First post March 10, 2019: While Wells Fargo has spent the last few years apologizing for deceiving customers with fake bank accounts, unwarranted fees and unwanted products, many employees say the cultural issues that led to those problems have not changed, even though leadership contends they have. These employees say the company continues to pressure them to hit aggressive sales targets and do whatever it takes to get results, according to a front-page story in today’s New York Times.
Update March 15, 2019: Wells Fargo Chief Executive Tim Sloan yesterday was granted a 5 percent raise, increasing his total compensation to $18.4 million. Of that, $2 million is an “annual incentive award, or in other words, a bonus. Sloan’s pay is now 283 times the median pay of the bank’s more than 200,000 employees, according to the Star Tribune.
[Verbatim] “The bonus was based on Wells Fargo’s “financial performance” and Sloan’s “continued leadership on the Company’s top priority of rebuilding trust,” the company said in its annual letter to shareholders. The company’s stock price fell 27 percent last year in a tough market, but its yearly profit rose to $22.4 billion compared with $22.2 billion in 2017, and the company’s board noted that Sloan had led a massive stock-buyback program.”
What ever happened to a CEO needing to do something that deserved not only continuing to be paid, but a bonus as well? As the New York Times story above indicates, Sloan has yet to fix the issues that led to Wells Fargo’s recent ethically blunders. He’s only spent a lot of money on PR, charitable giving and stock buybacks. If Wells Fargo truly wants to regain public trust, it needs to base CEO compensation not only on profitability, but also measured, provable change with its sales culture. Maybe that’s coming next year?
Update March 29, 2019: Wells Fargo & Co. Chief Executive Tim Sloan stepped down yesterday (March 28). Here are excerpts from a Wall Street Journal story about his departure:
“ ‘About damn time,’ Sen. Elizabeth Warren (D., Mass.), who is currently running for president, tweeted Thursday following Mr. Sloan’s resignation. ‘Tim Sloan should have been fired a long time ago.’
Sloan’s resignation ends a 31-year career at the bank and a 2½-year slog to get it back on solid footing after a fake-account scandal badly damaged its reputation and standing with regulators.
Problems continued to emerge throughout the bank. Nearly every one of its business lines is under investigation by a government agency, including the Justice Department and the Securities and Exchange Commission.
The bank also has struggled to put in place a new risk-management system—the infrastructure designed to catch and prevent problems that could harm customers. In an April 2017 report, Wells Fargo’s board said the bank had made a grave mistake letting business units police themselves.
The Federal Reserve took the rare step of capping the bank’s growth in February 2018, citing risk-management deficiencies. A few months later, the Consumer Financial Protection Bureau and the OCC imposed a $1 billion fine on the bank for misconduct in its auto- and mortgage-lending business. The OCC said it found risk-management deficiencies that “constituted reckless, unsafe or unsound practices,” leading to improper charges to hundreds of thousands of consumers.
Investors also have been skeptical. Wells Fargo’s shares rose about 8% during Mr. Sloan’s tenure, compared with a nearly 30% increase in the KBW Nasdaq Bank Index. The shares rose in after-hours trading Thursday, following Mr. Sloan’s resignation.
Officials at the Office of the Comptroller of the Currency, one of the bank’s primary regulators, were recently debating the rare step of forcing changes to Wells Fargo’s senior management or board.
Earlier this month, Mr. Sloan testified before the House Financial Services Committee and engaged in combative exchanges with Republicans and Democrats alike. Minutes after the hearing ended, the OCC issued a rare statement, saying it was “disappointed with [Wells Fargo’s] performance under our consent orders and its inability to execute effective corporate governance and a successful risk management program.”
Allen Parker, Wells Fargo’s general counsel, has been named interim CEO. Mr. Parker joined the bank in 2017 from law firm Cravath, Swaine & Moore LLP to help clean up after the 2016 sales scandal. The nation’s fourth-largest bank said it would search for a new permanent chief executive from outside the company.”