Wells Fargo 's WFC chief executive officer (CEO) - Tim Sloan - received about 36% pay hike in his total compensation package for 2017. His annual salary has been increased to $17.4 million in the year from $12.8 million in 2016, according to a proxy filing.
The CEO's package includes a salary of $2.4 million as base pay and restricted stock worth $15 million. Per the filing, Sloan has not been awarded cash bonus on his recommendations based on Wells Fargo's "significant but incomplete progress on addressing compliance and operational risk-management issues."
Notably, 2017 was the first full year as CEO for Sloan. He succeeded John Stumpf in October 2016, when Stumpf stepped down in the wake of public and political outrage concerning the sales scam which surfaced in September 2016 related to 3.5 million accounts.
For months, the banking giant has been caught in a horde of litigations over several malpractices. It is more than a year since the news of Wells Fargo's alleged involvement in unfair sales practices hit headlines. Apart from being penalized by the regulators with a fine of about $190 million, the bank had to go through a lot of restructuring.
Further, the Federal Reserve's recent action of restricting the bank's asset growth underlines poor governance, compliance and risk management of Wells Fargo associated with the sales practices scandal, as well as mishandling of auto-insurance and mortgage fees. Notably, it is restricted from growth until governance and risk management improve. However, the bank is allowed to continue with its current banking activities.
In the filing, Sloan's pay package was justified with the fact that the company is performing well under the reign of the present CEO and that the compensation is well deserved. In 2017, Wells Fargo notched a profit of $22.2 billion, up 1.4% from 2016.
Notably, the company's share price appreciated roughly 10.6% in 2017, underperforming 19.3% growth registered by the industry , following a slight decline in 2016.
Among other banking giants, Bank of America's BAC chairman as well as CEO - Brian Moynihan - is expected to receive $23 million as total compensation for 2017, which reflects a rise of 15% year over year. Citigroup's C CEO - Michael Corbat - received about 48% pay hike in his total compensation package. In addition, JPMorgan (JPM) and Morgan Stanley MS increased the CEOs' compensation.
While the current crisis at Wells Fargo will take some time to alleviate, the company's solid capital position, growing loans and deposits, and improving credit quality position it well for growth. We believe, over the long term, Wells Fargo will remain comfortably positioned to benefit from a recovering economy, given its diverse geographic mix. Furthermore, strategic acquisitions and restructuring moves will likely help the company expand its business and improve profitability.
Currently, Wells Fargo carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
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