By Jessica DiNapoli and Imani Moise
NEW YORK (Reuters) - Wells Fargo & Co's hunt for a new CEO is being impeded by limits on how much the bank can pay its next leader, a person close to the search and several industry insiders told Reuters.
A handful of top candidates have already said they would not pursue the job because Wells Fargo is unlikely to meet their pay requirements, said the person, who spoke about private negotiations on the condition of anonymity.
Wells Fargo declined to comment on the search process.
The San Francisco-based bank has been looking for a new leader since March, when Tim Sloan became the second CEO to abruptly depart in the wake of a sales scandal that has badly bruised the bank's reputation and crimped its financial performance.
Wells Fargo's CEO pay package has trailed peers in recent years in the aftermath of a wide-ranging sales practices scandal. Wells Fargo is also the smallest of the top four retail banks by assets.
The board will likely pay the next CEO $15 million-$20 million a year, said Robin Ferracone, the chief executive of compensation consultancy Farient Advisors LLC. That compares with the $25 million that CEOs of top retail banks earned last year on average.
Wells Fargo may also need to set aside funds to match vested shares a candidate has at a current employer, compensation consultants and recruiters said. That could be difficult in an environment where politicians, regulators and investors are closely scrutinizing Wells Fargo.
"If you think about the Wells situation, it has a lot of distressed features to it," Ferracone said.
The banking industry faces special restrictions on compensation that regulators imposed after the 2007-2009 financial crisis. Relative to other sectors, a bigger portion of executive pay comes in deferred stock, and contracts feature clawback provisions, which require money to be paid back under certain circumstances.
Among peers, Wells Fargo's CEO pay package is at the bottom of the pack.
Sloan's $18.4 million pay package last year compared with $31 million for JPMorgan Chase & Co's Jamie Dimon, $26.5 million for Bank of America Corp's Brian Moynihan and $24 million for Citigroup Inc's Michael Corbat.
Executives in other industries, and even other parts of Wall Street, get paid significantly more.
Blackstone Group LP CEO Stephen Schwarzman, for instance, earned $69.1 million last year. Alphabet Inc Chief Financial Officer Ruth Porat, a former Morgan Stanley executive considered a solid candidate for a bank CEO role, earned $47.3 million.
Wells Fargo Chair Betsy Duke has said the board wants to attract the "top talent in banking." Directors want the next CEO to be an outsider, following critiques from lawmakers that company veterans are incapable of turning things around.
The board has discussed approaching JPMorgan's finance chief, Marianne Lake, as well as Citigroup's head of Latin America, Jane Fraser, Reuters previously reported https://reut.rs/2PvxOo0. They have unvested stock awards worth $18.4 million and $11.2 million, respectively, according to recent filings.
Offering a signing bonus to cover such awards is harder at banks than other types of companies because of heightened scrutiny on the sector, industry experts told Reuters.
Last year, UBS Group AG's Andrea Orcel left the Swiss bank to run Banco Santander SA. But the deal fell apart after Santander refused to pay Orcel $50 million in deferred compensation he accrued at UBS.
There may be even bigger hurdles in Wells Fargo's case because of the sales scandal that erupted in late 2016. Regulators including the U.S. Federal Reserve, Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau are also closely monitoring progress of its operational overhaul, including executive changes.
The new CEO's pay package is sure to be "very carefully scrutinized," said Evan Stewart, who litigates compensation disputes as a partner at the law firm Cohen & Gresser.
(Reporting by Jessica DiNapoli and Imani MoiseEditing by Lauren Tara LaCapra and Cynthia Osterman)