, composition, and governance practices informed by the Board’s self-evaluation process and engagement with shareholders and other stakeholders. Our new directors have brought important experience in several areas, including financial services, other highly regulated industries, and consumer brand management. We recognize that we have more work to do and are committed to meeting the expectations of the Company’s regulators and enhancing risk management and operational excellence, as we work to transform Wells Fargo.”
|
Annual Independent Chair Selection
Our Board’s Governance and Nominating Committee is responsible for periodically evaluating our Board’s leadership structure and, based on the recommendation of the GNC, our Board selects the Chair of the Board annually and may elect a Vice Chair to assist the Chair from among its members. Our Board believes that having strong independent Board leadership in the form of an independent Chair, with clearly defined authority and responsibilities shown in the chart below, provides enhanced independent leadership and oversight for our Company and our Board. The separation of the CEO and Chair positions allows Ms. Duke to focus on governance of our Board (including Board composition and the recruitment of new directors, Board meeting schedule and agenda setting, Board committee succession planning, Board committee responsibilities, managing the information flow and management reporting to the Board, and investor engagement and outreach on governance matters), and allows Mr. Sloan to focus his attention on our business and strategy, including restoring the trust of our customers, team members, and other stakeholders.
In addition to an independent Chair, our Board has a significant majority of independent directors (11 of the 12 director nominees are independent under the Director Independence Standards) and independent Board committees. James H. Quigley, Chair of the Audit and Examination Committee, serves as independent Chairman of Wells Fargo Bank, N.A., our Company’s principal banking subsidiary.
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Corporate Governance
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Area of Responsibility
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Authority and Responsibilities of Independent Board Chair
| |
|
Board Effectiveness
|
• Promote the efficient and effective functioning of the Board
| |
| Board Agendas and Information
|
• Approving Board meeting agendas and schedules
• Working with committee chairs to have coordinated coverage of Board responsibilities
• Facilitating communication between the Board and senior management, including advising the CEO and other members of senior management of the Board’s informational needs and approving the types and forms of information sent to the Board
| |
|
Board Meetings and Executive Sessions |
• Presiding at meetings and executive sessions of the Board
• Calling and chairing special meetings of the Board and executive sessions or meetings of non-management or independent directors
| |
|
Board Communications and External Stakeholders |
• Serving as the principal liaison among the independent directors, and between the independent directors and the CEO and other members of senior management
• Facilitating effective communication between the Board and shareholders
• Facilitating the Board’s review and consideration of shareholder proposals
• Serving as an additional point of contact for the Company’s primary regulators
• Presiding over each meeting of shareholders
| |
|
Board Composition and Membership |
• Evaluating potential Board candidates and making director candidate recommendations to the GNC
• Advising on the membership of Board committees and the selection of committee chairs
• Working with committee chairs to oversee coordinated coverage of Board responsibilities
| |
|
Advisory Role
|
• Serving as an advisor to the CEO
| |
|
CEO Performance Evaluation
|
• Participating, along with other directors, in the performance evaluation of the CEO
| |
|
Ethics
|
• Setting the ethical tone for the Board and reinforcing a strong ethical culture
| |
|
Company Strategy |
• Reinforcing the expectation for all Board members to stay informed about the strategy and performance of the Company
• Leading the Board’s review of the Company’s strategic initiatives and plans and discussing the implementation of those initiatives and plans with the CEO
| |
|
External Advisors
|
• Recommending the retention of advisors or consultants who report directly to the Board
| |
Although the CEO’s performance evaluation is led by the Chair of the HRC, the Chair of our Board also has an important role in the evaluation, which is a multi-step process involving, among other things, individual director feedback and Board discussions regarding the CEO’s performance and discussions with the CEO regarding his assessment of his own performance. Ms. Duke participates, along with other directors, in the CEO performance evaluation and in the Board’s review of management succession and development plans. Her participation in those processes helps her evaluate the most effective Board leadership structure for our Company. In addition, Ms. Duke’s participation in our Company’s investor engagement program, engagement with our regulators, and leadership role with our external Stakeholder Advisory Council as well as facilitation of our Board’s review and consideration of shareholder proposals provide her with valuable insight into the views of our investors and other stakeholders regarding our Company’s corporate governance practices, including its Board leadership structure. Our Board believes that these and the other activities of the independent Chair serve to enhance the independent leadership of our Board in order to provide robust oversight and promote overall Board effectiveness.
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Corporate Governance
Management Succession Planning and Development
A primary responsibility of our Board is identifying and developing executive talent at our Company, especially the CEO and other senior leaders of our Company. Continuity of excellent leadership at all levels of our Company is part of our Board’s mandate for delivering superior performance to shareholders. Toward that goal, the executive talent development and succession planning process is integrated into our Board’s annual activities.
Our Board has assigned to the HRC, as set forth in its charter, the responsibility to oversee our Company’s talent management and succession planning process, including CEO evaluation and succession planning. Our Corporate Governance Guidelines require that the CEO and management annually report to the HRC and our Board on succession planning (including plans in the event of an emergency) and management development. Our Board’s Corporate Governance Guidelines also require that the CEO and management provide the HRC and Board with an assessment of persons considered potential successors to certain senior management positions at least once each year.
Management and our 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.
Summer HRC Annually Reviews Talent Management and Succession Planning The CEO and Human Resources executives collaborate with the HRC to prepare and evaluate management development and succession plans, and the HRC reports to the full Board on its reviews The HRC conducts an in-depth review of talent management and succession plans and provides input and feedback, typically in July of each year Fall Full Board Annually Reviews Talent Management and Succession Planning The full Board conducts an in-depth review of talent management and succession plans in executive session and provides input and feedback, typically in November of each year Winter Board Self-Evaluation Process Includes An Assessment of Talent Management and Succession Planning Processes As discussed under Comprehensive Annual Evaluation of Board Effectiveness, the Board assesses CEO and management talent development and succession planning processes, including diversity and inclusion, each year as part of its evaluation of the Boards effectiveness Ongoing Interactions Throughout the Year between Management, the HRC, our Chair, and our Board Management also regularly identifies high potential executives for additional responsibilities, new positions, promotions, or similar assignments to expose them to diverse operations within our Company, with the goal of developing well-rounded, experienced, and discerning senior leaders Identified individuals are often positioned to interact more frequently with our Board so that directors may gain familiarity with these executives as part of our talent management and succession planning process
Wells Fargo’s management changes over the last few years continue to reflect our thoughtful management succession planning process. We identify and develop a credible pipeline of leaders in support of our ongoing business needs, to promote the stability of our Company over time, and to reflect the communities we serve. We leverage ongoing talent and succession planning to make sure we have sufficient talent to meet the short-term and long-term needs of the Company. As part of our Board’s and management’s transformation efforts, our Company also identifies specific needs and hires external talent to strengthen our Company’s capabilities in various areas. For example, over the past year the Company has hired several new leaders, including our Chief Risk Officer, Head of Human Resources, Head of Technology, and Chief Auditor.
