Wells Fargo Slashes Executive Pay, Golf Sponsorship (Update1)

Feb. 27 (Bloomberg) -- Wells Fargo & Co. suspended cash bonuses for top executives and removed Wachovia Corp.’s name from a professional golf tournament as the U.S. government bolsters its authority over recipients of bailout funds.

The lender, which received $25 billion through the Troubled Asset Relief Program, is adhering to President Barack Obama’s new rules on perks and compensation, while the government is making its third attempt to save Citigroup Inc. by converting preferred shares into common stock.

Wells Fargo Chief Executive Officer John Stumpf and Chairman Richard Kovacevich are among executives who won’t receive bonuses for 2008 because Wells Fargo didn’t meet its performance goals, the bank said today in a regulatory filing. Separately, Wells Fargo changed the name of the Wachovia Championship in Charlotte, North Carolina, to the Quail Hollow Championship and said it won’t host client events tied to the tournament. Wells Fargo acquired Charlotte-based Wachovia in December.

“Anyone who is taking any type of TARP money is going to have a harder time sponsoring these kinds of events,” said David Lykken, a consultant at Mortgage Banking Solutions in Austin, Texas. “These are legacy ventures.”

Earlier this month, San Francisco-based Wells Fargo canceled a four-day corporate event in Las Vegas, and TARP recipients including Goldman Sachs Group Inc. and Bank of America Corp. have moved events away from resort destinations. Wells Fargo said this week it will cut costs associated with the golf championship after lawmakers criticized Northern Trust Corp. for spending on clients and employees at a company-sponsored tournament.

Mixed Signals

“Promoting this event with our brand could send mixed signals about our priorities to many of our stakeholders,” said David Carroll, a Wells Fargo executive, in a statement.

Wachovia renewed its contract with the PGA in 2008 and extended it through 2014. Wells Fargo still plans to honor sponsorship obligations and hasn’t determined what the tournament will be named in future years, spokeswoman Mary Beth Navarro said in an interview.

Citigroup, which has also canceled corporate events, eliminated its dividend today after accepting a third bailout from the government. The Treasury Department said it would convert as much as $25 billion of preferred shares into common stock, slashing existing shareholders’ stake in the New York- based company by 74 percent.

Democratic lawmakers have pledged to cap top executives’ pay at $500,000 a year and restrict bonuses from companies receiving TARP funds. The bonus suspension at Wells Fargo applies to Stumpf, Kovacevich, Chief Financial Officer Howard Atkins and senior executive vice presidents David Hoyt and Mark Oman.

The bank granted restricted share rights to Atkins, Hoyt and Oman valued at one-third of their 2008 annual compensation, as permitted by the Emergency Economic Stabilization Act, Wells Fargo said. Those restricted shares vest between July 2012 and March 2014, the bank said.

Wells Fargo plunged $2.32, or 16 percent, to $12.08 at 4 p.m. in New York Stock Exchange composite trading as Citigroup led a slump in financial stocks. Wells Fargo has lost almost 60 percent of its value this year.

To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; David Mildenberg in Charlotte at dmildenberg@bloomberg.net.

To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net.