Wells Fargo CEO John
Stumpf quits, replaced by Tim Sloan
Send a link to a friend
[October 13, 2016]
By Dan Freed and Elizabeth Dilts
YORK (Reuters) - Wells Fargo & Co's veteran chairman and chief executive
officer, John Stumpf, abruptly departed on Wednesday bowing to pressure
over its sales tactics that has damaged the bank's reputation and put
Wall Street under renewed scrutiny.
San Francisco-based Wells Fargo said Stumpf, 63, was retiring and would
be replaced as chief executive by President and Chief Operating Officer
Tim Sloan, 56.
The bank is splitting the role of chairman and CEO with Stephen Sanger,
its lead director, becoming chairman.
Stumpf's exit leaves Sloan with a steep challenge in rebuilding its
reputation and overhauling its hard-charging sales culture without
gutting profits. The new CEO will also contend with ongoing regulatory
investigations and private litigation.
The departure is a stunning reversal of fortune for Stumpf, who
successfully navigated Wells through the financial crisis and built it
into the world's most valuable bank with a focus on Main Street-style
lending that was the envy of Wall Street.
"I have decided it is best for the company that I step aside," he said
in a statement.
The bank's shares, which have slumped in the wake of the scandal, rose 2
percent in after-hours trading after the bank announced Stumpf's exit.
Sloan said his immediate priority was to restore trust in the bank.
Long considered Stumpf's successor, Sloan has spent most of his career
at Wells working with corporations and institutional investors not the
retail division, where the fraudulent accounts were opened.
But as the former CFO, and president and COO of the company since
November, he has been responsible for the entire company, including the
retail bank at the heart of the scandal.
Carrie Tolstedt, the woman who ran the retail division when the
misconduct occurred, reported to Sloan from November of last year. She
left the bank last month.
“They had three goals in replacing Stumpf: speed, integrity, and
competence. If you want to move very fast and find someone intimately
familiar with the business, you’ve got to hire an insider," said Peter
Conti-Brown, a business ethics and law professor at University of
Pennsylvania's Wharton School of Business.
"If you want to hire someone with unimpeachable integrity, that's going
to take time to find," Conti-Brown said.
Sloan will preside over the bank's third-quarter earnings on Friday.
FALL FROM GRACE
Stumpf's fall from grace started with a $185 million regulatory
settlement between the bank, regulatory authorities and a Los Angeles
prosecutor over its staff opening as many as 2 million accounts without
[to top of second column]
Wells Fargo CEO John Stumpf testifies before the House Financial
Services Committee on Capitol Hill in Washington, DC, U.S. September
29, 2016. REUTERS/Gary Cameron
misconduct, carried out by low-level branch staff to meet internal sales
targets, shattered the bank's folksy image and a raft of federal and state
was summoned before the U.S. Senate and faced calls for his resignation after
repeatedly deferring responsibility to low level workers and decision-making
authority to his board of directors. Massachusetts Senator Elizabeth Warren
called him a "gutless leader" who "should be criminally investigated."
A week after that hearing, he agreed to forgo $41 million in unvested stock
However, that was not enough and at a second hearing, some lawmakers called for
the bank to be broken up.
California State Treasurer John Chiang, who announced a year-long ban on state
business with Wells Fargo, released a statement praising Stumpf's resignation.
"Based on his duck, dodge, and deny performance in the wake of admissions that
his bank had fleeced legions of its own customers, he was not – and would never
be – the change agent leader Wells Fargo so desperately needs," Chiang said in
John Thielen, who grew up with Stumpf in Piers, Minnesota where he was a year
behind the future CEO in school, said he felt sorry for Stumpf.
"He's in hot water, but I think he put himself there," Thielen told Reuters in a
recent interview that preceded Stumpf's resignation.
(Additional reporting by Sarah N. Lynch; Editing by Bernard Orr)
[© 2016 Thomson Reuters. All rights
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.