After taking a beating in Congress, the press and social media over his leadership during the consumer banking scandal that led to Wells Fargo firing 5,300 low-level workers and paying $185 million in fines, Well Fargo chairman and CEO John Stumpf yesterday announced his retirement, effective immediately.
“I have decided it is best for the company that I step aside,” Stumpf says in a statement.
“Now it's no secret that corporate press releases announcing the departure of a top executive often use the word ‘retire’ as a euphemism, and this one was no different. The fact that Wells Fargo announced a sweeping management reorganization just days before the bank will have to face analysts after it reports third-quarter earnings lends some intrigue to the development, but it had the air of inevitability,” observesBloomberg Gadfly columnist Michael P. Regan.
“It was an extraordinary moment even in the banking industry, which has been bedeviled by criticism and regular scandals since the financial crisis. Despite the industry’s many troubles, relatively few banking chiefs have stepped down under outside pressure,” writeThe New York Times’ Michael Corkery and Stacy Cowley. “But Wells Fargo’s transgressions were unusually blatant and straightforward, which contributed to the still-mounting public outcry.”
That would include, as you might expect, Sen. Elizabeth Warren (D.-Mass.), who went “on a tirade” on Twitter, according to a CNBC headline. “As I said: @WellsFargo CEO Stumpf should resign, return every nickel he made during the scam, & face DOJ/SEC investigation. He’s 1 for 3,” was the first of several tweets Warren made in the evening hours. “A bank teller would face criminal charges & a prison sentence for stealing a handful of 20s from the cash drawer” was another.
Stumpf’s job is being split between Tim Sloan, who has been widely viewed as a likely successor since he was named president and COO last November, and lead director Stephen Sanger, who will become Wells Fargo’s non-executive chair. Independent director Elizabeth Duke will serve as vice chair.
Sloan, 56, who joined the bank 29 years ago and has held leadership positions in the bank’s wholesale and commercial banking operations, had no exposure to the consumer banking scams.
“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,” write Reuters’ Dan Freed and Elizabeth Dilts.
“They had three goals in replacing Stumpf: speed, integrity, and competence,” Peter Conti-Brown, a business ethics and law professor at University of Pennsylvania's Wharton School of Business, tells Freed and Dilts. “If you want to move very fast and find someone intimately familiar with the business, you’ve got to hire an insider.”
Investors liked the move. The bank’s stock “popped” in after-hours trading, according to Barron’s, rising 1.5% by 5:30 p.m.
Stumpf will not receive a severance payment, according to Wells Fargo, Maggie McGrath reports in Forbes.
“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,” McGrath writes. He had earlier “agreed to forfeit $41 million in unvested equity awards and forego a salary while the Wells Fargo board launched an independent investigation.”
“Jeffrey Sonnenfeld, an authority on corporate governance at Yale, said Stumpf proved to be a ‘deer caught in the headlights with a tin ear in understanding, addressing, and communicating the problem,’” write Matt Egan, Jackie Wattles and Cristina Alesci for CNN Money.
Mind you, not everybody sees reality the same way, as you know if you’ve been paying any attention at all to any headlines recently.
Writing for the AustralianFinancial Review, John Kehoe warns that Stumpf’s resignation is “yet further evidence that investors must be alert to politics weighing heavily on banks around the world.” Kehoe suggests that “Congress has claimed a big scalp in forcing the hand of Mr. Stumpf,” and “left him little option but to fall on his sword.” And, looking at the big, global picture, he warns: “If politicians from Washington to Canberra get their way, it won't be the final profit-sapping blow banks are dealt.”
And, no, to answer your question. Rupert Murdoch does not own the AustralianFinancial Review.