Embattled Wells Fargo CEO John Stumpf steps down effective immediately

Embattled Wells Fargo Chairman and CEO John Stumpf is stepping down from the bank he has led for nearly a decade, following intense scrutiny over a fake accounts scandal that erupted last month.

San Francisco-based Wells said Wednesday that Stumpf informed the company’s board of directors that he is retiring from the bank and its board immediately. The bank’s board elected President and Chief Operating Officer Tim Sloan to replace him and named him to the board.

It’s a stunning fall for a banking leader who had helped guide Wells Fargo through the financial crisis and lead the company through its acquisition of Charlotte-based Wachovia. The bank now has its biggest employee base in Charlotte.

Lead director Stephen Sanger will take on the role of non-executive chairman and director Elizabeth Duke, a former Federal Reserve Board governor, will become board vice chair.

“While I have been deeply committed and focused on managing the company through this period, I have decided it is best for the company that I step aside,” Stumpf said in a statement. “I know no better individual to lead this company forward than Tim Sloan.”

Sanger, in a statement, praised Stumpf for his leadership of Wells Fargo during the financial crisis and the Wachovia merger, “and helping to create one of the strongest and most well-known financial services companies in the world.”

“However, he believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges and take the company forward,” Sanger said.

Stumpf, 63, faced heated, bipartisan criticism from lawmakers at two Capitol Hill committee meetings, with multiple House and Senate members calling on him to resign. Sen. Elizabeth Warren, D-Massachusetts, said he had showed “gutless leadership” by placing blame on lower-level employees while top executives kept their jobs.

Stumpf had repeatedly said he was “deeply sorry” for the San Francisco-based bank’s conduct, and on Sept. 27 the bank’s board announced he would forfeit all of his outstanding unvested equity awards, worth $41 million, and forgo his salary during a board investigation. He had given no indication he planned to leave, saying he was committed to fixing the bank’s problems.

On Sept. 8, Wells agreed to pay $185 million in fines over allegations of “widespread illegal” sales practices that dated to at least 2011. Regulators said bank employees, racing to meet aggressive sales goals, opened 2 million accounts that may not have been authorized by customers. More than 60,000 accounts in North Carolina and South Carolina may have been opened without customer consent.

The scandal turned a harsh spotlight on a bank that had long touted its corporate culture, boasted about its ability to sell multiple products to customers and navigated the financial crisis with its reputation and balance sheet intact. The controversy also sparked new questions about whether large banks were too big to manage and stoked debate about the effectiveness of the Consumer Financial Protection Bureau.

Independent bank analyst Nancy Bush said Wednesday’s move “had to happen,” calling it a “big step” for the bank to move past the controversy.

Sloan will do “just fine” in the role, but the departure of Stumpf will not silence all of the bank’s critics, Bush said.

“There is no end,” she said. “This is going to go on for quite a long time. There’s going to be other heads to roll.”

Stumpf has been with the bank since joining Minnesota-based predecessor Norwest in 1982.

The Minnesota native is fond of telling folksy stories about growing up on a dairy farm with his 10 siblings, paying his way through college playing in a band called The Mason-Dixon Line and starting his banking career as a repo man. He became CEO in 2007 and added the chairman title in 2010.

In the hearings before Congress, he took responsibility for the bank’s actions but defended its values.

“Wrongful sales practice behavior goes entirely against our values, ethics, and culture and runs counter to our business strategy of helping our customers succeed financially and deepening our relationship with those customers,” he said in remarks to the House Financial Services Committee on Sept. 29.

In recent years, the silver-haired executive has been one of the industry’s top-paid bankers. In 2015, he received $19.3 million in salary, bonus and stock awards. The stock awards taken away from Stumpf represented about a quarter of the $160 million in stock, deferred compensation and retirement benefits he would have received upon retirement, according to an analysis by Chicago-based human-resources consultancy Overture Group.

On Sept. 27, the board also announced that former retail banking head Carrie Tolstedt would give up stock awards worth $19 million. She left the bank in September, earlier than her previously announced retirement at the end of the year. She was replaced July 31 by Charlotte-based executive Mary Mack.

Wells Fargo gained an East Coast presence after buying Charlotte’s Wachovia in 2008. Wells Fargo now maintains its largest employment hub in Charlotte, with more than 23,000 workers.

In November 2015, the Wells board named Sloan, a bank veteran to the role of president and chief operating officer.

This story was originally published October 12, 2016 at 5:11 PM with the headline "Embattled Wells Fargo CEO John Stumpf steps down effective immediately."