With lawyer as interim CEO, Wells Fargo looks to mend fences with regulators
After Tim Sloan’s hasty retirement announcement, attention turned Friday to Wells Fargo’s new interim CEO, a corporate attorney who spent most of his career at a prominent New York law firm.
C. Allen Parker will run the $1.9 trillion-asset bank until its board selects a new CEO from outside the company, a process that seems likely to take months. Parker practiced law for 32 years at Cravath, Swaine & Moore, where he eventually became presiding partner, before joining Wells Fargo as general counsel in 2017.
Parker, 64, has never worked in the revenue-generating parts of a bank, and there are early indications that major business decisions will be put on hold during his tenure.
When asked during a conference call Thursday about the status of Wells Fargo’s plans to slash expenses, Chief Financial Officer John Shrewsberry offered little visibility beyond 2019. “Since there’s a new CEO coming, I think we should let that person have a view rather than locking them into Tim’s vision,” he said.
Parker, who was not available for comment Friday, said during the conference call that his priorities include addressing and meeting the expectations of regulators. His comments illustrated the company’s need to repair key relationships in Washington.
Sloan’s exit came two weeks after Wells Fargo’s primary federal regulator, the Office of the Comptroller of the Currency, issued a rare public rebuke, expressing disappointment with the bank’s corporate governance, its risk management and its performance under multiple consent orders.
Since February 2018, the scandal-plagued company has also been operating under an asset cap impose by the Federal Reserve Board. In January, Wells pushed back its estimate of when that restriction will be lifted, saying most recently that it expects the cap to remain in place for all of 2019.
One big question now is whether Sloan’s departure will further extend Wells Fargo’s time in the regulatory doghouse.
Jaret Seiberg, an analyst at Cowen Washington Research Group, wrote in a research note Friday that he believes the next window for action by the Fed is mid-2020. He stated that it is hard to see how the bank’s eventual new CEO can change how the company operates in less than a year.
He also noted that while a great deal of attention has been paid to the Fed’s asset cap, less is known about the bank’s fractious relationship with the OCC. “Our point is that solving the bank’s Washington troubles is more than just getting the Federal Reserve to lift the asset cap,” Seiberg wrote.
Cornelius Hurley, a lecturer at Boston University law school, noted that a good search for a CEO takes months. He added that it could take years for the person who is eventually hired to make an imprint on Wells Fargo. “Time is not on their side,” he said.
In predicaments like the one facing Wells Fargo, rebuilding credibility with regulators is critical, said Thomas Vartanian, a former OCC lawyer who later spent many years representing banks in private practice.
“I have never found deadlines to be a problem when things are going in the right direction,” said Vartanian, executive director of the financial regulation and technology institute at George Mason University’s law school. “Deadlines are a problem when things aren’t going in the right direction.”
Shares in Wells Fargo fell by 1.6% on Friday, even as the KBW Nasdaq Bank Index was basically flat.
In his final public remarks as CEO, Sloan insisted that the decision to retire was his own. “It’s simply a decision based on what I believe is best for our company,” he said Thursday.
But the circumstances of his retirement sparked chatter about what role the bank’s regulators may have played.
Sloan’s departure was somewhat reminiscent of Citigroup’s decision in 2003 to appoint Charles Prince as CEO amid a regulatory probe that involved outgoing CEO Sanford Weill.
Prince was also a lawyer. Unlike Parker, he was not put in charge on an interim basis.
The change at the top of Wells Fargo was also somewhat analogous to Bank of America’s choice of Brian Moynihan, a lawyer by training, to succeed Ken Lewis as CEO in late 2009. Moynihan’s tasks included repairing the Charlotte, N.C.-based bank’s relationships with its regulators.
Parker is a 1983 graduate of Columbia Law School who joined Cravath in 1984. His practice included advising banks and other companies on merger and acquisition deals.
In a 2013 interview, Parker recalled that in his first transaction as a lawyer, he represented a fledgling cellphone company. He credited two colleagues with teaching him the importance of being exhaustively prepared, treating everyone involved with respect, and taking personal responsibility for all aspects of the deal.
“Although this was a straightforward transaction, it was a great learning experience for a young lawyer in his first few months of practice,” he recalled.
Parker was named Cravath’s presiding partner in 2012, and he served in that position until 2016.
Thomas DeLong, a senior fellow and former professor of management practice at Harvard Business School, first met Parker about a decade ago when Parker attended a leadership program for leaders in professional services. Very few managing partners of law firms attend these types of programs, and Parker stood out for that reason, DeLong said.
“The fact that he was there, by definition, illustrated that he was interested in this whole concept of how do you bring individuals who don’t necessarily want to be managed together in a particular direction and get commitment to the direction and then execute on that direction,” he said. “Most importantly, he just seemed like a very real person. There was no image management. I just said, this is an authentic human being, and I thought to myself, any organization that has the opportunity to have Allen in a senior position is very fortunate.”
Parker reportedly met Sloan at a charity event in 2012. The San Francisco bank and its subsidiaries had a relationship with Cravath that dated back more than a century.
In March 2017, Parker was hired by Wells Fargo as general counsel, succeeding James Strother, who had postponed his retirement amid the company’s unauthorized-account-opening scandal.
“Allen is well known throughout the legal and financial services industries not only for advising some of the world’s largest companies in their most complex legal matters,” Sloan said in a press release at the time,” but also for his strong character, integrity and high ethical standards.”
Parker has spent enough time at Wells Fargo to get to know the organization, but not enough time to become entrenched in the problems consuming the bank, DeLong said. “He needs to lean in to regulators,” DeLong said. “I know that Allen will not simply sit by the wayside and nod.”
Laura Alix contributed to this report.