Wells Fargo & Co. CEO John Stumpf resigned immediately on Wednesday, unable to overcome the scandal that has rocked the bank in recent months.
Zeke Faux and Laura J. Keller of Bloomberg News had the news:
Stumpf, 63, is retiring from both posts effective immediately, the bank said Wednesday in a statement. Tim Sloan, 56, the company’s president and chief operating officer, will succeed him as CEO. Lead director Stephen Sanger will serve as the board’s non-executive chairman.
“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,” Sanger said in the statement. “However, he believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges.”
Stumpf leaves Wells Fargo and its 268,000 employees with a damaged reputation. It has refunded $2.6 million to affected customers and has said it’s ending the sales incentives that have been blamed for the abuses. The bank’s stock fell as much as 12 percent after the misdeeds became public, and its subsequent rebound has not been enough for Wells Fargo to retake the top spot in market value among U.S. banks, which it relinquished to JPMorgan Chase & Co.
Wells Fargo shares climbed 1.5 percent to $46 in extended trading at 5:11 p.m. in New York, after the bank announced Stumpf’s exit. The stock had slumped 17 percent this year through the close of regular trading, the worst performance in the 24-company KBW Bank Index.
Emily Glazer of The Wall Street Journal focused on what led to Stumpf’s departure:
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.
The bank has said it regrets the improper behavior, has ended sales goals for retail-bank employees and has been refunding customers improperly charged.
The problems came to light Sept. 8 when Wells Fargo agreed to a $185 milion fine and enforcement action with regulators. That settlement also brought to light that the bank had fired 5,300 employees over a five-year period for improper behavior. This underscored the breadth of problems related to a hard-charging sales culture that pushed bankers to sell multiple products to individual customers.
Matt Krantz of USA Today notes that Stumpf walks away with at least $134 million:
While Stumpf doesn’t receive a special retirement payout, executive-pay tracker Equilar estimates he’ll walk with $134.1 million. The package remains that large even after Stumpf last month agreed to a $41 million clawback following a grilling he received from the Senate Banking Committee reprimanding him for not taking responsibility. He agreed to give up unvested stock, but still owns shares vested in previous years.
During his nearly four-hour testimony before the House Financial Services Committee last month, Stumpf was called upon several times to resign by representatives. Stumpf said at the hearing he wasn’t planning to resign, and that remaining at the bank and seeing through the reforms was part of taking responsibility. He also indicated such decisions are up to the board.
While Stumpf walks with millions, the fraud has been much costlier for the bank’s once-stellar reputation and for those who hold Wells Fargo stock. Investors have lost $23.1 billion in market value as the shares have fallen nearly 10% from when the scandal broke. Wells Fargo was formerly the most valuable U.S. bank but has since fallen behind JPMorgan Chase (JPM).
