WELLS FARGO CEO AND CFO SIGN SEC CERTIFICATIONS
SAN FRANCISCO — August 13, 2002
Wells Fargo Chairman and CEO Dick Kovacevich and CFO Howard Atkins signed and delivered to the SEC sworn statements covering the Company’s 2002 SEC reports, including its 2001 10-K, 10-Qs for this year’s first and second quarters, and 2002 proxy statement. The statements are in the form required by the SEC, without exception.
“It is unfortunate that these certifications have become necessary to restore public confidence in light of what appears to be a serious breakdown in the corporate governance of some public companies in the United States,” said Kovacevich. “As I said in our most recent earnings report, ‘this breakdown is not about a lack of formal structures and rules. It’s not about accounting standards, outside auditors, the structure of boards of directors, audit committee meetings, FASB or the SEC. It’s about honesty, trust and integrity. The management of Wells Fargo is accountable for the results of Wells Fargo. Our approach is conservative, and we, and we alone, are responsible for making sure these results are reported accurately.’
“Recent events have called into question the adequacy of corporate governance structures. We hope steps taken by Congress, the Securities and Exchange Commission and the New York Stock Exchange will restore public confidence in the country’s publicly held companies.
“This is also a time to thoughtfully examine the principles used by public companies to report their performance. As we’ve recently seen, some companies have abused the rules-based accounting framework by engaging in economically unsound financial practices tailored to conform to the literal terms of GAAP definitions. We’re encouraged by the possibility of a principles-based accounting framework for corporate America and welcome the study of this subject recently mandated by Congress. Transactions should be recorded in a way that accurately reflects their underlying economic reality, rather than technical compliance with GAAP. We’ve previously commented, for example, on concerns we have about GAAP rules for determining goodwill impairment and recording certain venture capital gains.
“Accounting treatment for stock options is another subject in the current debate. Opinions differ on whether stock options should be accounted for as an expense. In my view the important questions are how companies use stock options, how much value stock options confer on recipients and how stock options affect the interests of stockholders. Some companies have issued a large number of options that excessively dilute current stockholders and some have unjustifiably concentrated the award of stock options on a few executives. At Wells Fargo we consider an appropriate level of stock options to be an important incentive for all team members. Last March, Wells Fargo announced its fifth company-wide stock option grant in seven years for virtually all team members, including part-time team members. We also expect all managers who receive stock options to own at least 25 percent of the number of shares granted within five years of the grant date, with senior management having even higher ownership targets.
“Regardless of the outcome of the debate on expensing stock options, two things are clear. First, stock options do have value to the recipient. This information should be disclosed to stockholders. We have and will continue to disclose in our annual report an estimate of the value of the options Wells Fargo grants to its team members. Second, the exercise of a stock option has the effect of diluting the earnings of shares held by other stockholders. The cost of every ‘in the money’ option is reflected in the fully-diluted earnings per share we report each quarter. And when an option is exercised, the impact of the exercise is reflected in the number of outstanding shares used to calculate earnings per share. We believe these disclosures inform investors of the potential economic effects of our stock option programs and accurately and properly account for the effect of stock options on stockholders.
“The executive management and other team members of Wells Fargo are proud of our company and the reputation and trust it has built over the last 150 years with the communities we serve and with our owners. We know we must work every day to build on that reputation and trust,” said Kovacevich.
Wells Fargo is a $315 billion diversified financial services company providing banking, insurance, investments, mortgage and consumer finance through more than 5,400 stores, the internet (wellsfargo.com) and other distribution channels across North America and elsewhere internationally.