Wells Fargo Pares Executives’ Raises

Despite Wells Fargo & Co.’s strong showing in 1990, top executives at the banking company have set a cost-cutting example for the troops by eliminating their own merit pay increases this year.

The action affects Chairman and Chief Executive Carl E. Reichardt and President Paul Hazen, along with about 130 other senior executives, a company official said. In addition, merit raises for about 1,250 vice presidents will be cut to 3% from 4.5%. Pay boosts for junior officers will not be affected.

Although Wells has so far turned in a healthy performance, analysts and credit rating agencies have voiced concerns about the bank’s heavy exposure in real estate and leveraged-buyout loans, two areas hard hit by the recession. The freeze, a bank official said, sends a signal to shareholders and employees that Wells is mindful of increasing turmoil in the economy.

“It’s a prudent business practice that Wells Fargo (uses) when it wants to set the stage for maintaining expense controls,” Stephen A. Enna, executive vice president and personnel director, said Wednesday. The bank last froze senior executives’ pay in 1986.

Enna said such a step is not unusual at Wells, the nation’s 11th-largest bank holding company that has developed a reputation as a fierce cost-cutter under Reichardt’s leadership. Late last year, Wells Fargo closed seven real estate and commercial lending offices, eliminating about 120 jobs.

“Cost cutting is really a part of the corporate culture,” said Enna, one of those who will be missing out on a merit raise this year.

Among other banks that have slashed, postponed or canceled pay raises are New York-based Citicorp and NCNB Corp. of Charlotte, N.C.

Wells is expected to report 1990 earnings on Tuesday. Donald K. Crowley, a bank analyst with the Keefe, Bruyette & Woods brokerage firm in San Francisco, foresees record operating earnings for 1990 but a decline this year because of increased provisions for loan losses, squeezed margins and slower asset growth.

“The company fundamentally remains in fine shape,” Crowley said, but the merit pay freeze should help appease anxious shareholders.

Enna said senior officers might still be eligible for incentive bonuses based on 1990 performance.

Whatever happens, don’t weep for the top guns. In 1989, Reichardt received cash compensation of $1.5 million, including bonuses. Hazen made $1.1 million.