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Corporate Governance
Continuing to Enhance How We Think About Management Succession Planning
Our Board and senior management have continued to enhance our talent planning and succession program. Annually, the Board and its Human Resource Committee review succession plans to assess internal talent readiness for executive roles and associated development plans to support their readiness. Enhancements to the succession planning approach include:
| • | Enhanced the CEO attributes used by the Board to evaluate potential candidates as part of CEO succession planning |
| • | Created Operating Committee (direct reports to our CEO) attributes used by management and the Board to evaluate potential candidates as part of Operating Committee succession planning |
| • | Added a new succession bench analysis process to ensure succession plans are appropriate and are not over-reliant on individual leaders across multiple benches |
| • | Enhanced the talent attributes used by management to calibrate talent on succession plans and expanded these attributes to include focus on risk management capabilities |
| • | Continued to review and seek diverse representation for our leadership benches and talent pools |
| • | Focused on developing our talent pipeline and providing experience-based development opportunities and solutions |
| • | Evaluated the need to augment succession plans with external talent as appropriate |
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Corporate Governance
Over the past two years, our Board’s succession planning focused primarily on the composition of our Board and its committees, upcoming retirements under our director retirement policy, succession plans for committee chairs and committee members, our commitment to Board diversity, and recruiting strategies for adding new directors. In its succession planning, the GNC and our Board consider the results of our Board’s annual self-evaluation, as well as other appropriate information, including the types of skills and experience desirable for future Board members and the needs of our Board and its committees at the time in light of the Company’s strategy and risk profile.
| • | Thoughtful, Deliberate Board Refreshment Process. The Board’s refreshment actions reflect a thoughtful and deliberate process that was informed by our Company’s engagement with shareholders and other stakeholders as well as the Board’s annual self-evaluation and director nomination processes. |
| • | Appropriately Balance Experience and Perspectives While Ensuring an Orderly Transition. Our Board has taken care as part of its Board refreshment process to appropriately balance new perspectives and the experience of existing directors while undergoing an orderly transition of roles and responsibilities on the Board and its committees. |
| • | Importance of Board Diversity. In addition, our Board continues to focus on the importance of maintaining Board diversity (both gender and ethnic); three of the seven directors who joined our Board from 2017 to 2019 are women and three of those directors are ethnically diverse. |
Director Tenure and Retirement Age Policies
| • | In February 2018, our Board amended its Corporate Governance Guidelines to better reflect its recognition of the importance of periodic Board refreshment and maintaining an appropriate balance of tenure, experience, and perspectives on the Board. |
| • | The Board values the contributions of both newer perspectives as well as directors who have developed extensive experience and insight into the Company, and as a result does not believe arbitrary term limits are appropriate. |
| • | The Board believes that directors should not have an expectation of being renominated annually and that the Board’s annual self-evaluation is a key component of its director nomination process. |
| • | In connection with the Board’s annual self-evaluation and director nomination processes, the Board considers at least annually upcoming retirements under its director retirement policies, the average tenure and overall mix of individual director tenures of the Board, the overall mix of the diverse skills, knowledge, experience, and perspectives of directors, each individual director’s performance and contributions to the work of the Board and its committees, the personal circumstances and other time commitments of directors, along with other factors the Board deems appropriate. |
Director Retirement Age of 72
| • | Our Board established the retirement age of 72 for directors with the understanding that directors may not necessarily serve until their retirement age. |
| • | Our Board’s retirement age policy is intended to facilitate our Board’s recruitment of new directors with appropriate skills, experience, and backgrounds and provide for an orderly transition of leadership on our Board and its committees. |
| 2019 Proxy Statement | 23 |
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Corporate Governance
Overall Board Composition and Size
The Board has made changes to its composition that resulted from a thoughtful process informed by the Board’s comprehensive self-evaluation and director nomination processes and feedback received from the Company’s engagement with shareholders and other stakeholders. As part of Board succession planning, the Board will seek to add new directors that complement the overall skills and capabilities of the Board in ways identified through the Board’s self-evaluation. Although the Board’s size may fluctuate in the near term as it recruits new directors, the Board expects that its size will settle over time toward the lower end of its recent historical range of 12 to 16 directors. As always, gender and ethnic diversity remain a priority for the Board in its director recruitment efforts.
Financial Services 45% 5 of 11 Independent Director Nominees have Financial Services Experience Tenure of Independent Director Nominees* 2.7 Average Years of Tenure Financial Services Risk Experience On Risk Committee 57% 4 of 7 Members of Risk Committee have Large Financial institution Risk Management Experience * Based on completed years of service from date first elected to Board
|
Board Composition Snapshot
|
|
11 of 12 (or 92%) Director nominees are independent |
Board size is 12 and expected to settle over time toward the lower end of historical range of 12 to 16 directors |
More than half of independent director nominees elected since 2017, enhancing financial services, risk management, information security/cyber, technology, regulatory, human capital management, finance, consumer, business process and operations, and social responsibility experience on the Board |
Highly qualified directors with a diverse mix of qualifications, skills, and experience consistent with the Company’s strategy, risk profile, and risk appetite
|
Current focus on recruitment of new directors to complement existing Board skills and experience in areas identified by the Board, including: • Banking, bank regulatory, and financial services, • Former CFO and/or accounting, and • Technology and information security experience
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| 24 | Wells Fargo & Company |
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Corporate Governance
Board Qualifications and Experience
Minimum Qualifications
Our Board has identified the following minimum qualifications for its directors:
|
Character and Integrity Must be an individual of the highest character and integrity | |
| CEO / Leadership Experience Demonstrated breadth and depth of management and/or leadership experience preferably in a senior leadership role, in a large or recognized organization or governmental entity | ||
| Financial Literacy or Other Relevant Professional or Business Experience Financial literacy or other professional or business experience relevant to an understanding of our Company and its business | ||
| Independence and Constructive Collegiality Must have a demonstrated ability to think and act independently as well as the ability to work constructively in a collegial environment |
Our Board believes that CEO or other senior management and/or leadership experience provides our directors with substantial experience relevant to serving as a director of our Company, including in many of the areas discussed below that our Board views as important when evaluating director nominees. Our 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.
Additional Qualifications and Experience Identified by Our Board as Important to Our Company, Strategy, and Operations
The GNC and our Board desire that the Board as a whole has an appropriate balance of skills, knowledge, experience, and perspectives that are relevant to our Vision, Values & Goals. In addition to the minimum qualifications required for Board services under the Board’s Corporate Governance Guidelines, the following are additional qualifications and experience that the Board has previously identified through its annual self-evaluation process as desirable in light of Wells Fargo’s business, strategy, risk profile, and risk appetite.
Categories of Additional Qualifications/Experience and Their Relevance to Wells Fargo
|
Financial Services Industry Experience in one or more of the Company’s specific financial services areas, including retail banking, wholesale banking, wealth and investment management, or global payments |
|
Corporate Governance Experience or expertise in corporate governance matters, including through service as the executive or independent chair or lead director of a board of directors | |||
|
Accounting, Financial Reporting Experience as an accountant or auditor at a large accounting firm, chief financial officer, or other relevant experience in accounting and financial reporting |
|
Management Succession Planning Experience or expertise in CEO and senior management succession planning, including through service as a current or former chief executive officer or president of a large organization | |||
|
|
Risk Management Experience managing risks in a large organization, including specific types of risk (e.g., financial, cyber) or risks facing large financial institutions |
|
Environmental, Social, and Governance (ESG) Experience in ESG matters, including as part of a business and managing corporate, environmental, and social responsibility issues as business imperatives | |||
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Corporate Governance
Categories of Additional Qualifications/Experience and Their Relevance to Wells Fargo
|
Human Capital Management Experience or expertise through a human resources leadership role in the management and development of human capital, including management of a large retail workforce, compensation, culture and other human capital issues |
|
Community Affairs Experience in community affairs matters, including as part of a business and managing community relations and/or relationships with communities and other stakeholders | |||
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Strategic Planning, Business Development, Business Operations Experience defining and driving strategic direction and growth and managing the operations of a business or large organization |
|
Government, Public Policy Experience in governmental affairs and public policy matters, including as part of a business and/or through positions with government organizations and regulatory bodies | |||
|
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Information Security, Cybersecurity, Technology Experience or expertise in information security, data privacy, cybersecurity, or use of technology to facilitate business operations and customer service |
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Regulatory Experience in regulatory matters or affairs, including as part of a regulated financial services firm or other highly regulated industry | |||
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Consumer, Marketing, Digital Experience in a client services or consumer retail business, including mobile and digital consumer experiences, or marketing |
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Global Perspective or International Experience doing business internationally or focused on international issues and operations | |||
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Legal Experience acquired through a law degree and as a practicing attorney in understanding legal risks and obligations |
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Corporate Governance
Board Qualifications and Experience Matrix
The following chart reflects areas of qualifications and experience that our Board views as important when evaluating director nominees. Additional information on the business experience and other skills and qualifications of each of our director nominees is included under Item 1 – Election of Directors. Each director also contributes other important skills, expertise, experience, and personal attributes to our Board that are not reflected in the chart below.
