Wells Fargo (NYSE: WFC) Execs Will Not Receive Cash Bonuses

As the year draws to a close, the bonuses earned on Wall Street receive significant attention. In past years, these funds trickled down and provided booms for high end real estate in New York, Ferrari dealerships in Greenwich, and in virtually every jewelry store on 47th Street.

As bonus information trickles out, it seems unlikely any of that will occur – at least, not this year. Earlier this month, banks began disclosing what senior managers were being compensated, drawing ire over the dollar value. However, many of these bonuses are not being paid in cash – instead, they are being paid in stock, options, or a mix with a claw back stipulation.

Today, Wells Fargo (NYSE: WFC) took their turn announcing bonuses, and similar to its predecessors, the executives have been denied cash bonuses. The top four executives will receive performance based stock awards, currently worth a combined $25 million, designed to keep them away from rival banks waiting to poach them.

The stock (called retention shares) would be forfeited if CEO John Stumpf, or the three other executives leave the San Francisco based firm for a competitor. Although the populist movement decry they are overpaid, and question where they will go, it is important to remember that hedge funds continue to exist, just as foreign firms do. If these employees are not compensated, they would leave for another opportunity, taking their spending and tax dollars with them. Steve Sanger, chair of the Human Resources Committee for Wells Fargo’s board, said in a statement that keeping the four executives at the bank in the wake of its acquisition of Wachovia Corp. is “absolutely essential for the continued long-term success of Wells Fargo.”

The shares issued have a three year vesting period, provided that the firm continues to meet predetermined performance goals. The bonus program is very similar to the Goldman Sachs (NYSE: GS) plan announced earlier this month. Wells Fargo will also issue stock bonuses with a five year vesting period to the 30 highest ranking executives of the firm.

Clark Troy, an analyst with financial consulting firm Aite Group, said the vesting periods could insulate the banks from further public outcry over industry compensation, should the banks’ capital strength deteriorate in 2010. On the other hand, should the banks improve profitability and 2008 becomes an afterthought, the stock prices will surely rise, making these bonuses worth significantly more than the declared value.