Stumpf's Exit Caps Sudden Fall of Once-Touted Wells Fargo Brand
The Wells Fargo phony-accounts scandal is barely five weeks old, but it felt like John Stumpf had been hanging on for five years.
The ax finally fell Wednesday, when the company put out a news release after the markets had closed saying that Stumpf had retired as chairman and chief executive effective immediately.
His exit marks the rare case of a major U.S. bank CEO stepping aside amid accusations of company misconduct. It also caps a remarkable change in fortune for a bank that, following the financial crisis, was regarded as a marquee brand.
Perhaps there had been worse scandals in recent memory, or ones costlier to the bottom line like JPMorgan's London Whale controversy, but few were as understandable to the general public as the Wells fiasco. The fact that it had occurred in the homestretch of a highly polarized presidential election made Stumpf even more of a target.
In the end he had to step aside amid mounting anger from investors and policymakers over the creation of fraudulent customer accounts.
Stumpf, 63, has left his post after nearly a decade as CEO. He will be succeeded by Tim Sloan, 56, who currently serves as president and chief operating officer. Sloan keeps the title of president and has joined the board of directors, too.
The new chairman is Stephen Sanger, who had been lead director. Independent director Elizabeth Duke, a former Federal Reserve Board governor, has been elevated to serve as vice chair.
Sloan's tough challenge will be to try to repair the tattered image of Wells Fargo.
"It's a great privilege to have the opportunity to lead one of America's most storied companies at a critical juncture in its history," Sloan was quoted as saying in the release. "My immediate and highest priority is to restore trust in Wells Fargo. It's a tremendous responsibility, one which I look forward to taking on."
Calls for Stumpf's resignation had escalated in recent weeks after the San Francisco company said on Sept. 8 it would pay nearly $190 million to settle charges that employees created roughly 2 million fake accounts to meet sales goals and collect bonuses.
More than 5,300 employees across the country were fired between 2011 and 2014 for creating the unlawful accounts.
Shortly after the settlement was disclosed, Wells Fargo said it would eliminate incentive packages that reward branch employees for cross-selling and hitting sales targets.
Still, Wells has struggled to contain the fallout from the cross-selling scandal — and, in the meantime, the company's once-sterling reputation has taken a significant hit.
Adding to the furor was a disastrous appearance by Stumpf in front of the Senate Banking Committee on Sept. 20. During his testimony, Stumpf fumbled basic questions such as when exactly the company uncovered the pervasive fraud.
Stumpf also provided confusing answers about whether senior executives have been held responsible for the scandal — and if they would be subject to clawbacks in pay. Eventually, Wells clawed back $41 million of Stumpf's pay and $19 million of unvested stock awards from former retail banking head Carrie Tolstedt.
But those punishments weren't enough to satisfy the bank's many critics.
"While I have been deeply committed and focused on managing the company through this period, I have decided it is best for the company that I step aside," Stumpf was quoted as saying in the release.
Stumpf was named CEO of Wells Fargo in June 2007, succeeding longtime executive Richard Kovacevich. Stumpf added the title of chairman nearly three years later, in January 2010.
In his first few months on the job, Stumpf oversaw one of the biggest deals in banking history, when Wells Fargo agreed in late 2008 to buy the $510 billion-asset Wachovia, which was on the brink of collapse.
Stumpf spent more than three decades at Wells Fargo and its predecessor companies. He joined Minneapolis-based Norwest Corp. in 1982 and quickly worked his way up the ranks. When Wells Fargo merged with Norwest in 1998, Stumpf took over as head of banking operations in the Southwest.
In 2002, Stumpf was named executive vice president and head of community banking. He was promoted to the roles of president and chief operating officer three years later.
In the lead-up to the announcement Wednesday, Sloan was widely viewed as the heir apparent. Still, some analysts had called on Wells to consider external candidates, arguing that an outsider was necessary to change company culture.
Sloan has been with Wells Fargo for 29 years. He was named president and chief operating officer in November 2015.
"The board of directors has great confidence in Tim Sloan," the new chairman, Sanger, said in the release. "He is a proven leader who knows Wells Fargo's operations deeply, holds the respect of its stakeholders, and is ready to lead the company into the future."