Baker Clark Craver Duke Hewett James Morris Pujadas Quigley Sargent Sloan Vautrinot Total # Qualifications and Experience Financial Services 5Consumer Banking 2 Wholesale/Institutional 3 Other (e.g., Insurance, Retirement Services) 3 Accounting, Financial Reporting 3Prior Large Public Company CFO ExperienceII8Risk Management 4 Human Capital Management 5 Strategic Planning, Business Development, Business Operations 11 Information Security, Cybersecurity, Technology 4 Consumer, Marketing, Digital 4 Corporate Governance 9 Management Succession Planning 8 Environmental, Social, and Governance (ESG) 2 Community Affairs3 Government, Public Policy 4 Regulatory 7 Financial Services 6 Other Regulated Industry 2 Global Perspective, International 9 Legal 2 Additional Qualifications and Information Financial Services Risk Expertise Other Risk Expertise Audit Committee Financial Expert# of Other Public Company Boards1110111102202Board Tenure and Diversity Tenure (# completed years of service)** 10114010115223 Annual Meeting Retirement Year (Age 72 Retirement Policy)2021202620242025203720212035203420242028N/A2032Age at 2019 Annual Meeting706567665470565767635859GenderMFMFMMFFMMMMFAfrican-American/BlackIIAsian, Hawaiian, or Pacific Islander Latino/HispanicI Geographic Location FL FL CA VA CT AL NJ NY UT OH CA CO
| * | Diversity characteristics based on information self-identified by each director to the Company. |
| ** | Based on completed years of service from date first elected to Board. |
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Corporate Governance
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 shareholders, the current composition of our 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, in addition to having a diverse candidate pool for each director search the Board undertakes, when evaluating and recommending director nominees to serve on our Board so that our Board’s composition as a whole appropriately reflects the current and anticipated needs of our Board and our 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 our Board at the time. Gender, race, and ethnic diversity also have been, and will continue to be, a priority for the GNC and our Board in its director nomination process because the GNC and our Board believe that it is essential that the composition of our Board appropriately reflects the diversity of our Company’s team members and the customers and communities they serve. The GNC considers the self-identified diversity characteristics of each director or potential director candidate.
The GNC believes that it has been successful in its efforts over the years to promote gender, race, and ethnic diversity on our Board. The GNC and our Board believe that our 12 director nominees for election at our 2019 annual meeting bring to our 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 our Board. The charts below show the diversity of our 12 director nominees. The Board expects to maintain its focus on the importance of Board diversity as well as desired qualifications and experience identified by the Board in future director recruitment efforts.
The GNC and our Board will continue to monitor the effectiveness of their practice of considering diversity through assessing the results of any new director search efforts, and through the GNC’s and our Board’s annual self-evaluation processes in which directors discuss and evaluate the composition and functioning of our Board and its committees.
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Item 1 – Election of Directors
Our Board understands the critical role it plays in protecting and serving the interests of shareholders and meeting the expectations of our regulators and other stakeholders. This has been reflected in every change our Board has made over the past two years to its composition and practices, including many that reflect valuable feedback we have received from investors and other stakeholders. Our Board believes that it has the right mix of professional experiences and diverse perspectives to provide effective oversight and governance of our Company and management. See Board Composition for more information about our Board.
Director Nominees for Election
Below we provide information about our Board’s nominees, including their age and the month and year in which they first became a director of our Company, their business experience for at least the past five years, the names of publicly-held companies (other than our 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 our Board’s conclusion that each nominee should serve as a director of our Company.
Our Board has set 12 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 shareholders, except for Wayne M. Hewett (elected by our Board effective January 7, 2019). Mr. Hewett is standing for election by our shareholders for the first time at the annual meeting. Karen B. Peetz, a current director, is not standing for re-election and will retire from our Board at the 2019 annual meeting. Our Board has determined that each nominee for election as a director at the annual meeting is an independent director, except for Timothy J. Sloan, as discussed under Director Independence. Directors are elected to hold office until our 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, or our Board may reduce its size. In addition, as described under Director Election Standard and Nomination Process, 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 our Board and our Board accepts the resignation.
Item 1 – Election of Directors
Our Board recommends that you vote FOR each of the director nominees below for a one year term.
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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 our Board, such as at this meeting). Under this standard, a nominee for director will be elected to our 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 our 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 our 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 our Board whether or not to accept such resignation. The GNC, in deciding what action to recommend, and our 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 our Board regarding such resignation. If our Board does not accept the resignation, the director will continue to serve until his or her successor is elected and qualified. Our Board will publicly disclose its decision on the resignation within 90 days after certification of the voting results.
Director Nomination Process
GNC Leadership of the 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, regardless of who nominates a candidate for consideration. The goal of the GNC’s nominating process is to assist our 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 our Company and its shareholders. The GNC regularly reviews the composition of our 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 discussed above, the GNC also oversees our Board’s self-evaluation process.
Identification and Assessment of Director Candidates
The GNC identifies potential candidates for first-time nomination as a director through various sources, including recommendations it receives from the following:
| • | Current and former Board members, |
| • | Third-party search firms, |
| • | Shareholders and other stakeholders, and |
| • | Contacts in the communities we serve. |
The GNC has the authority to engage a third party search firm to identify and provide information on potential candidates. A key objective of the GNC in connection with its identification of potential director candidates is to use multiple sources and actively seek out qualified women and ethnically diverse candidates in order to have a diverse candidate pool for each search the Board undertakes.
Wayne M. Hewett, who became a director in January 2019, was identified and recommended to the GNC by a third-party search firm retained by the GNC. In addition to identifying and providing information on a number of potential director candidates, the third party search firm reviewed and provided information about Mr. Hewett for review by the GNC and our Board.
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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 our Board-approved minimum qualifications for director nominees described under Board Qualifications and Experience; |
| • | Whether there are any apparent conflicts of interest in the individual serving on our Board; and |
| • | Whether the individual would be considered independent under our Director Independence Standards, which are described under Director Independence. |
In addition, as discussed under Comprehensive Annual Evaluation of Board Effectiveness, the GNC considers the results of the Board’s annual self-evaluation, including the individual contributions of directors to the work of the Board and its committees, in connection with its determination to nominate existing directors for election at each annual meeting of shareholders.
The GNC determines, in its sole discretion after considering all factors it considers appropriate, whether a potential new director nominee meets the Board’s minimum qualifications and also considers the composition of the entire Board taking into account the particular qualifications, skills, experience, and attributes that our Board believes are important to our Company such as those described under Board Qualifications and Experience.
If a candidate passes this initial review, the GNC arranges introductory meetings with the candidate and our Chair, the GNC Chair, and the CEO to discuss the candidate’s background and determine the candidate’s interest in serving on our Board. If determined appropriate by the Chair and GNC Chair and if the candidate is interested in serving on our Board, the GNC arranges additional meetings with members of the GNC and other members of our Board. The candidate also may meet with Company executives, including as part of the candidate’s consideration of potentially joining our Board. If our 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 and Business Conduct, and any other rules, regulations, or policies applicable to members of our 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 our Board or for nomination for approval by the shareholders at the next shareholders’ meeting, as applicable.
