[ACCESSWIRE]
LONDON, UK / ACCESSWIRE / October 14, 2016 / Active Wall St. blog coverage looks at the headline from Wells Fargo & Company (NYSE: WFC) as the company announced on October 12, 2016, that its CEO John Stumpf has put in his papers and will retire from his position immediately. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
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The Decision
John Stumpf had communicated his decision to retire to Wells Fargo's Board of Directors, which have accepted his resignation. The Board then announced the election of Tim Sloan, who is currently the President and Chief Operating Officer as Stumpf's successor. Tim Sloan was also elected to company's Board. He will take charge as CEO and his position on the Board with immediate effect and will continue using his official title of President.
The Board also announced the appointment of Stephen Sanger, who is currently the Lead Director, as the non - Executive Chairman of the Board and independent director Elizabeth Duke was appointed as the Vice Chair.
Commenting on his appointment Tim Sloan said:
"My immediate and highest priority is to restore trust in Wells Fargo. It's a tremendous responsibility, one which I look forward to taking on, because of the incredible caliber of our people, and the opportunity we have to impact the lives of our millions of customers around the world."
Backdrop to Stumpf's Early Retirement
An alleged scam is related to sales' practices undertaken in Wells Fargo's retail banking business during the years 2011 - 2015. Nearly 2 million bank and credit card accounts were created by employees without the knowledge of customers. The company had then fired nearly 5,300 low level employees over the years when they called the ethics line about the wrongful sales tactics. The fired employees coped with a stressful work environment wherein they were pressured by their respective managers to achieve daily sales quotas which in turn forced many of them to resort to creating unsanctioned accounts.
Stumpf in the Eye of the Storm
John Stumpf's tenure at Wells Fargo spans over three decades. Stumpf joined Wells Fargo in 1982 and has been with the bank since. He was appointed as CEO of the bank in June 2007 and later on was appointed as Chairman in January 2010.
Stumpf retirement comes in after he faced serious flak for how he handled the alleged sales scam and the resultant public outcry. He testified before the U.S. Senate Banking Committee on Banking, Housing, and Urban Affairs in September 2016 explaining the bank's position in addressing the wrongful sales practices and outlining the action plan to address and eliminate them. During the senate meeting, he was grilled by both the Republicans and the Democrats to the extent of both questioning his leadership and ability in handling the complex business of Wells Fargo. Senator Elizabeth Warren even demanded Stumpf's resignation and asked him to return the money he made during the period. Her reaction came in as he was seen as trying to pass on the blame to the lower rung employees and shielding top management from taking any sort of responsibility and a general lack of accountability.
After the Senate meetings, Wells Fargo constituted an internal investigation with a Special Committee of Independent Directors. The Committee immediately took some steps to promote accountability. Their decision led to Stumpf' forfeiting the outstanding equity valued at $ 41 million and also forgoing his salary for the duration of the investigation. Apart from this he would not receive any bonus for 2016 and will also not receive any severance pay. Experts indicate that in spite of this, Stumpf will take away nearly $134 million.
The investigation of the scam will not end with the resignation of Stumpf. In fact, this may just be the tip of the iceberg even as newer facts emerge.
Challenging times ahead for Tim Sloan
The freshly appointed CEO Tim Sloan has been with Wells Fargo for the last 29 years. He became the President and COO in November 2015 and headed the bank's four main business groups - Community Banking, Consumer Lending, Wealth and Investment Management and Wholesale Banking.
Sloan has huge expectations on his shoulders. First and foremost being the restoration of the banks' scam-ridden image and gaining investors' confidence. Then he needs to look internally and change the sales culture as well as boost employee's morale. The most difficult task would be facing the various legal complications and probable lawsuits being filed in the wake of the sales scam. He will also face the various state and federal investigations that will come up in the wake of the said scam. Critics are not happy with appointment of Sloan as he was one of the top executives working in the company during the scam period.
Stock Performance
Wells Fargo's share price finished yesterday's trading session at $44.75, slipping 1.26%. A total volume of 44.12 million shares exchanged hands, which was higher than the 3 months average volume of 24.41 million shares. The stock is trading at a PE ratio of 11.04 and has a dividend yield of 3.40%.
Wells Fargo is expected to report earnings on October 14th, 2016, before market open.
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