Updated Oct. 12, 2016 5:30 p.m. ET
Wells Fargo & Co. Chairman and Chief Executive John Stumpf is stepping down from both roles, effectively immediately, as the bank’s sales tactics scandal continues to roil the firm, a person familiar with the matter said.
WELLS FARGO SCANDAL
- CEO Isn’t Out of Danger (Sept. 28)
- Lawmakers Grill CEO (Sept. 29)
- Wells Fargo to Pay $185 Million Fine Over Account Openings (Sept. 8)
- Wells Fargo Accused of Aggressive Sales Tactics (Sept. 7)
Mr. Stumpf will be replaced by President and Chief Operating Officer Timothy J. Sloan, who was widely expected to succeed Mr. Stumpf when he retired in the future.
The bank’s independent chairman Stephen Sanger will take over as board chairman, the person said. Elizabeth Duke, a current board director and former Federal Reserve governor, will become vice chairman of the board, this person said.
The bank has been under fire for more than a month after agreeing in early September to pay a $185 million settlement with regulators and a city official for opening as many as 2 million accounts without customers’ knowledge. It has since faced a raft of federal and state investigations, including from the Department of Justice.
The board previously had decided that Mr. Stumpf must forfeit $41 million in unvested equity, one of the largest clawbacks ever for the chief of a U.S. bank.
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Less than a month after Senator Elizabeth Warren called for his head, embattled Wells Fargo CEO John Stumpf is out. Wells Fargo announced Wednesday evening that Stumpf is retiring, effective immediately.
Tim Sloan, Wells Fargo’s current president and chief operating officer, will succeed Stumpf as CEO. Stephen Sanger, the bank’s lead director, has been chosen to serve as the board’s non-executive chairman.
“I am grateful for the opportunity to have led Wells Fargo,” Stumpf said in a statement Wednesday. “I am also very optimistic about its future, because of our talented and caring team members and the goodwill the stagecoach continues to enjoy with tens of millions of customers. 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.”
Stumpf has been under fire since Wells announced on September 8 that it is paying $185 million to regulators to settle claims that it had created phony bank accounts for customers and applied for credit cards without customers’ knowledge or permission. This “settlement” proved to be anything but, instead drawing the ire of everyone from customers to Treasury Secretary Jack Lew. On September 20, Stumpf was grilled by the Senate Banking Committee; it was during this session that he was slammed by Senator Elizabeth Warren.
“You should resign,” she said. “You should be criminally investigated by the Department of Justice and Securities and Exchange Commission.”
By September 27, Stumpf had agreed to forfeit $41 million in unvested equity awards and forego a salary while the Wells Fargo board launched an independent an investigation. The move was a pre-emptive attempt to temper the criticism that Stumpf would face during his September 29 hearing in front of the House Financial Services Committee, though it ended up being too little, too late.
“The buck always stops at the leader. The original answer coming out of the gate didn’t fly,” says Bill Smead, chief investment officer of the $1.15 billion Smead Value Fund. Smead was referencing Stumpf’s early response to the scandal, which appeared to place the blame on the 5,300 rank-and-file branch workers who were fired for opening the fake accounts. Former employees allege that they were under unreasonable pressure to hit unrealistic sales goals, with some going as far as filing a $2.6 billion class action suit.
Wells has since abolished product sales goals in its retail banking unit.
Stumpf departs Wells Fargo after 34 years with the bank, nine of which he spent as its CEO. Stumpf grew up on a farm in Pierz, Minnesota, and until the phony account scandal broke, was seen as bringing a dose of Minnesota-nice to Wall Street.
“Even though we were very poor financially we learned the value of plural pronouns—us, we and ours,” Stumpf told FORBES in 2012. “There wasn’t a lot of time for I, me and my.”
It appears that mindset was the one behind Wednesday’s news.
“John’s decision to retire is clearly sad for all of us because we think so highly of John and his leadership over the last decade and longer. He concluded this was the right thing to do for the company, to allow it to move forward,” Sloan said during a live interview on CNBC Wednesday evening. “He felt the focus on him was becoming a distraction.”
Sloan comes to the CEO role after 29 years and numerous different positions with Wells Fargo; most recently, he was head of wholesale banking (a position he assumed in 2014) and president and COO (roles he assumed in November 2015). These appointments were a part of a Stumpf strategy that involved rotating his deputies through a variety of positions so that there would be a deep bench of talent when it came time for his replacement.
“My immediate and highest priority is to restore trust in Wells Fargo. It’s a tremendous responsibility,” Sloan said Wednesday.
A representative for Wells Fargo said that Stumpf will not receive a severance payment. According to a March 2016 proxy statement, Stumpf is entitled to a $24 million “supplemental cash balance plan,” though the spokesperson said that the proceeds from this benefit are not paid until six months after retirement.
Wells Fargo shares, which have hit a 52-week low since the account scandal broke, rose 2% in after hours trading on the news. The bank is set to report its quarterly earnings on Friday morning.
Reporting was contributed by Antoine Gara