Board Nomination Process
1. Evaluation of Board Composition The GNC and the Board evaluate Board composition annually and identify skills, experience, and capabilities desirable for new directors in light of the Companys business and strategy 2. Identification of Diverse Pool of Candidates Identification of a diverse pool of potential director candidates using multiple sources, including a third party search firm and input from stakeholders 3. Assessment of and Meetings with Potential Candidates Evaluation and assessment of candidate interest, minimum qualifications, conflicts, independence, background and other information Members of the GNC and other Board members meet with qualified candidates 4. Recommendation of Potential Director for Approval GNC recommends potential directors to the Board for approval Shareholders vote on nominees at our annual meeting
Process for Shareholders to Recommend Individuals for Consideration by the GNC
The GNC will consider an individual recommended by one of our shareholders for nomination as a new director. In order for the GNC to consider a shareholder-recommended nominee for election as a director, the shareholder must submit the name of the proposed nominee, in writing, to our Corporate Secretary at: Wells Fargo & Company, MAC# D1130-117, 301 South Tryon Street, 11th Floor, Charlotte, North Carolina 28282. All submissions must include the following information:
| • | The shareholder’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 our Company, if elected. |
Our Corporate Secretary will present all shareholder-recommended nominees to the GNC for its consideration. The GNC has the right to request, and the shareholder will be required to provide, any additional information with respect to the shareholder-recommended nominee as the GNC may deem appropriate or desirable to evaluate the proposed nominee in accordance with the nomination process described above.
Communicating with our Board
Shareholders and other interested parties may communicate with our Board, including our Board’s Chair or our non-employee or independent directors as a group, in the following ways:
| • | Sending an e-mail to BoardCommunications@wellsfargo.com, or |
| • | Sending a letter to Wells Fargo & Company, P.O. Box 63750, San Francisco, California 94163. |
Additional information about communicating with our directors and our Board’s process for reviewing communications sent to it or its members is provided on our website at https://www.wellsfargo.com/about/corporate/governance.
Director Orientation Process and Continuing Education
New Director Orientation
All new directors on our Board receive an orientation to the Company and training that is individually tailored, taking into account the director’s experience, background, education and committee assignments. Our new director orientation program is led by members of senior management, in consultation with the Chair of our Board and each of our new directors, and covers a review of our business groups, strategic plans, financial statements and policies, risk management framework and significant risks, regulatory matters, our internal and external auditors, corporate governance and key policies and practices (including our Code of Ethics and Business Conduct), as well as the roles and responsibilities of our directors. Orientation sessions are typically held in-person and also may include specific site visits.
Ongoing Director Training
The Board and its committees participate in and receive various forms of training and education throughout the year, including business update sessions; management presentations on the Company’s businesses, services, and products; and information on industry trends, regulatory developments, best practices, and emerging risks in the financial services industry. Other educational and reference materials on governance, regulatory, risk, and other relevant topics are regularly included in Board and committee meeting materials and maintained in an electronic library available to directors.
Continuing Director Education
We also encourage our directors to attend outside director and other continuing education programs and make available to directors information on director education programs that might be of interest on developments in our industry, corporate governance, regulatory requirements and expectations, the economic environment, or other matters relevant to their duties as a director of our Company.
Our Corporate Governance Guidelines provide that a significant majority of the directors on our Board, and all members of the Audit and Examination Committee, Governance and Nominating Committee, Human Resources Committee, and Risk Committee must be independent under applicable independence standards. Each year our Board affirmatively determines the independence of each director and each nominee for election as a director. Under New York Stock Exchange (NYSE) rules, in order for a director to be considered independent, our Board must determine that the director has no material relationship with our Company (either directly or as a partner, shareholder, or officer of an organization that has a relationship with our Company). To assist our Board in making its independence determinations, our 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 our Board. The Director Independence Standards are available on our website at: https://www.wellsfargo.com/about/corporate/governance.
Based on the Director Independence Standards, our Board considered information in early 2019 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
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one hand, and our Company, on the other, to determine the director’s independence. After reviewing the information presented to it and considering the recommendation of the GNC, our Board determined that, except for Timothy J. Sloan, who is a Wells Fargo employee, all current directors and director nominees (John D. Baker II, Celeste A. Clark, Theodore F. Craver, Jr., Elizabeth A. Duke, Wayne M. Hewett, Donald M. James, Maria R. Morris, Karen B. Peetz, Juan A. Pujadas, James H. Quigley, Ronald L. Sargent, and Suzanne M. Vautrinot) are independent under the Director Independence Standards, including the NYSE “bright line” standards of independence. Ms. Peetz, a current director, is not standing for re-election and will retire from our Board at the 2019 annual meeting. Our Board determined, therefore, that 11 of our Board’s 12 director nominees are independent. The Board previously determined that each of John S. Chen, Lloyd H. Dean, Enrique Hernandez, Jr., and Federico F. Peña was an independent director prior to their retirement from our Board in April 2018.
In connection with making its independence determinations, our 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 our Board’s categorical standards of independence:
| Banking and Financial Services Relationships |
Our Company’s banking and other subsidiaries had ordinary course banking and financial services relationships in 2018 with certain 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 our Company and complied with applicable banking laws.
| |
| Business Relationships |
The spouse of a sibling of Wayne M. Hewett is affiliated with an entity which has ordinary course business relationships with the Company. The aggregate amount of payments made by our Company to this entity did not exceed 1% of that entity’s or our Company’s 2018 consolidated gross revenues.
| |
| Other Relationships |
Elizabeth A. Duke has outstanding pension and supplemental retirement plan balances with an aggregate actuarial present value of approximately $157,000 earned from her prior employment with SouthTrust Corporation and its successor, Wachovia Corporation, which employment ended in 2005. Our Company assumed these pre-existing obligations under the applicable plans following the Wachovia merger at the end of 2008.
Theodore F. Craver, Jr. has an outstanding pension balance with an aggregate actuarial present value of approximately $478,000 earned from his prior employment with First Interstate Bancorp, which employment ended when First Interstate was acquired by legacy Wells Fargo in April 1996.
No additional service-based contributions or accruals will be made to any of these plan balances. Payment of the plan balances is not conditioned on any future service or performance by Ms. Duke or Mr. Craver and are currently being made in accordance with the applicable plan documents.
| |
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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 shareholders’ meeting. All of our current directors, with the exception of Wayne M. Hewett who joined our Board in 2019, attended our Company’s 2018 annual shareholders’ meeting.
Our Board held 15 meetings during 2018. Attendance by our Board’s current directors at meetings of our Board and its committees (including subcommittees) averaged 97.23% during 2018. Each current director who served as a director during 2018 attended at least 75% of the total number of 2018 meetings of our Board and committees on which he or she served. Our Board met in executive session without management present during 7 of its 2018 meetings. During 2018, our independent Chair, Elizabeth A. Duke, chaired each of the executive sessions of the non-management and independent directors.
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, shareholders, regulators, and other stakeholders. We operate under a Board approved risk management framework which outlines our company-wide approach to risk management and oversight and describes the structures and practices employed to manage current and emerging risks inherent to Wells Fargo. We believe that enhancements made during 2018 to our risk management framework transform and clarify our risk management approach by emphasizing the role of risk management when setting corporate strategy and by further rationalizing and integrating certain risk management organizational, governance, and reporting practices.
Risk Management Framework
Our risk management framework defines how we manage risk in a comprehensive, integrated, and consistent manner and lays out our vision for the risk management of the organization. It reinforces each team member’s personal accountability for risk management and is built on a foundation that begins with a deep understanding of the Company’s processes, risks, and controls. Our risk management framework also supports members of senior management in achieving the Company’s strategic objectives and priorities, and it supports the Board as it carries out its risk oversight responsibilities.
