Does it really matter where Wells Fargo’s CEO is based?
Wells Fargo’s decision to hire a CEO who will be based in New York highlights an underappreciated reality of big-bank life in 2019: The corporate headquarters has lost much of its importance.
Wells may technically be based in San Francisco, but that distinction has been blurred over the years by acquisitions, the use of corporate aircraft and the rise of technology that enables remote work. Seven of the 12 members of the bank’s executive committee currently live outside of the Bay Area. Former CEO Tim Sloan maintained two homes during his tenure — one near the bank’s headquarters and the other just outside of Los Angeles.
The setup is similar at Bank of America. Brian Moynihan has been serving as CEO of the Charlotte, N.C.-based company for almost a decade, even though he is based in Boston. He travels frequently and also takes advantage of video conferencing technology that simulates the experience of being in the same room as his fellow executives. Numerous other members of BofA’s leadership team also live in the Northeast.
So Charles Scharf, Wells Fargo’s newly hired CEO, is merely following the trend. The $1.9 trillion-asset bank disclosed last week that Scharf will have access to a corporate plane for business and personal use, though he will be required to reimburse the bank for incremental costs in the case of personal travel. He will also have a driver, which figures to make it easier to get work done on trips to and from the airport.
“Where a headquarters is these days, it has a lot less meaning for a lot of these big banks,” said Marty Mosby, an analyst at Vining Sparks.
Wells Fargo was founded during the California Gold Rush of the 1850s, but over the last two decades the bank’s center of gravity has migrated away from San Francisco. First came the 1998 merger with Minneapolis-based Norwest. A decade later, Wells Fargo purchased Wachovia, which was headquartered in Charlotte but also had a substantial New York-based investment banking operation.
Today, Wells Fargo’s retail banking chief, Mary Mack, its controller, Richard Levy, its interim general counsel, Douglas Edwards, and its head of strategic execution and operations, Derek Flowers, are all based in Charlotte. Jonathan Weiss, who heads wealth and investment management, and Saul Van Beurden, the bank’s head of technology, are in New York. Perry Pelos, who heads wholesale banking, is based in Portland, Ore.
“You want to be close to your management team, but their management team isn’t always in one place,” said Brian Kleinhanzl, an analyst at Keefe, Bruyette & Woods.
It’s not just the bank’s top executives who are far-flung. Wells has more employees in the Charlotte region than it does in the Bay Area. The company also has large operations in New York, Minneapolis, Des Moines and St. Louis.
“This is a broad national franchise,” Scharf said Friday during a conference call. “These jobs, whether it’s the Wells Fargo job or any other job I had, you spend very little time actually in your office.”
Still, some observers saw the bank’s decision to hire a New York-based chief executive as less than ideal. Wells Fargo is looking to bounce back from a series of scandals that led its regulators to demand major operational changes.
“The only real negative we see is that Mr. Scharf will be based in New York rather than in San Francisco,” analysts at Sandler O’Neill wrote in a research note.
For Scharf, who served from 2012 to 2016 as CEO of San Francisco-based Visa, frequent coast-to-coast travel will be nothing new.
When Scharf stepped down from the Visa job, he said that “running a San Francisco-based company just doesn’t work for me personally right now and wouldn’t be fair to Visa.” He noted at the time that his daughters, parents and extended family were all living on the East Coast.
After Scharf became CEO of Bank of New York Mellon in 2017, the bank briefly sought to crack down on employees working from home. Scharf reportedly backed the decision as a way to increase collaboration and speed up decision-making.
But he quickly backed down after the policy change sparked an employee backlash.
“We did not fully appreciate the level of impact this would have on those employees with existing arrangements,” Scharf wrote in a March 2019 email to BNY Mellon employees. “While we believe that it is enormously helpful to have as many people as possible physically together working collaboratively, we also realize that changes can affect personal lives in many ways.”