From PNC Financial Services Group Inc. to Wells Fargo & Co., a growing number of banks are disclosing more about family ties between the boardroom and the executive suites.
At PNC, Cheryl Kraft, the sister-in-law of president Joseph C. Guyaux, is the vice president and the program operations manager in regional community banking. She pulled down $62,654 last year, according to a company proxy.
Norma Hajduk, a senior vice president at the Pittsburgh company's Hilliard Lyons and the director of market sales for PNC Investments, is the sister of PNC's chief information officer and executive vice president, Timothy G. Shack. She got a salary of $210,000 and bonuses of $9,000 last year, the proxy says.
Then there are the son and the son-in-law of Thomas H. O'Brien, a director of PNC and its retired chairman and chief executive officer.
Thomas H. "Toby" O'Brien Jr. is a vice president and a senior investment associate at PNC Equity Management Corp., a private equity subsidiary of which the senior Mr. O'Brien is a director. Last year Toby received cash compensation of $111,346; he is also involved in a complicated leveraged equity co-investment plan, according to the proxy.
Jeffrey Troutman, a vice president and a sales manager for PNC's Treasury management business and the elder Mr. O'Brien's son-in-law, made $88,769 in salary, as well as an $88,681 bonus.
The disclosures are related to growing regulatory and investor pressure. The Securities and Exchange Commission's Regulation S-K advises, but does not require, that companies disclose when a director's child or other family member works at the company and earns more than $60,000 "as a transaction in which the director has a material interest."
PNC says it is going a step further by disclosing information about its five highest-paid managers as well. The information did not show up in its proxy last year.
"We believe our disclosure is consistent with the SEC's publicly expressed position on this issue," said Brian Goerke, a PNC spokesman. "It's part of an evolving trend of disclosure."
For at least the past three years Wells Fargo has made similar disclosures about directors with relatives working there. This year its proxy noted that a child and a nephew of David A. Christensen; a child and an in-law of Donald B. Rice; and a child of Michael W. Wright all work for the San Francisco company. Each makes between $60,000 and $310,000, the document said.
Several corporate governance experts questioned the wisdom of hiring or retaining family members of prominent company officials, even if the relationships are disclosed.
Patricia Crawford, the executive director of the Center for Corporate Governance at Dartmouth College's Tuck School of Business, said hiring or engaging family members in business is simply not considered a best practice for large, public companies.
The field "does not look favorably upon nepotism, because it smacks of lack of impartiality," Ms. Crawford said.
Beth Young, the director of special projects at the Corporate Library, a Portland, Maine, firm, said, "There will always be the question in shareholders' minds: Is this the best person they could get for this job?"
More typical are the proxy disclosures of business ties between directors and their outside interests.
U.S. Bancorp, which was formed by the brothers John F. and Jerry A. Grundhofer, disclosed payments of over $10 million to maintain executive life insurance policies underwritten by Ohio National Life Insurance Co. David B. O'Maley, Ohio National's CEO, is a director of the bank.
Nepotism does have its supporters. Sanford I. Weill, the chairman of Citigroup Inc. and a champion of the practice, once had both his children working in prominent roles there. They have since moved on.
Gerard Cassidy, an analyst with Royal Bank of Canada's RBC Capital Markets, said that, particularly in PNC's case, "these individuals, as a percentage of the total employment base, are infinitesimal."
He also argued that, when practiced by a motivated, successful family, nepotism can be effective. "If you've got a strong, hard-working family - we'll take that."