The risk management framework consists of three lines of defense: (1) the front line which consists of Wells Fargo’s risk-generating activities, including all activities of its four primary business groups (Consumer Banking; Wholesale Banking; Wealth and Investment Management; and Payments, Virtual Solutions, and Innovation) and certain activities of its enterprise functions (Human Resources, Enterprise Finance, Technology, Legal Department, Corporate Risk, Stakeholder Relations, and Wells Fargo Audit Services); (2) independent risk management, which consists of our Corporate Risk function and is led by our Chief Risk Officer who reports to the Board’s Risk Committee; and (3) internal audit, which is Wells Fargo Audit Services and is led by our Chief Auditor who reports to the Board’s Audit and Examination Committee. In addition to the three lines of defense, our risk management framework includes enterprise control activities, which are certain specialized activities performed within centralized enterprise functions (such as Human Resources and the Legal Department) with a focus on controlling specific risks.
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Board Risk Oversight
The business and affairs of the Company are managed under the direction of the Board, whose responsibilities include overseeing management’s implementation of the Company’s risk management framework and ongoing oversight and governance of the Company’s risk management activities. 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 full Board and are comprised solely of independent directors. 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 our Company’s key risk exposures.
The Risk Committee oversees company-wide risks and the Company’s Corporate Risk function and plays an active role in approving and overseeing the Company’s risk management framework. The Risk Committee and the full Board review and approve the enterprise statement of risk appetite annually, and the Risk Committee also actively monitors the Company’s risk profile relative to the approved risk appetite. The Board’s other standing committees also have primary oversight responsibility for certain specific risk matters. The full Board receives reports at each of its regular meetings from the Board committee chairs about committee activities, including risk oversight matters, and the Risk Committee receives periodic reports from management regarding current or emerging risk matters. Additional information about our risk management framework and practices, as well as the risk oversight responsibilities of each of our Board committees, is described in the Financial Review—Risk Management section in our 2018 annual report on Form 10-K and under Our Board and Its Committees in this proxy statement.
Our standing Board committee structure and the primary risk oversight responsibilities of each of those committees is shown in the chart below.
|
Board of Directors Annually approves strategic plan and company-wide statement of risk appetite
| ||||||||||||
|
Audit and Examination Committee
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Corporate Responsibility Committee
|
Credit Committee
|
Risk Committee
|
Finance Committee
|
Governance and Nominating Committee
|
Human Resources Committee
| ||||||
|
Financial, regulatory and risk reporting and controls |
Social and public responsibility matters |
Credit Risk |
COMPANY-WIDE RISKS - Compliance (includes Conduct and Financial Crimes) - Liquidity - Model - Operational (includes Data Management, Information Security/Cyber, and Technology) - Reputation - Strategic
|
Interest Rate Risk Market Risk
|
Board-level governance matters |
Culture, ethics, human capital management, and compensation | ||||||
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The Corporate Risk function, which is the Company’s independent risk management organization, is headed by the Company’s Chief Risk Officer who, among other things, is responsible for setting the strategic direction and driving the execution of Wells Fargo’s risk management activities. The Chief Risk Officer is appointed by and reports to our Board’s Risk Committee. The Chief Risk Officer, as well as the Chief Risk Officer’s direct reports, work closely with the Board’s committees and frequently provide reports and updates to the committees and the committee chairs on risk matters, as appropriate. Corporate Risk develops the Company’s enterprise statement of risk appetite in the context of our risk management framework described above. The Corporate Risk function provides senior management and the Board with an independent perspective of the level of risk to which the Company is exposed.
As part of our Board’s and its committee’s annual self-evaluation process, our Board’s committees annually review their respective charters in light of regulatory expectations, best practices, changes in the Company’s strategy, risk appetite, and identified enterprise risks, updates to our Company’s risk management framework, and director and committee feedback. As a result of its continuing review of committee responsibilities and oversight of risks, our Board has continued to enhance the risk oversight responsibilities of various Board committees and will continue to review our Board’s and its committees’ oversight responsibilities as part of its annual self-evaluation process or more frequently as needed. For additional information on recent enhancements made to the Board’s oversight of risk, including through its committees, see Our Board and Its Committees.
Our Board believes that its Board leadership structure with separate CEO and independent Chair roles has the effect of enhancing our Board’s risk oversight function because of our independent Chair’s involvement in risk oversight matters, including as a member of our Board’s Risk Committee. Our Board also believes that Mr. Sloan’s knowledge of our Company’s businesses, strategy, and risks significantly contributes to our Board’s understanding and appreciation of risk issues.
Board Oversight Of Cyber Risk
Information security is a significant operational risk for financial institutions such as Wells Fargo, and includes the risk resulting from cyber attacks and other information security events relating to Wells Fargo technology, systems, networks, and data that would disrupt Wells Fargo’s businesses, result in the disclosure of confidential data which could damage Wells Fargo’s reputation, cause losses or increase costs. Wells Fargo’s Board is actively engaged in the oversight of the Company’s information security risk management and cyber defense programs. The Board’s Risk Committee has primary oversight responsibility for information security risk and approves the Company’s information security program, which includes the information security policy and the cyber defense program. The Risk Committee formed a Technology Subcommittee to assist it in providing oversight of technology, information security, and cyber risks as well as data management risk. The Technology Subcommittee reviews and recommends to the Risk Committee for approval any significant supporting information security (including cyber security) risk, technology risk, and data management risk programs and/or policies, including the Company’s data management strategy. The Technology Subcommittee reports to the Risk Committee and both provide updates to the full Board.
Continuing to Enhance Board Committees and Risk Oversight
During 2017 and 2018, the Board reviewed, clarified, and enhanced Board committee oversight responsibilities through amendments to Board committee charters in order to restructure the Board’s oversight activities and enhance its oversight of risk, including conduct risk, compliance risk, operational risk, information security/cyber risk and technology risk. The Board amended committee charters further during 2018 to align with the Company’s enhanced Risk Management Framework, which was reviewed and approved by the Risk Committee.
In connection with the GNC’s and the Board’s annual review of committee member assignments and chair positions, the GNC considers best practices with respect to committee refreshment and committee chair rotations. The GNC also reviews a director qualifications and experience matrix for each Board committee to assist it in evaluating the collective experience of directors on each committee in light of the particular committee’s oversight responsibilities. The collective qualifications and experience of directors on each committee are reflected in the charts under Board Committee Composition and Oversight Responsibilities below. The Board has reconstituted the membership and leadership of its Board committees since 2016, including based on the addition of new directors to the Board. Six of the Board’s seven standing Board committees have new chairs since September 2017.
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Current Board Committee Membership and Charters
Our Board has established seven standing committees: Audit and Examination, Corporate Responsibility, Credit, Finance, Governance and Nominating, Human Resources, and Risk. Our Board’s committees act on behalf of our Board and report on their activities to the entire Board. Our Board appoints the members and chair of each committee based on the recommendation of the GNC. Certain of our directors also serve as members of the Wells Fargo Bank, National Association board of directors. The following table provides current membership information for each of our Board’s standing committees and Wells Fargo Bank’s board of directors.
| Name
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AEC
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CRC
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Credit
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Finance
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GNC
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HRC
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Risk
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Wells Fargo Bank board of directors
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John D. Baker II
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·
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Chair
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Celeste A. Clark
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Chair
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·
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·
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Theodore F. Craver, Jr.
