Wells Fargo CEO John Stumpf Steps Down
By EMILY GLAZER
Oct. 12, 2016 6:50 p.m. ET
Wall Street Journal
Wells Fargo & Co. Chairman and Chief Executive John Stumpf, under fire for the bank’s sales-tactics scandal and his own handling of its fallout, is stepping down from both roles, effectively immediately, the bank said Wednesday.
Mr. Stumpf will be replaced as head of the third-largest U.S. bank by assets by President and Chief Operating Officer Timothy J. Sloan, who was widely seen as his heir apparent.
Mr. Stumpf won’t receive a severance package, the bank said. But he still retires with tens of millions of dollars in previously earned compensation over his about 35-year career at the bank. The board, at Mr. Stumpf’s own recommendation, had previously decided he should relinquish $41 million in unvested equity, one of the biggest-ever forfeitures of pay by a bank chief.
Mr. Stumpf’s departure comes after he was subjected to two brutal 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 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.
Those problems came to light Sept. 8 when Wells Fargo agreed to a $185 million 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. This underscored the breadth of problems related to a hard-charging sales culture that pushed bankers to sell multiple products to individual customers.
While Mr. Sloan takes over as CEO, the bank’s independent chairman, Stephen Sanger, will become board chairman, the bank said. Elizabeth Duke, a current board director and former Federal Reserve governor, will become the board’s vice chairman.
Mr. Stumpf officially told the board of his decision to retire in a half-page letter Wednesday, according to a person familiar with the matter. In the letter, he said he wouldn’t sell any of the shares he already owns before the end of the board’s independent investigation, this person said.
Mr. Stumpf will walk away with total compensation valued at about $120 million, according to an estimate by Mark Reilly, a managing director at human-resources consultancy Overture Group LLC. This estimate reflects the value of stock and stock options as well as retirement benefits. It is based on the bank’s Wednesday share price.
However, the board could decide, depending on the investigation’s outcome, that Mr. Stumpf should relinquish more pay, the person added. This could include as much as $24 million of pension benefits, the person said.
The board didn’t try to persuade Mr. Stumpf to stay. It hosted a phone-call board meeting in the early afternoon Wednesday to vote officially on next steps. It made sense for Mr. Sanger to take over as nonexecutive chairman since he was already the lead independent director and to split the CEO and chairman functions, this person said, given the corporate-governance pressure in all industries to do so.
This will make Wells Fargo only the second big U.S. bank, along with Citigroup Inc., to split the roles of chairman and chief executive. It will also return Wells Fargo to the arrangement in place when Mr. Stumpf first became CEO.
At that time, his predecessor, Richard Kovacevich, remained as chairman. Known for his affable demeanor, Mr. Stumpf in his early years as CEO often allowed the outspoken Mr. Kovacevich to grab the spotlight. When Wells Fargo decided to acquire Wachovia Corp. during the 2008 financial crisis, for instance, it retained Mr. Kovacevich as chairman to play a key role in combining the two large retail banks. Mr. Stumpf succeeded Mr. Kovacevich as chairman at the end of 2009.
Mr. Sloan said in an interview after the bank’s announcement Wednesday that Mr. Stumpf had told him about his plans to retire “over the last few days.” He said Mr. Stumpf’s decision was “the best thing for the company...to pivot in a new direction” and that Mr. Stumpf had said he was “becoming a bit of a distraction.”
Mr. Sloan said Mr. Stumpf’s decision to retire wasn’t related to “any short-term metrics or returns for the company” but added that he can’t get into more specifics ahead of the bank’s third-quarter earnings report Friday.
Mr. Sloan said, though, that he aims to improve the bank’s reputation by being “very focused” on addressing customers’ concerns, remediating customers who were improperly charged fees and ensuring the bank has the right products and services available to them.
Mr. Sloan has one advantage in trying to clean up the bank’s mess: the 29-year veteran’s roots within Wells Fargo aren’t in the retail-banking business. Rather, the 56-year-old rose through the commercial- and investment-banking side.
That is a contrast to Mr. Stumpf, who rose through the ranks of the bank’s retail business. A Minnesota native, Mr. Stumpf was raised on a farm with 10 siblings and joined Norwest Corp. in 1982 as a loan administrator. He rose to oversee the bank’s Colorado and Arizona operations and later oversaw its Texas business. When Norwest merged with Wells Fargo in 1998, Mr. Stumpf became head of the bank’s southwestern region, then in 2002, he became head of the community banking unit. It was problems within that business that eventually led to Mr. Stumpf’s departure.
Shares of Wells Fargo, down 13% over the past year, rose 1.8% to $46.15 in after-hours trading.
—Christina Rexrode contributed to this article.
