Wells Fargo CEO retires amid accounts scandal and is replaced by a longtime company insider – Los Angeles Times
John Stumpf resigned Wednesday as chairman and chief executive of Wells Fargo & Co., bowing to mounting criticism from lawmakers and others who said he should lose his job over revelations that bank employees created as many as 2 million accounts without customer authorization.
The wrongdoing by the San Francisco bank was exposed by a Los Angeles Times investigation and led to an $185-million settlement with regulators last month, sparking the biggest banking scandal since the financial crisis and renewing calls for a breakup of the nation’s biggest banks.
Stumpf, 63, had been chief executive since 2007 and chairman of Wells Fargo’s board since 2010.
Timothy J. Sloan, 56, a longtime Wells Fargo executive who was named president of the company last year, immediately replaced Stumpf as chief executive, the bank said.
Stumpf is not set to receive any severance, according to public filings. However, he still will retain more than $100 million in vested stock, plus accumulated pension and 401(k) benefits exceeding $24 million, according to the filings.
“I am grateful for the opportunity to have led Wells Fargo,” Stumpf said in a statement. “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. I know no better individual to lead this company forward than Tim Sloan.”
This week, the bank signaled that Sloan was in line to succeed Stumpf, announcing several management changes, including naming a new head of its wholesale banking unit, which Sloan had previously led.
Sloan will not inherit the company’s chairmanship. That role will go to former General Mills executive Stephen Sanger, now the company’s lead independent director. Critics of the bank had called not only for Stumpf’s resignation but for the bank to separate the CEO and chairman roles.
In after-hours trading, investors reacted positively to the news, sending shares up 1.65% to $46.07. Shares had been off nearly 9% since the day before the $185-million settlement was disclosed last month.
In an interview with The Times on Wednesday, Sloan said it is “a privilege” to take over as CEO, though he acknowledged that he is taking over at a difficult time.
“Our reputation has been impacted by some of the mistakes we made in our retail banking business,” said Sloan, who has been with the bank for 29 years. “We’ll regain our customers’ trust and continue to grow.”
He said he’s not sure how long that will take. “I wish it could be a week from now,” he said, adding that it will more likely be a process that takes at least months if not years.
In an earlier interview on CBNC, Sloan said the last five weeks have tainted the bank’s reputation. But regulators say bad practices at the bank went on for years.
Sloan told The Times he was not trying to minimize the scope of the scandal.
“I don’t mean to downplay that at all,” he said. “I don’t mean to minimize the impact. But the changes we’ve made, I think, are working.”
Sloan also said that Stumpf was not pushed out. The Wall Street Journal and New York Times reported that he submitted his resignation in a brief and unexpected letter to the board Wednesday, just two days before a quarterly earnings call Stumpf was expected to lead.
“This was a decision made by John Stumpf,” Sloan said. “He wasn’t fired, he wasn’t asked to leave. He decided it was in the best interest of the company to retire.”
Sloan, who lives in San Marino but also owns a residence in San Francisco, said he plans to continue to split his time between the two.
Though the bank’s critics had called for Stumpf to resign weeks ago, Wednesday’s announcement did little to satisfy them. In fact, some immediately raised questions about Sloan’s possible connection to the scandal.
“Mr. Stumpf’s retirement does nothing to answer the many questions that remain,” said Sen. Sherrod Brown (D-Ohio), who harshly criticized Stumpf last month at a meeting the Senate Banking Committee held on the Wells Fargo scandal.
“We are still waiting for answers as to how Wells Fargo plans to right its wrongs against customers and the low-paid employees who weren’t given the benefit of a retirement package when they were fired for refusing to cheat,” he said.
Rep. Maxine Waters (D-Los Angeles), called it “more than appropriate” that Stumpf retire given his direct responsibility” for failing to stop fraudulent activity at the bank. But she questioned whether Sloan was the right person to replace him.
“I remain concerned that incoming CEO Tim Sloan is also culpable in the recent scandal, serving in a central role in the chain of command that ought to have stopped this misconduct from happening. Indeed, as recently as June of this year, Mr. Sloan was telling the news media that Wells Fargo’s aggressive cross-selling strategies were fundamentally sound and didn’t need to change,” she said in a statement.
Paulina Gonzalez, executive director of banking advocacy group California Reinvestment Coalition, said she wants to ensure there are “criminal investigations for anybody involved in the scandal” and also questioned Sloan’s appointment given his tenure at the bank.
Carrie Tolstedt, the community banking executive who ran the division where much of the unauthorized accounts activity took place, reported to Sloan after he was named president last year.
“We have a lot of questions for Mr. Sloan,” Gonzalez said. “He was there for the entirety of the accounts scandal.”
Stumpf had said he intended to stay at his post, telling members of the House Financial Services Committee investigating the matter on Sept. 29 that he was “accountable for leading Wells Fargo as the company restores the trust of customers, team members and investors.”