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·
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Chair
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·
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Elizabeth A. Duke
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·
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·
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·
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·
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Wayne M. Hewett
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·
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·
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·
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Donald M. James
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·
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Chair
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·
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Maria R. Morris
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·
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Chair
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·
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Karen B. Peetz
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·
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·
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·
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Juan A. Pujadas
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·
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·
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·
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James H. Quigley
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Chair
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·
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Chair
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Ronald L. Sargent
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·
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·
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·
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Chair
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Suzanne M. Vautrinot
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·
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·
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·
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Number of Members
|
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4
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4
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5
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4
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4
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5
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7
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5^
|
| ||||||||
• = Member
^ = Mr. Sloan also serves as a member of the Wells Fargo Bank board of directors
Our 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 our Board must approve any recommended charter amendments. Additional information about our 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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Board Committee Composition and Oversight Responsibilities
|
Risk Committee Maria R. Morris, Chair |
Members: Morris (Chair) Duke Hewett
|
Peetz Pujadas Quigley Vautrinot |
Number of meetings in 2018: 14 (includes 1 joint meeting with AEC)
|
|
“In my new role as chair of the Risk Committee, I am working closely with Karen Peetz to provide for a smooth transition of chair responsibilities as we continue our important work to oversee the Company’s progress in strengthening its risk management, including operational and compliance risk management, and achieving operational excellence across the organization in order to reduce risk and improve the experiences of our team members and our customers. In 2018, the Risk Committee approved significant enhancements to the Company’s Risk Management Framework, which defines how the Company manages risk, and is overseeing the Company’s overall risk transformation program and Corporate Risk function. The two new subcommittees of the Risk Committee have been providing focused oversight of compliance and technology-related risks, including the Company’s investment in technology capabilities and systems, as we continue to strengthen the foundation of the Company for the future.
|
|
Risk Committee Qualifications and Experience:
|
||||||||||
| • Financial Services • Accounting, Financial Reporting • Risk Management • Human Capital Management |
• Strategic Planning, Business Development, Business Operations • Information Security, Cybersecurity, Technology
|
• Consumer, Marketing, Digital • Corporate Governance • Management Succession Planning • Environmental, Social, and Governance (ESG)
|
• Community Affairs • Government, Public Policy • Regulatory • Global Perspective, International |
|||||||
| 44 | Wells Fargo & Company |
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Corporate Governance
|
Audit and Examination Committee (AEC) James H. Quigley, Chair |
Members: Quigley (Chair) Baker
|
Craver Sargent
|
Number of meetings in 2018: 12 (includes 1 joint meeting with Risk Committee) |
|
“In 2018, the Audit and Examination Committee focused heavily on oversight of the integrity of the Company’s financial statements, strength of internal controls over financial reporting, efforts to enhance capabilities relating to risk reporting, and the independence of and actions by the Company’s external auditor to continue to enhance the quality of its audit practice. Another one of our key responsibilities is overseeing the performance of Wells Fargo Audit Services, our internal audit function and third line of defense which is a critical part of our Risk Management Framework. In early 2019, we also approved the appointment of a new Chief Auditor to lead our internal audit function and look forward to working with her, including in connection with our oversight of the scope and execution of our internal audit plan and performance of the internal audit function. We continue to focus on oversight of regulatory activities and monitoring management’s progress addressing those matters.”
|
|
Audit and Examination Committee Qualifications and Experience:
|
||||||||||
| • Financial Services • Accounting, Financial Reporting • Risk Management • Human Capital Management |
• Strategic Planning, Business Development, Business Operations • Information Security, Cybersecurity, Technology
|
• Consumer, Marketing, Digital • Corporate Governance • Management Succession Planning • Government, Public Policy |
• Regulatory • Global Perspective, International • Legal |
|||||||
| 2019 Proxy Statement | 45 |
Table of Contents
Corporate Governance
|
Governance and Nominating Committee (GNC) Donald M. James, Chair |
Members: James (Chair) Clark |
Duke Sargent |
Number of meetings in 2018: 7 |
|
“During 2018, the Governance and Nominating Committee continued to enhance the Board’s governance practices, including by formalizing the framework used by the Board for its own succession planning and approving guidance to management reflecting the Board’s and our Committee’s expectations of management for support of the Board and its committees, including relating to the quality and focus of management reporting. In light of the significant changes the Board made to its composition, leadership, oversight responsibilities, and governance practices that were informed by the Board’s 2017 self-evaluation process and engagement with shareholders and other stakeholders, we again decided to engage a third party to facilitate the Board’s 2018 self-evaluation, including to assist the Board in assessing the implementation and effectiveness of changes made. In addition, we continue to focus on making sure we maintain a Board composition and structure that is appropriate in light of the Company’s strategy, risk profile, and risk appetite. We have added important experience to the Board through recent director recruiting and refreshment, and are currently focused on recruitment of new directors to compliment existing Board skills and experience in areas identified by the Board, including banking, bank regulatory, and financial services, former CFO and/or accounting, and technology and information security experience.”
|
|
Governance and Nominating Committee Qualifications and Experience:
|
||||||||||
| • Financial Services • Risk Management • Human Capital Management • Strategic Planning, Business Development, Business Operations
|
• Consumer, Marketing, Digital • Corporate Governance • Management Succession Planning
|
• Environmental, Social, and Governance (ESG) • Community Affairs • Government, Public Policy |
• Regulatory • Global Perspective, International • Legal |
|||||||
| 46 | Wells Fargo & Company |
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Corporate Governance
|
Human Resources Committee (HRC) Ronald L. Sargent, Chair |
Members: Sargent (Chair) Hewett
|
James Morris Peetz |
Number of meetings in 2018: 6
|
|
“The Human Resources Committee’s oversight responsibilities were expanded in 2017 to include oversight of the Company’s culture, ethics program, and human capital management. An important focus of our Committee is to oversee the alignment of our culture with our performance management and incentive compensation programs so that they are consistent with the Company’s Vision, Values & Goals, including doing what is right for customers. We continue to invest in our team members in order to improve our overall team member experience, including through profit sharing contributions to the Company’s 401(k) plan and our benefits programs. Another key responsibility of our Committee is to oversee the Company’s incentive compensation risk management program, which we have expanded to cover all team members who are eligible to receive incentive compensation and all potential risk types, including risks associated with misconduct and reputational harm. For 2018, we introduced new behavioral expectations for all team members that are aligned with our Vision and Values as well as an enhanced performance objective framework for our senior leaders that focuses on expectations for both “what” is achieved and “how” it is achieved, and includes an evaluation of performance consistent with the Company’s leadership and risk accountability expectations.”
|
|
Human Resources Committee Qualifications and Experience:
|
||||||||||
| • Financial Services • Risk Management • Human Capital Management • Strategic Planning, Business Development, Business Operations
|
• Information Security, Cybersecurity, Technology • Consumer, Marketing, Digital • Corporate Governance
|
• Management Succession Planning • Environmental, Social, and Governance (ESG) • Community Affairs • Regulatory |
• Global Perspective, International • Legal |
|||||||
| 2019 Proxy Statement | 47 |
Table of Contents
Corporate Governance
|
Corporate Responsibility Committee (CRC) Celeste A. Clark, Chair |
Members: Clark (Chair) Hewett |
Sargent Vautrinot |
Number of meetings in 5 |
|
“Wells Fargo’s Vision, Values & Goals reflect our aspiration to be the financial services leader in corporate citizenship. We are committed to making a positive contribution to the communities where we live and do business. The Corporate Responsibility Committee’s responsibilities are focused on oversight of Wells Fargo’s policies, programs, and strategies for corporate citizenship matters, our brand, and our relationship with external stakeholders. In 2017, we formed a new Stakeholder Relations group, which was expanded in 2018 to include sustainability and corporate responsibility, community relations, and philanthropy, as we do the fundamental work needed to transform our Company and restore our brand and reputation with stakeholders. Among my priorities in my new role as chair of the Corporate Responsibility Committee is a continued focus on community reinvestment, how we evaluate and manage environmental and social risks in connection with our Environmental and Social Risk Management Policy and framework, increasing our spend with diverse suppliers, and continuing to use our philanthropy to address community issues like affordable housing, small business growth, and equity and economic inclusion. I also want to thank our team members who continue to demonstrate their significant commitment and dedication to our communities through their own personal philanthropy and volunteerism.”
