The Real Cost of Mismanaged Incentives: Wells Fargo

untitledWell, so much for the warm-hearted caffeinated, pick-me-up from the Comp Café. Today is a steaming jolt of quadruple espresso in response to the Wells Fargo incentive pay mess. Let me start with the fact that I have been interviewed a few times about this story and even I was surprised by my response to the question, “What companies in the financial world are considered to have good incentive programs?” I answered that if I had been asked a few weeks ago, Wells Fargo would have been on the list. I guess it’s hard to know what you don’t know.

If you have been under a log for a couple of weeks, please start by reading a couple of earlier Compensation Café Articles (my own When Incentive Pay Goes Rogue! and Jim Brennan’s Excessively Successful Incentives). That foundation will help you understand the following summary.

A couple weeks ago, Wells Fargo was fined about $185 million for fraudulently opening millions of accounts. They also fired 5,300 employees and were the media poster-child for why incentive plans are terrible. At the very least, the plans in question ended up costing more than they delivered. In the past few days, the real costs of these programs are starting to reveal themselves. Recent developments are listed below. Continue reading

Executive Pay Has Been Fixed on Both Sides of the Pond!

6a0134836082f8970c01bb09238e9f970d-200wiIn the past week there have been two major reports describing how to fix executive compensation. The first is from the UK report and comes at the end of a project by the “Executive Remuneration Working Group” (those Brits love their whimsical names) This project was publicly announced September 8, 2015 as an effort by The Investment Association. The second report “Commonsense Principles of Corporate Governance” is from a group of executives in the US. It covers a broad list of corporate governance issues. For the purposes of this post we will focus only on the section titled “Compensation of Management.”

Here’s the basic run down: Continue reading

UPDATE ISS Equity Plan Scorecard EPSC 2.0

untitled3Have you ever played a card game with 5-year olds? Before you start, they explain the game in vague details and provide a list of rules that are customized to their needs. Then you begin playing, doing your best to remember the rules and keep the game moving and fun for everyone. STOP!

The game is no longer fun. The 5-year has just realized that one of their rules is not beneficial to them. Because they are a kid and generally pretty darned cute, you allow the change of how the rules apply to them without comment (yet you must continue following their original rules). It doesn’t take long for Continue reading

Big Bucks, Tiny Details and Multiple Personalities

11122015 6a00d83451df4569e201b8d173f5a4970c-200wiWhen it comes to compensation, it’s easy to get caught up in strategy and communication. We know that missing a chance at impacting the big picture is missing a chance at being successful. But, pay is also about the smallest of details. These include the language in plan documents, the timing of processing or reporting transactions and making sure that people know their roles and sign correctly on the correct lines.

In June of 2014, a shareholder filed a lawsuit against Facebook. The suit alleged that Continue reading