Maxine Waters asks CEO Tim Sloan is Wells Fargo too big to manage?
Wells Fargo announced on Thursday that embattled CEO and president Tim Sloan is stepping down immediately, a development that comes more than two years after a scandal over fake accounts rocked the bank.
Sloan, 58, plans to retire from the company June 30, the bank said in a statement.
The board has elected general counsel Allen Parker as interim CEO and president, effective immediately, the company said. The bank said it now will look outside the company for a new CEO and president.
Sloan, a veteran Wells leader, was promoted to CEO in 2016 after John Stumpf resigned amid revelations that employees opened millions of accounts without customer permission to meet high-pressure sales goals.
In a statement, Sloan said he has focused since then on leading efforts to address the bank’s problems and rebuild trust in the company. The bank has made progress, he said.
“However, it has become apparent to me that our ability to successfully move Wells Fargo forward from here will benefit from a new CEO and fresh perspectives,” Sloan said. “For this reason, I have decided it is best for the company that I step aside and devote my efforts to supporting an effective transition.”
Wells Fargo is based in San Francisco but maintains its largest hub in Charlotte, where it employs about 25,700 in the region.
Thursday’s announcement comes just a little more than two weeks after a blistering congressional hearing where lawmakers criticized Sloan for revelations of new customer harm that have emerged since he took over.
Those revelations followed the disclosure in 2016 of the unauthorized-account scandal. In that matter, Wells said bankers opened as many as 3.5 million bank and credit card accounts without customer permission as employees faced intense pressure to sell products.
Wells Fargo has struggled to fix its image as it has disclosed problems in other areas of the company, including foreign exchange, wealth management, auto lending and add-on products such as identity theft protection.
Last August, for example, Wells announced that about 545 of its customers lost their homes to foreclosure because of an error by the bank as it calculated their eligibility for modifications to make their mortgages more affordable.
At the roughly four-hour hearing before the House Committee on Financial Services, Chairwoman Rep. Maxine Waters accused the bank of engaging in an “egregious pattern of consumer abuses.” Later in the month, Waters said in a statement that Sloan “should be shown the door.”
On the same day of the hearing, a spokesman for the Office of the Comptroller of the Currency said the banking regulator continued to be disappointed with Wells Fargo’s corporate governance and risk management program. It was a rare rebuke from the regulator, underscoring Wells Fargo’s struggles to right itself.
And last week, Federal Reserve Chairman Jerome Powell criticized the bank during a press conference.
“So what happened at Wells Fargo really was a remarkably widespread series of breakdowns really in their risk management apparatus, which resulted in significant consumer abuses let’s say,” he said.
Sloan’s departure comes after the board has continued to praise his work trying to turn around the fourth-largest U.S. bank by assets.
This month, the board disclosed it had boosted Sloan’s compensation by more than 5 percent to $18.4 million for his work last year. The increase was the result of a $2 million cash bonus.
The year before, he did not receive a cash bonus as the bank struggled to move past a series of scandals.
In explaining the increase in compensation, the bank listed accomplishments under Sloan, including efforts “to create a simpler, more collaborative Wells Fargo and efficiently serve our customers.” Also last year, Wells Fargo customer loyalty and satisfaction scores reached a two-year high, the bank said in announcing Sloan’s higher pay.
In a statement Thursday, Wells Fargo Chairwoman Betsy Duke said Sloan has served the company with pride and dedication for more than 31 years. But, she said, the board has decided to look outside the company for its next CEO, a different tact than it took when it named Sloan, an insider, its chief executive.
Seeking an outsider, “is the most effective way to complete the transformation at Wells Fargo,” Duke said.
Parker, 64, joined the bank in 2017, replacing James Strother, who retired after the 2016 scandal over unauthorized accounts.
Parker was a Duke University graduate who joined Wells from Cravath, Swaine & Moore LLP, where he was a partner in the law firm’s corporate department. Parker has been based in San Francisco, where he reports to Sloan.
Wells said Thursday that Parker will be paid a base salary of $2 million.
Despite Sloan’s work, the bank had failed to convince some lawmakers and regulators that it’s done enough.
Since last year, the bank has failed to get out from under an asset cap the Federal Reserve imposed on its growth. In taking that step, the Fed cited “widespread consumer abuses and other compliance breakdowns” at the bank.
Sloan told the board about his decision to leave on Tuesday, the bank said in a regulatory filing.
Speaking to industry analysts on a conference call on Thursday, Sloan said it was his decision to step down and that the move was not related to “any newly discovered issues” at the bank.
He said that while he was confident that he could have continued to lead Wells Fargo through its transformation, “it has become apparent that the focus on me has become a distraction that impacts our ability to successfully move Wells Fargo forward.”
A spokesman for the OCC did not respond to a request for comment on Thursday, and a spokesman for the Federal Reserve said the regulator declined to comment.
‘About damn time’
Some praised Thursday’s development.
“About damn time,” Sen. Elizabeth Warren tweeted on Thursday. The Massachusetts Democrat and 2020 presidential candidate has been a frequent critic who had called repeatedly for Sloan’s ouster.
“He enabled Wells Fargo’s massive fake accounts scam, got rich off it, & then helped cover it up,” she tweeted. “Now—let’s make sure all the people hurt by Wells Fargo’s scams get the relief they’re owed.”
But it’s unclear whether Sloan’s stepping down will satisfy regulators and lawmakers, or if more steps will be needed to remove pressure from the bank.
Some consumer advocates said Sloan’s stepping down is not enough.
Linda Jun, senior policy counsel for Americans for Financial Reform, called it a “whiff of accountability, but just a whiff.” The consumer-advocacy group is based in Washington, D.C.
“When Wells Fargo starts treating its own customers right, and ponders whether this unmanageable mega-bank ought to even exist, then we will have reached a milestone,” she said. “The Wells Fargo wagon has not yet arrived where it ought to go.”