|
|
Corporate Responsibility Committee Qualifications and Experience:
|
||||||||||
| • Risk Management • Human Capital Management • Strategic Planning, Business Development, Business Operations
|
• Information Security, Cybersecurity, Technology • Consumer, Marketing, Digital • Corporate Governance |
• Management Succession Planning • Environmental, Social, and Governance (ESG) • Community Affairs |
• Government, Public Policy • Global Perspective, International |
|||||||
| 48 | Wells Fargo & Company |
Table of Contents
Corporate Governance
|
|
Credit Committee John D. Baker II, Chair |
Members: Baker (Chair) Clark Duke |
Pujadas Vautrinot
|
Number of meetings in 2018: 4
|
|
“Wells Fargo continues to maintain its strong and conservative credit risk discipline. Wells Fargo is to be one of the few large financial institutions to have a separate board committee focused on credit risk management and credit quality, which is reflective of the importance of effective credit risk management to the Company and the Board in order to enable performance through credit cycles. This strength was evident through the financial crisis and remains a priority of the Credit Committee. During 2018, we continued to focus on maintaining appropriate underwriting standards and credit quality as well as consideration of various components of our credit portfolio, economic conditions, and emerging risks that could impact credit performance in particular industries and sectors. The Credit Committee also oversees the ongoing enhancement of our credit risk management policies and practices which are fundamental to maintaining this core strength of our Company.”
|
|
Credit Committee Qualifications and Experience:
|
||||||||||
| • Financial Services • Risk Management • Human Capital Management • Strategic Planning, Business Development, Business Operations
|
• Information Security, Cybersecurity, Technology • Consumer, Marketing, Digital • Corporate Governance |
• Management Succession Planning • Environmental, Social, and Governance (ESG) • Community Affairs |
• Government, Public Policy • Regulatory • Global Perspective, International • Legal |
|||||||
| 2019 Proxy Statement | 49 |
Table of Contents
Corporate Governance
|
|
Finance Committee Theodore F. Craver, Jr., Chair |
Members: Craver (Chair) Duke |
James Pujadas |
Number of meetings in 2018: 7 |
|
“During 2018, the Finance Committee continued to focus on oversight of the Company’s financial risk management, financial forecast, and capital management and planning, including stress-testing policies. The Company maintained a high level of capital in 2018, and received a non-objection from the Federal Reserve on its 2018 Capital Plan. The Finance Committee will continue to oversee progress against capital objectives in the 2018 Capital Plan, and future capital planning. We also monitor our progress on meeting our efficiency goals and reducing expenses. Following the consolidation of oversight of recovery and resolution planning as part of the Finance Committee’s oversight responsibilities in 2017, we receive coordinated updates on our recovery and resolution strategies, monitor how those processes and practices are incorporated as part of our day-to-day business operations, and review and approve related plans in connection with our regulatory obligations. Given the current interest rate environment, monitoring our market risk and interest rate risk, and the Company’s strategies to manage these risks, have been and will continue to be a priority for the Finance Committee. ”
|
|
Finance Committee Qualifications and Experience:
| ||||||||
| • Financial Services • Accounting, Financial Reporting • Risk Management |
• Strategic Planning, Business Development, Business Operations • Information Security, Cybersecurity, Technology
|
• Corporate Governance • Management Succession Planning • Community Affairs • Government, Public Policy |
• Regulatory • Global Perspective, International • Legal | |||||
| 50 | Wells Fargo & Company |
Table of Contents
Corporate Governance
Other Special Purpose Board Committees
From time to time, the Board or Wells Fargo Bank board of directors may form special purpose committees to which each board may delegate responsibility for oversight of particular matters.
Regulatory Compliance Oversight Committee
| • | Wells Fargo Bank’s board of directors has delegated oversight of compliance with various regulatory consent orders to this committee to provide appropriate Board-level oversight of progress against consent order requirements. |
| • | This committee is comprised of Mses. Morris (Chair), Duke, and Peetz and Messrs. Pujadas and Quigley, and met 15 times during 2018. |
Other Special Purpose Committees
| • | From time to time, the Board may establish other limited or special purpose committees as it determines appropriate. |
Compensation Committee Interlocks And Insider Participation
Current directors Donald M. James, Maria R. Morris, Karen B. Peetz, and Ronald L. Sargent and former directors John S. Chen and Lloyd H. Dean served as members of the HRC during 2018. During 2018, no member of the HRC was an employee, officer, or former officer of the Company. None of our executive officers served in 2018 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, some HRC members had banking or financial services transactions in the ordinary course of business with our banking and other subsidiaries.
| 2019 Proxy Statement | 51 |
Table of Contents
Corporate Governance
The table below provides information on 2018 compensation for our non-employee directors other than Wayne M. Hewett who joined our Board effective January 7, 2019. Mr. Sloan is an employee director and does not receive separate compensation for his Board service. Our 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.
2018 Director Compensation Table
| Name(1) (a) |
Fees Earned or Paid in Cash ($)(2)(3)(b) |
Stock Awards ($)(4)(c) |
Option Awards ($)(5)(d) |
Non-Equity Incentive Plan Compensation ($)(e) |
Change in (f) |
All Other Compensation ($)(6)(g) |
Total ($)(h) | |||||||||||||||||||||
|
John D. Baker II |
|
170,000 |
|
|
180,004 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
350,004 |
| |||||||
|
John S. Chen |
|
37,542 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
37,542 |
| |||||||
|
Celeste A. Clark |
|
123,000 |
|
|
240,056 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
363,056 |
| |||||||
|
Theodore F. Craver, Jr. |
|
163,542 |
|
|
240,056 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
403,598 |
| |||||||
|
Lloyd H. Dean |
|
58,167 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
58,167 |
| |||||||
|
Elizabeth A. Duke |
|
451,000 |
|
|
180,004 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
631,004 |
| |||||||
|
Enrique Hernandez, Jr. |
|
68,167 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
68,167 |
| |||||||
|
Donald M. James |
|
178,000 |
|
|
180,004 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
358,004 |
| |||||||
|
Maria R. Morris |
|
172,556 |
|
|
240,056 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
412,612 |
| |||||||
|
Karen B. Peetz |
|
215,750 |
|
|
180,004 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
395,754 |
| |||||||
|
Federico F. Peña |
|
62,194 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
62,194 |
| |||||||
|
Juan A. Pujadas |
|
157,000 |
|
|
180,004 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
337,004 |
| |||||||
|
James H. Quigley |
|
237,000 |
|
|
180,004 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
417,004 |
| |||||||
|
Ronald L. Sargent |
|
174,153 |
|
|
180,004 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,000 |
|
|
359,157 |
| |||||||
|
Suzanne M. Vautrinot |
|
168,153 |
|
|
180,004 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
348,157 |
| |||||||
| (1) | The following directors who appear in the table above left our Board during 2018: |
• Messrs. Chen, Dean, Hernandez, and Peña retired as directors effective April 24, 2018, the date of our 2018 annual meeting.
