Wells Fargo CEO John Stumpf Quits, Replaced by Tim Sloan

"I have decided it is best for the company that I step aside," Stumpf said in a statement.

(Reuters) — Wells Fargo & Co’s veteran chairman and chief executive officer, John Stumpf, abruptly departed on Wednesday bowing to pressure over its sales tactics that has damaged the bank’s reputation and put Wall Street under renewed scrutiny.

San Francisco-based Wells Fargo said Stumpf, 63, was retiring and would be replaced as chief executive by President and Chief Operating Officer Tim Sloan, 56.

The bank is splitting the role of chairman and CEO with Stephen Sanger, its lead director, becoming chairman.

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.

The departure is a stunning reversal of fortune for Stumpf, who successfully navigated Wells through the financial crisis and built it into the world’s most valuable bank with a focus on Main Street-style lending that was the envy of Wall Street.

“I have decided it is best for the company that I step aside,” he said in a statement.

The bank’s shares, which have slumped in the wake of the scandal, rose 2 percent in after-hours trading after the bank announced Stumpf’s exit.

Sloan said his immediate priority was to restore trust in the bank.

Long considered Stumpf’s successor, Sloan has spent most of his career at Wells working with corporations and institutional investors not the retail division, where the fraudulent accounts were opened.

But as the former CFO, and president and COO of the company since November, he has been responsible for the entire company, including the retail bank at the heart of the scandal.

Carrie Tolstedt, the woman who ran the retail division when the misconduct occurred, reported to Sloan from November of last year. She left the bank last month.

“They had three goals in replacing Stumpf: speed, integrity, and competence. If you want to move very fast and find someone intimately familiar with the business, you’ve got to hire an insider,” said Peter Conti-Brown, a business ethics and law professor at University of Pennsylvania’s Wharton School of Business.

“If you want to hire someone with unimpeachable integrity, that’s going to take time to find,” Conti-Brown said.

Sloan will preside over the bank’s third-quarter earnings on Friday.

Fall From Grace

Stumpf’s fall from grace started with a $185 million regulatory settlement between the bank, regulatory authorities and a Los Angeles prosecutor over its staff opening as many as 2 million accounts without customers’ knowledge.

The misconduct, carried out by low-level branch staff to meet internal sales targets, shattered the bank’s folksy image and a raft of federal and state investigations followed.

Stumpf was summoned before the U.S. Senate and faced calls for his resignation after repeatedly deferring responsibility to low-level workers and decision-making authority to his board of directors. Massachusetts Senator Elizabeth Warren called him a “gutless leader” who “should be criminally investigated.”

A week after that hearing, he agreed to forgo $41 million in unvested stock awards.

However, that was not enough and at a second hearing, some lawmakers called for the bank to be broken up.

California State Treasurer John Chiang, who announced a year-long ban on state business with Wells Fargo, released a statement praising Stumpf’s resignation.

“Based on his duck, dodge, and deny performance in the wake of admissions that his bank had fleeced legions of its own customers, he was not — and would never be — the change agent leader Wells Fargo so desperately needs,” Chiang said in the statement.

John Thielen, who grew up with Stumpf in Piers, Minnesota, where he was a year behind the future CEO in school, said he felt sorry for Stumpf.

“He’s in hot water, but I think he put himself there,” Thielen told Reuters in a recent interview that preceded Stumpf’s resignation.

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  • “San Francisco-based Wells Fargo said Stumpf, 63, was retiring and would be replaced as chief executive by President and Chief Operating Officer Tim Sloan, 56.”

    “Chief OPERATING Officer Tim Sloan”? The whole problem stemmed from the way the bank ‘operated’. At best, this sounds like ‘replacing a headache with an upset stomach’; but, it sounds MORE like ‘out of the frying pan, into the fire’.

      • To the degree that what i said is oversimplification, your criticism is valid. My intended point stands unscathed, though: A COO is NOT someone who is far enough outside of the thick of things that he could possibly not have known what was going on. That suggests either that Sloan condoned what was happening as much as anyone, or that he deliberately looked the other way. Neither case offers much hope for the future rectitude of Wells Fargo.

        • I can’t think of a single reason for the senior executives to condone such behavior. There’s no way anybody could think it could’ve gotten on undetected for long.

          Decapitating top management would destroy shareholder value, millions of Americans would be either directly or indirectly (mutual fund) be hurt. The resulting chaos would also open the door to who knows what other fraud or mismanagement. One out of five Americans banks with Wells Fargo. 270,000 people work there.

          Finally, nobody wants to and their career like John Stumpf.

