Wells Fargo CEO steps down in wake of sales scandal

The beleaguered bank head’s retirement was effective immediately, leaving the company’s reputation in the hands of its former chief operating officer.

Wells Fargo will continue picking up the pieces of its reputation under a new leader.

On Wednesday, the company’s chief executive, John Stumpf, announced his immediate retirement roughly a month after the bank’s sales scandal surfaced.

The Wall Street Journal reported:

Mr. Stumpf’s departure comes after he was subjected to two grillings on Capitol Hill in which he was attacked by both Democrats and Republicans. The bank also faces numerous federal and state inquiries into its sales-practices issues, including from the Justice Department.

The toppling of Mr. Stumpf, 63 years old and just shy of his 10th year as CEO, marks a stunning comedown for a firm that largely passed through the financial crisis unscathed and which was seen as a reliable Main Street lender. That reputation was shattered by the sales-tactics scandal, which revealed that bank employees had opened as many as two million accounts without customers’ knowledge.

CNN reported that the announcement marks “a stunning downfall for one of the banking industry’s most powerful figures.”

Wells Fargo’s president and chief operating officer, Tim Sloan, will lead the company in Stumpf’s stead.

White paper: How to break bad news to staff and take tough questions head on.

In a company press release, Stumpf said:

I am grateful for the opportunity to have led Wells Fargo. 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.

Wells Fargo’s lead director and chairman of the board, Stephen Sanger, said the following:

John Stumpf has dedicated his professional life to banking, successfully leading Wells Fargo through the financial crisis and the largest merger in banking history, and helping to create one of the strongest and most well-known financial services companies in the world. However, he believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges and take the Company forward. The Board of Directors has great confidence in Tim Sloan. 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.

The New York Times reported:

In an interview, Mr. Sloan — who had known for several days that Mr. Stumpf was preparing to step down — said Mr. Stumpf told him of his decision to retire after concluding that he would most likely continue to be the focus of much of the criticism being leveled at the bank.

“It was an incredibly selfless decision,” Mr. Sloan said.

In Wells Fargo’s press release, Sloan said his focus will be to “restore trust” in the company:

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. 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, because of the incredible caliber of our people, and the opportunity we have to impact the lives of our millions of customers around the world. We will work tirelessly to build a stronger and better Wells Fargo for generations to come.

Though Sloan and other company leaders are hailing the resignation, critics say the move isn’t enough.

The New York Times reported:

Some of Mr. Stumpf’s biggest critics in Congress, Senator Elizabeth Warren and Representative Maxine Waters (both Democrats), approved of Mr. Stumpf’s resignation but called for more action.

“As I said at the hearing last month, Mr. Stumpf should resign, return every nickel he made while this scam was going on, and face an investigation by the Justice Department and S.E.C.,” Ms. Warren said in a statement. “So far, he’s one for three.”

Investors appear to have put a stamp of approval on the resignation. The New York Times reported that Wells Fargo’s stock rose 2 percent in after-hours trading.

Stumpf will receive roughly $120 million as his compensation package, The Wall Street Journal reported. The amount includes Stumpf’s retirement benefits, stock and stock options. It’s also the amount left after the $41 million that Wells Fargo previously deducted from the former executive’s earnings.

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