Stumpf’s departure is a clear sign that the bank wishes to put its scandal, in which employees laboring under relentless production quotas opened millions of bogus accounts in the names of customers and others, to rest. It’s also a sign that its management and directors still aren’t owning up to their responsibility for the debacle. What’s needed is a clean break with the past. That won’t be happening.
How do we know? Consider, to start, the changes on the Wells Fargo board, such as they are. The posts of chairman and chief executive, both of which Stumpf held, will be bifurcated, as many corporate good-governance activists recommend.
But the new chairman is former General Mills Chairman Stephen W. Sanger, who has been a Wells Fargo director since 2003. That means he’s been cemented in place through the entirety of the scandal, which began no later than 2011 and possibly years earlier. Since 2011, he’s received $1.7 million in pay from Wells, close to the highest average of any director. He’s a member of the board’s human resources and risk committees, both of which could have exercised oversight over the activities at the heart of the scandal. Plainly, neither did.
To the extent the somnolent Wells Fargo board bears responsibility for a corporate culture that implicitly, or explicitly, appeared to condone wholesale identity theft and fraud by bank employees and their supervisors — and it is responsible — Sanger would seem to exemplify the board’s dereliction. Why does he deserve to be elevated to chairman? How will that improve Wells Fargo’s governance?
Stumpf’s successor as chief executive is Timothy J. Sloan, 56, who has been at Wells Fargo for 29 years. That suggests that he may well have become imbued with the same culture that Stumpf chose to accommodate. Sloan has been Stumpf’s designated heir apparent since last year. That suggests he’s been groomed for the succession for at least a couple of years. That’s a circumstance that wouldn’t have encouraged his rocking the boat by taking a strong line against what seemed to be a lucrative system of saddling retail customers with numerous accounts they didn’t need, or even know about.
There are hints, indeed, that Sloan was less than forthcoming in meetings with investigators before the scandal broke into the open. There are also hints that once he became Wells Fargo’s chief operating officer last November, he was instrumental in quietly ushering Carrie Tolstedt out the door. She was the executive in charge of the retail division where the abuses occurred. Wells Fargo’s machinations to get Tolstedt to retire, however, smack more of trying to make a problem go away quietly than to solve it and come clean.
One way or another, replacing Stumpf with Sloan seems premature at best, since the latter’s role in managing the bank through the scandal isn’t yet at all clear. And for a company that needs to demonstrate a commitment to cultural change by bringing in an outsider, it sends the wrong signal. Sloan is “not someone you would consider a transformational CEO if this company needs to go in a new direction,” Brian Kleinhanzl, an analyst at Keefe, Bruyette & Woods, told Bloomberg.
This is the conventional version of a new broom wielded by any scandal-wracked U.S. corporation: Move one or two scapegoats out, and let everyone below them take one step higher.
Wells bid Stumpf adieu Wednesday with an unintentionally ironic valediction. “John Stumpf has dedicated his professional life to banking,” it read, “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.” What it didn’t say was that his management had left it saddled with perhaps the most sullied reputation of any big American bank.
Certainly the shuffle in the corporate suite won’t end the questions about Wells Fargo’s treatment of its customers. Sen. Sherrod Brown (D-Ohio), one of the bank’s staunchest critics on Capitol Hill, made that clear Wednesday.
“We are still waiting for answers,” he said, “as to how Wells Fargo plans to right its wrongs against customers and the low-paid employees who weren’t given the benefit of a retirement package when they were fired for refusing to cheat.”