John Stumpf’s departure from Wells Fargo was inevitable, but it came quickly. The Wells Fargo chairman and chief executive’s “retirement,” announced on Wednesday evening, clears the way for his successor to fix the culture that led to millions of fake accounts being opened. Along with the $228 billion lender’s board, though, veteran Tim Sloan has to show he can break with the past.
The last stage of Stumpf’s fall from grace must have come faster than anyone – including Wells Fargo’s stodgy board – expected. Only two days earlier, the bank unveiled new executive appointments that bolstered its operating committee and Sloan’s responsibilities. Now the latter part of that, at least, has been overtaken by events.
Stumpf’s final chapter began when his California-based bank agreed in early September to pay $190 million to settle U.S. charges that its bankers illegally opened accounts to help meet sales targets. Complacency and prevarications at two disastrous appearances before Congress – interspersed by his belated forfeiture of $41 million in unvested stock awards – undid the good work that made Wells Fargo unusually solid among big American banks during and after the 2008 mortgage crisis.
The views of shareholders, the biggest of which is Warren Buffett’s Berkshire Hathaway, may have had something to do with Stumpf’s hurried departure. Investors boosted the company’s shares by some 2 percent in after-hours trading in New York – a step back towards the levels in late August.
Yet although the CEO’s exit became necessary, it isn’t sufficient. A scandal which executives knew about for years and led to the firing of over 5,000 staff suggests ingrained problems, at least in parts of the Wells Fargo edifice. Sloan, a 29-year veteran, has been at the bank for only five years fewer than Stumpf. It’s no certainty he will be able to set a sufficiently different tone.
It’s an improvement that the board will now get a separate chairman, Stephen Sanger, and a new vice chair, too. However, Sanger has acted as lead director since 2012, and if there was anyone in a position to push Stumpf into tackling the accounts problem sooner and with more gusto, it was him. The Wells Fargo stagecoach has changed drivers; now it also needs a clear new direction.