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Running Wells Fargo just got even more thankless

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Wells Fargo CEO Charlie Scharf testifies before a House Financial Services Committee on Capitol Hill in Washington, March 10, 2020. REUTERS/Carlos Barria

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NEW YORK, April 27 (Reuters Breakingviews) - The banking world’s most thankless job just got more so. Wells Fargo’s (WFC.N) executive pay plan won approval on Tuesday from a scant 57% of shareholders, based on a preliminary count at the lender’s annual meeting – a level so low that it’s tantamount to failure. Chief Executive Charlie Scharf is at the sharp end of a system that tends to reward success more than risk.

Since the financial crisis, banks tend to get upwards of 80% approval for their executive pay as a matter of course. When Goldman Sachs (GS.N) got just 71% last year, its board heeded the warning: CEO David Solomon’s package fell by $10 million this year. A giant lender hasn’t had a slap as embarrassing as Scharf’s since Citigroup (C.N) investors squawked at Vikram Pandit’s pay in 2012. Bank of America (BAC.N) boss Brian Moynihan squeaked through last week with a face-saving 82%.

Wells Fargo’s shares have almost kept pace with its peers – its 62% total shareholder return over the past year is just a whisker behind Citi and JPMorgan (JPM.N). But the $185 billion bank has much more to prove. One source of frustration is that investors still don’t know when the Federal Reserve will consider Wells Fargo rehabilitated enough to let it grow its assets. Scharf still couldn’t answer that on Tuesday. And after banks have received so much support from governments, paying the boss 274 times more than the median employee looks callous.

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While Scharf’s $20.3 million for 2020 is enough for any human, a challenging job ought to come with rewards. Wells Fargo might have gained some goodwill had it been more conservative in its methods. Some two-thirds of Scharf’s package is deferred. JPMorgan does better there: although Jamie Dimon’s package is a plutocratic $31.5 million, he must wait to get almost 80% of it.

Does Dimon really work 50% harder than Scharf? It seems unlikely. The two banks have similar sized loan books, though JPMorgan also has a gigantic investment bank. Dimon may attract ire too at his own meeting in May. The problem is that shareholders voting on pay are likely to be most fractious when things are tough and most needful of a firm hand at the tiller. They may get an underperforming bank, and a disgruntled chieftain to boot.

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CONTEXT NEWS

- Wells Fargo’s executive compensation package for 2020 was approved by 57% of shareholders at the bank’s annual meeting on April 27, according to a preliminary count. The vote is non-binding.

- Chief Executive Charlie Scharf was awarded $20.3 million for 2020. That compares with higher-value packages given to rivals like JPMorgan’s Jamie Dimon, who was awarded $31.5 million.

- Bank of America’s say-on-pay vote received 82% approval on April 20. The previous year, both Bank of America and Wells Fargo received over 90% approval.

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