The Sorry State Of Wells Fargo Continues
What a mess. Wells Fargo is an unmitigated disaster example of culture, and senior leadership gone wrong. Its board of governors is now in the crosshairs of negligence, too.
In the latest plot twist to this sordid management tale, the bank’s CEO, Tim Sloan, abruptly announced his retirement for the end of June. His duties as CEO ceased effective immediately.
The company has been mired in scandal after scandal for the better part of three years. Its corporate culture has suffered longer. Suffice it to say; Wells Fargo is in dire need of a factory reset.
Even before Sloan’s early retirement notice and immediate resignation as CEO, The Wall Street Journal reported that the Office of the Comptroller of the Currency (OCC) was “debating the rare step of forcing changes to Wells Fargo’s senior management or board.”
It’s the “or board” throwaway comment that got my attention.
OCC went so far as to state via a spokesperson, Bryan Hubbard, the following:
We continue to be disappointed with Wells Fargo Bank N.A.’s performance under our consent orders and its inability to execute effective corporate governance and a successful risk-management program. We expect national banks to treat their customers fairly, operate in a safe and sound manner, and follow the rules of law.
Before any ejection by OCC played out, I suspect Sloan and the Wells Fargo board took proactive evasive action. Why?
When a meteorite is heading straight for your hull, the human condition is to get out-of-the-way.
First, for Sloan to be removed by the OCC—with an additional shove from the Federal Reserve—the result would have been personally humiliating. Imagine working 31 years of your life for a bank only to see yourself forcibly removed from the big chair that you’ve worked so hard to attain.
Second, if the Fed and OCC were indeed plotting a modern-day coup d’état, Wells Fargo board members were likely to be implicated forcing another dimension of personal embarrassments. There are several high-profile members from organizations such as PwC, Deloitte, Staples, Edison and Kellogg on the Wells Fargo board. Don’t think for a second that these people want to be swept up by an OCC investigation.
Indeed Sloan and the board members had to act to preserve any shred of dignity.
We might never know the truth but somewhere between Sloan falling on his sword, the board’s insistence, and an agreement between the two parties is where things have landed.
During a conference call discussing his resignation, Sloan said, “I just care so much about this company and so much about our team that I could not keep myself in a position where I was becoming a distraction.”
One might argue the “distraction” has been his inability to rid the organization of its unethical management and sales practices since becoming CEO. What if he was part of the problem from the start?
When news of the bank account fraud scandal broke in 2016—a practice known as cross-selling—Sloan was its chief operating officer. In that role, he was responsible for the operations of the company’s four main business groups: Community Banking, Consumer Lending, Wealth and Investment Management, and Wholesale Banking.
The scandal crossed both Community Banking and Consumer Lending. Thus two of the business units implicated in those unethical sales behaviors reported directly into Sloan. After longtime CEO, John Stumpf left the company in 2016; the board still appointed Sloan to the top job. That decision, in retrospect, seems rather odd.
Before his time as CEO and COO, Sloan was CFO at the company. When the Los Angeles Times first reported on the crisis at Wells Fargo (in 2013!!), Sloan, as CFO, said, “I’m not aware of any overbearing sales culture.”
To recap, Sloan worked at Wells Fargo for 31 years. His career saw him lead units such as Capital Markets, Commercial Banking, Commercial Real Estate, Asset Backed Finance, Equipment Finance, Corporate Banking, Investment Banking, and Treasury Management. For a time he also led Corporate Communications, Corporate Social Responsibility, Enterprise Marketing, Government Relations, and Corporate Human Resources.
Then he became CFO. He eventually grew into the COO role. But he wasn’t aware of “any overbearing sales culture?” That too seems odd.
And yet, the board thought it would be a good idea to promote Sloan to CEO following the disgraceful departure of Stumpf. At the time it looked like the board was putting a fox in the henhouse. Now, that henhouse needs a complete rebuild.
Moving forward the board indicated it would hire someone from the outside as CEO. In a press release, board chair, Betsy Duke, said by hiring an individual not currently employed by the bank that it will be “the most effective way to complete the transformation at Wells Fargo.”
Perhaps the board has finally awoken to the madness that is the Wells Fargo culture. However, it is nowhere near completing its transformation. It’s not clear if the transformation has even begun.
It brings me to Alan Mulally. If I were Duke, my first call would be to him.
The former CEO of Ford and Boeing Commercial Airplanes might be the ideal candidate.
His work as a collaborative, no-nonsense yet compassionate and innovative leader is legendary.
At Boeing, he became CEO of the division just after 9/11 struck. He brought to market its most profitable airliner, the 787 Dreamliner. As fellow Forbes contributor, Bryce Hoffman writes:
His unshakeable confidence, commitment to transparency, and insistence on teamwork carried the company through that crisis and the painful restructuring that followed. Mulally relied on a powerful new management model to save Boeing: articulate a clear and compelling vision for the company, develop a comprehensive strategy to deliver on that vision, and execute on that through a relentless implementation process led by a team of talented people working together.
When Mulally left Boeing to head up Ford in 2006, he instituted ONE FORD (see graphic below), an organizational ethos that ensured everyone was working together in an ethical, collaborative, and efficient manner. Fast forward eight years when he retired as CEO, and you witness one of the greatest transformations of a company, under some of the most difficult economic, cultural and societal conditions.
Wells Fargo desperately needs Mulally. The customers and employees of Wells Fargo deserve his leadership.
Make the call, Ms. Duke.
PS. Read my 2016 Forbes piece entitled “Wells Fargo Proves Corporate Culture Can Also Be A Competitive Disadvantage” for early indicators of the organization’s problems.