Write to Emily Glazer at emily.glazer@wsj.com
Oct. 12, 2016 6:50 p.m. ET
Wall Street Journal
Wells Fargo & Co. Chairman and Chief Executive John Stumpf, under fire for the bank’s sales-tactics scandal and his own handling of its fallout, is stepping down from both roles, effectively immediately, the bank said Wednesday.
Mr. Stumpf will be replaced as head of the third-largest U.S. bank by assets by President and Chief Operating Officer Timothy J. Sloan, who was widely seen as his heir apparent.
Mr. Stumpf won’t receive a severance package, the bank said. But he still retires with tens of millions of dollars in previously earned compensation over his about 35-year career at the bank. The board, at Mr. Stumpf’s own recommendation, had previously decided he should relinquish $41 million in unvested equity, one of the biggest-ever forfeitures of pay by a bank chief.
Mr. Stumpf’s departure comes after he was subjected to two brutal 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 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.
Those problems came to light Sept. 8 when Wells Fargo agreed to a $185 million 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. This underscored the breadth of problems related to a hard-charging sales culture that pushed bankers to sell multiple products to individual customers.
While Mr. Sloan takes over as CEO, the bank’s independent chairman, Stephen Sanger, will become board chairman, the bank said. Elizabeth Duke, a current board director and former Federal Reserve governor, will become the board’s vice chairman.
Mr. Stumpf officially told the board of his decision to retire in a half-page letter Wednesday, according to a person familiar with the matter. In the letter, he said he wouldn’t sell any of the shares he already owns before the end of the board’s independent investigation, this person said.
Mr. Stumpf will walk away with total compensation valued at about $120 million, according to an estimate by Mark Reilly, a managing director at human-resources consultancy Overture Group LLC. This estimate reflects the value of stock and stock options as well as retirement benefits. It is based on the bank’s Wednesday share price.
However, the board could decide, depending on the investigation’s outcome, that Mr. Stumpf should relinquish more pay, the person added. This could include as much as $24 million of pension benefits, the person said.
The board didn’t try to persuade Mr. Stumpf to stay. It hosted a phone-call board meeting in the early afternoon Wednesday to vote officially on next steps. It made sense for Mr. Sanger to take over as nonexecutive chairman since he was already the lead independent director and to split the CEO and chairman functions, this person said, given the corporate-governance pressure in all industries to do so.
This will make Wells Fargo only the second big U.S. bank, along with Citigroup Inc., to split the roles of chairman and chief executive. It will also return Wells Fargo to the arrangement in place when Mr. Stumpf first became CEO.
At that time, his predecessor, Richard Kovacevich, remained as chairman. Known for his affable demeanor, Mr. Stumpf in his early years as CEO often allowed the outspoken Mr. Kovacevich to grab the spotlight. When Wells Fargo decided to acquire Wachovia Corp. during the 2008 financial crisis, for instance, it retained Mr. Kovacevich as chairman to play a key role in combining the two large retail banks. Mr. Stumpf succeeded Mr. Kovacevich as chairman at the end of 2009.
Mr. Sloan said in an interview after the bank’s announcement Wednesday that Mr. Stumpf had told him about his plans to retire “over the last few days.” He said Mr. Stumpf’s decision was “the best thing for the company...to pivot in a new direction” and that Mr. Stumpf had said he was “becoming a bit of a distraction.”
Mr. Sloan said Mr. Stumpf’s decision to retire wasn’t related to “any short-term metrics or returns for the company” but added that he can’t get into more specifics ahead of the bank’s third-quarter earnings report Friday.
Mr. Sloan said, though, that he aims to improve the bank’s reputation by being “very focused” on addressing customers’ concerns, remediating customers who were improperly charged fees and ensuring the bank has the right products and services available to them.
Mr. Sloan has one advantage in trying to clean up the bank’s mess: the 29-year veteran’s roots within Wells Fargo aren’t in the retail-banking business. Rather, the 56-year-old rose through the commercial- and investment-banking side.
That is a contrast to Mr. Stumpf, who rose through the ranks of the bank’s retail business. A Minnesota native, Mr. Stumpf was raised on a farm with 10 siblings and joined Norwest Corp. in 1982 as a loan administrator. He rose to oversee the bank’s Colorado and Arizona operations and later oversaw its Texas business. When Norwest merged with Wells Fargo in 1998, Mr. Stumpf became head of the bank’s southwestern region, then in 2002, he became head of the community banking unit. It was problems within that business that eventually led to Mr. Stumpf’s departure.
Shares of Wells Fargo, down 13% over the past year, rose 1.8% to $46.15 in after-hours trading.
—Christina Rexrode contributed to this article.
Write to Emily Glazer at emily.glazer@wsj.com
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