| (2) | Includes fees earned, whether paid in cash or deferred, for service on our Company’s Board in 2018 (including any such amounts paid in 2019) as described under Cash Compensation. Also includes fees paid to non-employee directors who serve on the board of directors of Wells Fargo Bank, National Association (the “Bank”), a wholly owned subsidiary of our Company, or are members of one or more special purpose committees. Messrs. Craver and Quigley and Mses. Morris and Peetz, as current directors of the Bank, and Messrs. Dean, Hernandez, and Peña as former directors of the Bank from January 2018 to April 2018, 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, immediately prior to, or following a Company Board or committee meeting. In 2018, all except two Bank Board meetings were held concurrently with, immediately prior to, or following a Company Board or committee meeting. A fee of $2,000 was paid for special purpose committee meetings attended which were not held concurrently with, immediately prior to, or following a Company Board or committee meeting. |
| 52 | Wells Fargo & Company |
Table of Contents
Corporate Governance
| (3) | Includes fees earned in 2018 but deferred at the election of the director. The following table shows the number of stock units credited on a quarterly basis to our non-employee directors under our deferral program for deferrals of 2018 cash compensation paid quarterly in arrears and the grant date fair value of those stock units based on the closing price of our common stock on the date of deferral: |
| Name |
Stock Units (#) |
Grant Date Fair Value ($) |
||||||
|
John D. Baker II |
|
858.6148 |
|
|
45,000 |
| ||
| 847.7633 | 47,000 | |||||||
| 708.1340 | 37,000 | |||||||
|
|
889.7569
|
|
|
41,000
|
| |||
|
Celeste A. Clark |
|
178.8781 |
|
|
9,375 |
| ||
| 169.1017 | 9,375 | |||||||
| 179.4258 | 9,375 | |||||||
|
|
203.4505
|
|
|
9,375
|
| |||
|
Lloyd H. Dean |
|
357.7561 |
|
|
18.750 |
| ||
| 78.1625 | 4,333 | |||||||
| — | — | |||||||
|
|
—
|
|
|
—
|
| |||
|
Elizabeth A. Duke |
|
839.5344 |
|
|
44,000 |
| ||
| 541.1255 | 30,000 | |||||||
| 497.6077 | 26,000 | |||||||
|
|
564.2361
|
|
|
26,000
|
| |||
|
Ronald L. Sargent |
|
815.6840 |
|
|
42,750 |
| ||
| 710.7284 | 39,403 | |||||||
| 861.2440 | 45,000 | |||||||
|
|
1,019.9653
|
|
|
47,000
|
| |||
| (4) | We granted 3,428 shares of our common stock to each non-employee director elected at the 2018 annual meeting of shareholders on April 24, 2018. In addition, we granted 983 shares to each of Mses. Clark and Morris and Mr. Craver upon their election to the Board effective January 1, 2018. 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 April 24, 2018 and January 2, 2018, respectively. |
| (5) | 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, 2018. All options were fully exercisable at December 31, 2018. 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 |
|
7,570 |
| |
|
Lloyd H. Dean |
|
7,570 |
| |
|
Donald M. James |
|
19,900 |
| |
| (6) | The amount under “All Other Compensation” for Mr. Sargent represents a Company matching contribution during 2018 under our Company’s charitable matching contribution program, which for 2018 matched charitable donations to qualified schools and educational institutions of up to $5,000 per year, on a dollar-for-dollar basis, per employee and per non-employee director of our Company. |
| 2019 Proxy Statement | 53 |
Table of Contents
Corporate Governance
Structure of our Director Compensation Program
Cash Compensation
The following table shows the components of cash compensation paid to non-employee directors in 2018. Cash retainers and fees are paid quarterly in arrears. Directors who join the Board during the year receive a prorated annual cash retainer.
| 2018 Component |
Amount ($) | |||
| Annual Cash Retainer |
75,000 | |||
| Annual Independent Chairman Retainer1 |
250,000 | |||
| Annual Independent Vice Chairman Retainer2 |
100,000 | |||
| Annual Committee Chair Fees |
||||
| Each of AEC and Risk Committee |
40,000 | |||
| Each of CRC, Credit Committee, Finance Committee, GNC and HRC |
25,000 | |||
| Regular or Special Board or Committee Meeting Fee3 |
2,000 | |||
| (1) | The Company’s independent Chairman receives a $250,000 annual retainer, in lieu of any Committee Chair fee the Chairman might otherwise receive. |
| (2) | The Company’s independent Vice Chairman (if any) receives a $100,000 annual retainer, in lieu of any Committee Chair fee the Vice Chairman might otherwise receive. |
| (3) | 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. |
Effective March 1, 2019, our Board and the GNC approved the payment of meeting fees for subcommittees.
In addition, Bank directors receive an additional $10,000 annual cash retainer. Since November 1, 2018, the Chair of the Bank Board’s Regulatory Compliance Oversight Committee (RCOC), to which each of the Bank’s board of directors and the Company’s Board have delegated oversight of compliance with various regulatory consent orders, also receives an RCOC Chair fee of $25,000.
Equity Compensation
For 2018, each non-employee director elected to our Board at our Company’s annual meeting of shareholders received on that date an award of Company common stock having a value of $180,000. Each non-employee director who joins our 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 shareholders. 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 our 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 2018 on interest-bearing accounts was 2.33%. 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
Our Board has adopted a director stock ownership policy that each non-employee director, within five years after joining our 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 our Board and for one year after service as a director ends. Each director who has been on our Board for five years or more exceeded this ownership level as of December 31, 2018, and each director who has served less than five years is on track to meet this ownership level.
GNC Use of Compensation Consultant
The GNC is authorized to retain and obtain advice of legal, accounting, or other advisors at our expense without prior permission of management or our Board. The GNC retained FW Cook, a nationally recognized compensation consulting firm, to provide independent advice on non-employee director compensation matters for 2018. FW Cook compiles compensation data for the financial services companies the GNC considers our Labor Market Peer Group (which is the same peer group used to evaluate our Company’s executive compensation program) from time to time, and reviews with the GNC our Company’s non-employee director compensation program generally and in comparison to those of our Labor Market Peer Group. FW Cook also advises the GNC on the reasonableness of our non-employee director compensation levels compared to our Labor Market Peer Group.
| 54 | Wells Fargo & Company |
Table of Contents
Information About Related Persons
Lending and Other Ordinary Course Financial Services Transactions
During 2018, some of our executive officers, directors (including certain of our HRC members), and each of the persons we know of that beneficially owned more than 5% of our common stock on December 31, 2018 (Warren E. Buffett/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 and treasury management services, brokerage, investment advisory, capital markets, investment banking, and insurance transactions. 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 our 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 sell or purchase insurance and other products and services, including the purchase of aviation 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.
Transactions with Entities Affiliated with Directors
Enrique Hernandez, Jr., a former director, is chairman and chief executive officer and a majority owner of Inter-Con Security Systems, Inc. In 2018, Inter-Con provided guard services to certain of our Company’s retail banking stores under an agreement we first entered into in 2005. Payments in 2018 to Inter-Con under this contract did not exceed 1% of Inter-Con’s or our Company’s 2018 consolidated gross revenues, and each year since this contractual relationship began our Board determined that our relationship with Inter-Con did not impair Mr. Hernandez’s independence under our Director Independence Standards. In 2018, we paid Inter-Con approximately $1.18 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. Mr. Hernandez retired from our Board at our 2018 annual meeting.
Family and Other Relationships
Since 1986, our Company has employed Mary T. Mack’s sister, Susan T. Hunnicutt, who is currently a Wholesale Banking relationship manager. In 2018, Ms. Hunnicutt received compensation of approximately $196,000. In February 2018, we also granted her 167 RSRs, which will convert to shares of common stock upon vesting and which had a grant date fair value of approximately $10,000 (based on the NYSE closing price per share of our common stock on the grant date of $59.97). Since 2015, our Company has employed Richard D. Levy’s son-in-law, Matthew T. Bush, who is currently a Technology relationship manager in our Information Security group. In 2018, Mr. Bush received compensation of approximately $147,000. In February 2018, we also granted him 50 RSRs, which will convert to shares of common stock upon vesting and which had a grant date fair value of approximately $2,864 (based on the NYSE closing price per share of our common stock on the grant date of $57.28). We established the compensation paid to Ms. Hunnicutt and Mr. Bush in 2018 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, Ms. Hunnicutt and Mr. Bush also received employee benefits generally available to all of our team members. Neither Ms. Hunnicutt nor Mr. Bush is an executive officer of our Company and neither individual directly reports to an executive officer of our Company.
In 2010, our Board, based on the recommendation of the GNC, agreed as a matter of policy to strongly discourage our Company’s employment of any immediate family members of directors.
| 2019 Proxy Statement | 55 |
Table of Contents
Information About Related Persons
Related Person Transaction Policy and Procedures
Our Board has adopted a written policy and procedures for the review and approval or ratification of transactions between our 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; |
| • | Our 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 our Company’s attention are analyzed by our Company’s Legal 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. Our 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:
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Table of Contents
Information About Related Persons
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 that 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 our 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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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 shareholders, 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 | ||||||||||