WFC Wells Fargo and Company

By Emily Glazer 

Wells Fargo & Co.'s board is likely to eliminate annual bonuses for 2016 for some top executives following the bank's sales-practices scandal, according to people familiar with the matter.

The board met in late January and discussed withholding bonuses for senior executives including Chief Executive Timothy Sloan and Chief Financial Officer John Shrewsberry, these people said. The board is expected to finalize its decision, which could affect annual incentive awards that are paid in cash or stock, in coming weeks.

The cut to compensation isn't meant to reflect culpability on the part of the executives in connection with the sales-practices scandal, the people said. Rather it is meant to show accountability for the bank's overall performance.

Mr. Sloan didn't become chief executive until October when former chief John Stumpf abruptly retired following congressional grillings and a public uproar over the sales-practices scandal. Prior to this, Mr. Sloan was the bank's president and chief operating officer.

The board is continuing with its investigation into the scandal, which erupted last September when Wells Fargo entered into a $185 million settlement and enforcement action with regulators over sales practices that included staff opening accounts without customers' knowledge. This badly tarnished the bank's reputation and subjected it to numerous federal and state investigations -- including by the Justice Department.

The full results of the board's investigation aren't expected for months but it may release preliminary findings earlier. The board is expected to make final decisions about further compensation moves later this year.

While it is unusual for banks to withhold bonuses from top executives -- incentive compensation makes up the bulk of their pay -- it has become more common in recent years. Last month, Deutsche Bank AG said managing directors and other senior employees won't receive individual bonuses for 2016 given the German bank's escalating legal costs and other pressures on profit. In the wake of its so-called London Whale trading debacle, J.P. Morgan Chase & Co.'s board halved Chief Executive James Dimon's pay for 2012.

For the past few weeks, Wells Fargo executives have heard that overall compensation within the bank is likely to be down for 2016, a person familiar with the matter said. Bank employees also have heard that the bank's top brass would be "taking a hit," this person added.

In 2015, Mr. Sloan received a $1 million annual bonus atop his $2 million salary. He also received shares valued at $8 million, most tied to the company's performance, known as long-term equity incentives. The board is also examining this part of executives' compensation.

Mr. Shrewsberry in 2015 received an $850,000 bonus on a $1.7 million salary. He received $6.5 million in long-term equity incentives.

The process for Wells Fargo's compensation decisions, including bonuses, has remained similar to that of prior years. Executives finalize figures for their teams and forward them up the corporate ladder. The bank's management and, ultimately, the board have final say on the overall compensation package before it is announced around March.

Wells Fargo's board in late September rescinded a total of $61 million in pay from Mr. Stumpf and then-retail-bank head Carrie Tolstedt . The board also said neither would receive 2016 bonuses. In 2015, Mr. Stumpf received a $4 million bonus that included restricted stock that vests over three years. He also received $12.5 million in long-term equity incentives.

Stephen Sanger, lead independent director of the board then and now chairman, said at that time that further action may be warranted. The board's independent directors may take "further compensation actions before any additional equity awards vest or bonus decisions are made early next year, clawbacks of compensation already paid out, and other employment-related actions," the board said in a statement then.

The board is expected to vote on 2016 compensation for top executives later this month at another full board meeting, similar to prior years. Such compensation decisions need to be made before the bank releases its proxy in mid-March ahead of its annual meeting, people familiar with the matter said.

Further down the ranks, some compensation decisions for the retail bank business are still being completed, current executives said. For instance, midlevel managers known as area presidents and district managers aren't expected to hear of compensation decisions until early March, one of these people said.

Write to Emily Glazer at emily.glazer@wsj.com

(END) Dow Jones Newswires

February 08, 2017 16:08 ET (21:08 GMT)

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