Scandal-plagued Wells Fargo & Co. opted to choose a longtime insider, Timothy Sloan, to replace John Stumpf after the embattled chief executive abruptly quit on Wednesday.
But Sloan, who had been Well Fargo’s president, faces scrutiny as well. Critics say the bank’s entire top management oversaw an aggressive sales culture that led to Wells Fargo’s creating as many as 2 million accounts in customers’ names without their knowledge or consent.
“From a brand point of view, it would have been better for them to look outside,” Kelly O’Keefe, a professor at the VCU Brandcenter unit of Virginia Commonwealth University’s business school, said Thursday.
Choosing Sloan “doesn’t reflect the kind of clean sweep and accountability that the public looks for when these types of things happen,” O’Keefe said.
“This is a significant betrayal of trust,” he said. “Just from a public-relations point of view, [choosing Sloan] keeps the fires of criticism burning as opposed to signaling change.”
Others gave Sloan, a 29-year veteran of Wells Fargo, the benefit of the doubt.
Sloan “has one job right now, and it’s to overreact,” said Scott Galloway, founder of the brand research firm L2. “He needs to put in place all sorts of changes and new procedures to convince people that they are taking this very seriously. I don’t see a reason why that can’t be done by someone internally.
“The notion that this can’t be fixed from the inside — I don’t see the problem,” Galloway said.
Corporations in crisis often pick one of their own when the CEO abruptly quits or is ousted, in large part because they already have institutional knowledge of how the company operates and a familiarity with its key executives.
A year ago, for instance, Volkswagen named the top manager of its Porsche unit, Matthias Mueller, to replace Martin Winterkorn as VW tried to recover from a widespread cheating scheme to evade auto-emissions regulations.
Fox News parent 21st Century Fox in August promoted two veteran Fox News executives, Bill Shine and Jack Abernethy, to become co-presidents after Fox News Chairman Roger Ailes resigned amid a widening scandal over Ailes’ reported mistreatment of female employees.
But troubled companies sometimes go outside for new leadership. In 2005, Boeing Co. chose 3M Co. Chairman W. James McNerney Jr. as chief executive to repair the aircraft builder’s reputation after a series of high-profile ethics scandals.
In a letter sent to its customers Wednesday, Wells Fargo said the accounts scandal “is inconsistent with our values and with the culture we work hard to maintain. It’s not who we are as a company.”
Nell Minow, vice chair of ValueEdge Advisors, which promotes strong corporate governance, said the question of whether Sloan came from inside or outside Wells Fargo’s ranks is less important than his need to move fast to restore the bank’s trust with customers, investors and employees.
“We’re going to know very quickly whether he’s the right choice or not. He has a one-week window,” she said.
Among other things, Sloan must personally visit Wells Fargo’s largest institutional shareholders and its largest banking centers to listen to the concerns of investors, employees and customers and then respond to them, Minow said.
Sloan also should say Wells Fargo will “add new people to our board and ask investors to suggest candidates,” review the performance of other top Wells Fargo executives “to determine whether they can continue to work there” and even be the face on Wells Fargo’s television commercials, Minow said.
Sloan also must vow to conduct “a very rigorous examination of its system and make the results of that public,” Minow said. “If he doesn’t do all of those things, he was the wrong choice.”
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