Wells Fargo said Wednesday it will give $400 million in cash to nonprofits in 2018, in what it describes as a 40 percent increase in its corporate philanthropy compared with last year. And starting in 2019, the bank said, it will spend 2 percent of its after-tax dollars on corporate philanthropy.
The company had net income of $22.2 billion in 2017, meaning that with that 2 percent target, it would give about $440 million.
The surge in philanthropic commitments follows a flurry of recent bad publicity for the banking giant, including revelations that its employees used customers’ personal information to create millions of accounts without their knowledge. The bank also charged customers superfluous fees for auto and mortgage loans.
Wells Fargo has vowed to win back the trust of its customers and the public. None of the increased giving is court-ordered or required under the terms of recent settlements, according to a company spokeswoman.
The company has long given grants at the national and regional levels in areas including community development, education, human services, arts and culture, civic engagement, and the environment. It categorizes its national corporate social responsibility priorities in three main buckets: diversity and social inclusion, economic empowerment, and environmental sustainability.
Keeping Up With Profits
Jon Campbell, head of corporate responsibility and community relations at Wells Fargo, said in an interview with the Chronicle late Wednesday that the bulk of the increased charitable giving in 2018 — about $70 million — will be concentrated in two existing programs. The first is the company’s NeighborhoodLIFT program, which provides down payments for families and individuals for whom homeownership might otherwise be out of reach. The second is its Diverse Community Capital program, which helps small-business owners of color.
Campbell said that internal discussions about earmarking a specific percentage of profits for philanthropy had been going on among top executives for some time.
“Candidly, as earnings continued to grow, I wanted to make sure that our philanthropy kept pace with our earnings growth,” Campbell said. He had been benchmarking the company’s giving against others and “had talked to our leadership about a range of giving as a percentage of after-tax profits.”
It was President Trump’s signing of the new tax law in December – it dropped the corporate tax rate from 35 percent to 21 percent — that ultimately sparked the decision at the company, Campbell said.
“To my excitement, Tim Sloan, our CEO, said, ‘You know what, Jon, I want to go to 2 percent after-tax profits going forward.’ That was at the very upper end of the range we had talked about.”
In recent years, Campbell said, Wells Fargo’ giving was roughly split between the national and regional offices. He and his colleagues will be working on a new strategy for how the company’s increased giving will be allocated, he said.
Transparency Commitment
Wells Fargo says it will continue to advance a number of existing efforts, including supporting small businesses, expanding homeownership, particularly among African-Americans, improving outreach and services in Native American communities, and helping cities protect natural habitats and prepare for natural disasters.
From 2014 to 2017, charitable giving at Wells Fargo held mostly steady at a little more than $280 million, according to figures provided by the company. It ranked third in terms of cash donated in the Chronicle’s 2016 corporate-giving report, finishing behind No. 1 Gilead Sciences and No. 2 Walmart.
The $400 million in giving planned for this year would vault Wells Fargo past Walmart should the retail giant’s giving remain where it was in that 2016 Chronicle report.
Because Wells Fargo is already one of the top corporate donors in the country, Campbell said, it is difficult to make exact comparisons between the bank’s efforts and those of other big companies. Still, he and his team watch closely the work of corporate grant makers including JPMorgan, Bank of America, Coca-Cola, and Walmart, among others.
Daryl Brewster, CEO of the nonprofit consultancy CECP, which works with Fortune 500 companies on their giving and other social-investment efforts, said that Wells Fargo has long been a major player in corporate philanthropy, helping to support more than 14,000 nonprofits. The San Francisco bank has consistently been in the top quartile of dollar giving since the early 2000s, according to CECP data. And Brewster described Wells Fargo’s target of giving 2 percent of after-tax dollars as “substantial,” both in absolute dollars and as a percent of net income.
“I think it is something we should be celebrating,” he said, adding that the effort should be assessed based on the number of nonprofits and lives it will help.
Settlements and Fines
With nearly $2 trillion in assets, Wells Fargo is the third largest bank in the United States. The publicly traded company had a market valuation of $263.9 billion on Wednesday.
It’s been racked ongoing scandal, including revelations that for years Wells Fargo employees opened accounts and credits cards for customers without their knowledge in a push to hit sales targets. That, in turn, drove up Wells Fargo stock prices.
The fraudulent practices and allegations of widespread and high-reaching mismanagement cost then-CEO John Stumpf his job.
Under new CEO Tim Sloan it is trying to carve out a path to redemption.
Earlier this month, the corporation agreed to pay $480 million to settle a class-action lawsuit accusing it of securities fraud related to fake accounts created by its employees to collect fees and boost sales numbers.
It is just one of a number of settlements and fines Wells Fargo has faced in recent years. Last month, the San Francisco bank agreed to pay $1 billion in fines to settle with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency over allegations that it overcharged customers for auto and mortgage loans.
In its fourth-quarter earnings report, the company reported earmarking $3.25 billion to cover litigation and other costs related to the scandals.
Editor’s Note: This article was updated May 31 to include comments from Jon Campbell and Daryl Brewster.