          • Wells Fargo Employee

            I’ve worked at Wells Fargo for 12 years. This all makes me very sad – and having John Stumpf leave is really sad, too. He has been a fabulous leader to this company. Tim Sloan must now lead the company through a very difficult time.
            I wish there was a way to convince people…this is not a reflection of what our company is all about. I’m not quite a “low-level” employee referenced in the article…but I’m also nowhere near senior management. We are always encouraged to do what’s right for the customer, and I’ve never ever heard that anybody believes in cutting corners or deliberately acting in a way that is contrary to the company’s ethics and values. Those employees’ actions have tarnished the reputation of the entire company and cost a really great man his job.

          • I meet with roughly 35 CEOs every year along with their management teams. Organizational cultures are very different. One thing that is consistent ( at least with the people who care to meet with me) is a desire to do well.

            In my personal observation, the senior leadership of Wells Fargo are well-intentioned, diligent, thoughtful and proud people who are focused on their customers. It is this superior culture that was able to acquire Wachovia without destroying all the good that was in that bank.

          • The single reason for the senior executives to condone such behavior is what the single reason ALWAYS is: money. By that score, i expect that ALL of them will still emerge from this whole stratagem ahead of where they would have been otherwise. And, this wouldn’t be the first wrong-doing Wells Fargo has committed without ANY top-level career having to end. So, there wasn’t much reason for them to believe that anything would be different in this instance.

            What you say about “decapitating” top management may well be right; but, if one is not going to punish the people who are most responsible, what, then, is the purpose — aside from window dressing — of conspicuously firing thousands of LOW-level employees? A desire to do well and a desire to do GOOD are two different creatures. In this case, they are adversaries.

            The earnestness in your exalting characterization of Wells Fargo is almost palpable. So much so that i’d be inclined to adopt it at face value were it not for two considerations:

            1) In the wake of the string of misdeeds that Wells Fargo has committed in recent years, the LEAST we must allow is that there are people in upper management who are working at cross purposes with those who meet with you, and…

            2) I suspect that your assessment of Wells Fargo is formulated by comparison. But, compared to WHAT, then? Even if WF is the cream of the crop, that raises the question of what the crop is like. The crop of WF’s competitors in the banking industry as a whole sets a very low bar for integrity. (The actual TRAIT; not the word.) ALL OF THEM — Wells Fargo included — have enough financial security that they cannot possibly rationalize short-changing ANYONE AT ALL.

            With even a moderate attenuation of their acquisitiveness, they (individually or collectively) could be a great force for good in our society. In light of their privileged position in it, not to do good is unjustifiable; to do harm is inexcusable.

            Having said all of that, i’ll say this also, Mr. Visconti: under Tim Sloan, i’d like nothing more than for your esteem of Wells Fargo to be vindicated henceforth, and my misgiving to be proven baseless.

            “Be as you wish to seem.” –Socrates

  • I have been a Wells Fargo team member for 30 years. In my opinion, John Stumpf, has been an outstanding leader since he took the helm of the bank. I in no way feel that he, or any upper level management member knew or condoned the actions of the team members closer to the branch levels. I also feel that once the issue was discovered, by Wells Fargo internal investigation, steps were started to rectify the issues. This has been ongoing for sometime. I feel that Wells Fargo, as a company has done and continues to do everything that it can to return our company to the Wells Fargo that we know and support. Thank you John. Tim has big shoes to fill, and I feel that he can and will succeed.

  • Former Wells Client

    The three tools white males in “leadership” use to control, dominate and preserve their entitlement: 1) willful ignorance 2) plausible deniability 3) co-signing each other’s crap. Congratulations. You’ve had your good ‘ol boy card punched. Here you are reactively trying to control the damage that having a rogue enterprise on your prestigious list may do to your company. With the proliferation of corruption in Corp. America you were bound to catch a rotten fish or two in the net sooner or later. Why make the situation stink even worse by offering up excuses on Stumpf’s behalf? Do you have eight accounts with one bank? Do you personally know ANYBODY who does????? If you love him so much, then go visit him in prison. But please, please don’t pee on my leg and tell me it’s raining. Executive insulation, desperate, magical thinking, fear-based management tactics and alpha-male hubris is why they thought the scam could go on undetected. Now you apparently use willful ignorance to explain Stumpf’s willful ignorance. Do you know what the opposite of diversity is? It’s not homogeneity. It’s corruption. The two can’t exist in the same corporate ecosystem. They can’t. DI could use this unfortunate and undeserved business experience to fail forward. Double down on corporate vetting and display thought leadership on how authentic, values-based diversity can be a powerful anti-corruption tool with enormous balance-sheet benefits. This would be of particular value to CEOs in the wake of the Yates memo and the Department of Justice’s pursuit of individual wrongdoers. But you’d apparently rather just C.Y.A. and hope that the latest Trump salaciousness and tabloid titles with “pu–y” in them will soon push this inconvenient headline behind us. Oh well. I come here and to The Guardian and BBC for a little objectivity and reason. May have to look elsewhere.

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