Will Wells Fargo ever move its headquarters to Charlotte? Its CEO has options.
Since the California Gold Rush, Wells Fargo has been San Francisco’s bank. It’s history is part of California’s history. But in today’s San Francisco, Wells Fargo stands out more like a relic of history rather than a product of it.
Over the past decade, Wells Fargo’s headcount in San Francisco has stagnated, while it has increased its staffing in Charlotte and other cities.
Since buying Charlotte’s Wachovia in 2008, Wells has increasingly entrenched itself in the city that became its East Coast headquarters. Its headcount has grown rapidly from about 19,000 in 2010 to 27,000 today — the most in any city for Wells. The leaders of consumer banking and operations are based here.
At the same time, San Francisco seemed to move past one of its oldest institutions, bringing in thousands of technology jobs, whose high salaries made it hard for other industries to compete. San Francisco now has some of the highest salaries and most expensive office space in the country.
Even finance is starting to feel San Francisco’s pressure. In November, when Charles Schwab bought rival brokerage TD Ameritrade, it revealed that it was moving its headquarters from San Francisco to the Dallas area.
“What anchors a lot of the financial community here is honestly just that some companies have been here for a really, really long time,” said Sean Randolph, a former California state trade official who is now senior director of the Bay Area Council Economic Institute.
‘Move with haste’
It’s hard to image that Wells Fargo would still be in San Francisco if not for its history.
The bank’s new CEO, Charlie Scharf, is the first chief executive to run the bank from New York City. Foundational change is underway for one of the country’s oldest banks. Now would seem to be the opportune time for Wells Fargo to move its headquarters. Will it?
Scharf has brushed aside concerns and speculation about Wells’ future in San Francisco. “I’m looking forward to just spending the time wherever it’s necessary for me to be,” he said in September, according to Bloomberg News.
He has more pressing issues to handle first, namely addressing regulators who have capped the bank’s growth and repairing a staid image tarnished by a fake-account scandal.
Yet in the early stages of taking on these challenges, Scharf has started to pull the bank’s power center away from San Francisco. Scharf, who started 10 weeks ago, has yet to announce detailed plans on where he wants to take the bank. Josh Dunn, a company spokesman, declined to comment on the bank’s plans for its presence in San Francisco, New York and Charlotte.
In a memo sent companywide on his first day in October, Scharf gave a general outline of how he wants to proceed at Wells.
One of the 10 maxims he outlined, along with “always, always, always do the right thing,” was “celebrate the past, but move with haste toward the future.” He continued, “history is filled with companies who were industry leaders at one time but did not change and were left behind.”
Executives in different cities
Two of Scharf’s most prominent early hires, Bill Daley, a former White House Chief of Staff for Barack Obama, and Scott Powell, a former Santander executive, will be based in New York City. Of the bank’s 14-member operating committee, five are now based in New York and six are San Francisco-based (although two San Francisco members are in the process of leaving.)
Two more are in Charlotte, and one is in Portland, Ore.
Such a scattered executive team could make Scharf’s turnaround effort harder.
“You usually want an institution run in one common site. I think it’s important for executives to have personal contact with one another, that’s how compromise takes place,” said Charles Elson, a corporate governance professor at the University of Delaware and a Wells Fargo shareholder.
“It’s sometimes useful to relocate the headquarters when you have a culture that needs to be rethought. On the other hand, there’s nothing wrong with San Francisco as a corporate headquarters,” Elson said. “Maybe Charlotte makes sense, maybe New York makes sense. I don’t know.”
Reasons for Charlotte
Site selection is a key component of long term planning, and if the bank were to move, two logical candidates would be New York and Charlotte. (Des Moines, Iowa, also holds a large Wells Fargo population as the site of the bank’s home mortgage business, but few top executives are there and it has no major bank headquarters.)
Charlotte, for its part, has aggressively positioned itself over the last few decades to become the kind of city a bank would love to move to. Because Wells has more employees in Charlotte than any other city, that makes it a likely candidate for any potential headquarters discussion.
Its tax environment is business-friendly and there’s plenty of affordable talent and office space, according to Michael Smith who, as CEO of Charlotte Center City Partners, promotes development in uptown and South End.
Part of the strategy of attracting major companies to Charlotte has been building a critical mass of companies, he said. The city needed to get to the point where if someone were to move to Charlotte for a job and later lose that job, the employee wouldn’t be stuck without other options nearby.
“If someone is going to move from New York or Hong Kong, they’re moving their family here. They are going to want to have a Plan B,” Smith said.
It’s likely that at some point in the last few years Charlotte hit that critical mass.
Earlier this year, Charlotte reclaimed the title of second-largest banking center in the U.S., surpassing San Francisco (which had only taken it from Charlotte the year prior). Truist, the name of a combined BB&T and SunTrust, picked Charlotte as its new headquarters in February, and later purchased the city’s third-tallest skyscraper for nearly half a billion dollars.
Despite being the sixth largest bank in the U.S., Truist is only the third largest with a major presence in Charlotte, with Bank of America and Wells a good deal larger. Scores of comparatively smaller financial services companies have moved thousands of jobs into the city as well.
New York vs. San Francisco
New York has its own case for the headquarters, as it is home to Wells’ most high-profile and highly-paid executives and bankers. In addition to Scharf, the bank’s chief operating officer, top tech executive and money-management chief are based out of Wells’ new offices in the city’s Hudson Yards mega-development.
But the total headcount in the city is far smaller than that of both San Francisco and Charlotte, at about 3,700. And the cost of New York salaries and office space wouldn’t lead to significant cost savings in comparison to Charlotte or another more-affordable city.
Plus, after plans for Amazon’s second headquarters in Queens fell apart, it’s unlikely that Wells would get a plush incentive package like those Charlotte has offered other firms in the past.
In the meantime, with about 15,000 employees in San Francisco, “you pay a huge premium to stay,’’ said Dennis Donovan of site selection firm WDG Consulting.
“I would take a look at considering moving executive offices out, including to Charlotte,” Donovan said. “It’s cost effective. You can attract all kinds of talent. It meets all the requirements for a headquarters.”
Other options
There’s also a possibility that Scharf may continue the regular flow of Wells Fargo’s headcount growth away from San Francisco without formally moving the banks’ headquarters.
Despite having four CEOs in the last four years, Wells has consistently added headcount in North Carolina and other markets. Open positions in Charlotte listed on the company website dwarf those in San Francisco, an indication that the trend isn’t in danger of reversing.
In the memo Scharf sent outlining his principles, he referred to a quote from Eric Shinseki, the former U.S. Secretary of Veterans Affairs, that underscored his desire to revamp the culture of the bank: “If you don’t like change, you are going to like irrelevance even less.”