Patten Patten Inctn Lowers stake in Wells Fargo & Co
Oct 14 2016 by Johnny Bowman
The newly installed chief executive faces a plethora of challenges following a sales practices scandal that felled his predecessor John Stumpf.
Stumpf has told the company's Board of Directors that he is retiring from the company and the Board, and his departure is effective immediately, the bank said in the statement released on Wednesday.
Sloan, a 29-year Wells Fargo veteran now elevated to CEO, is taking over barely a month since it emerged that Wells Fargo created as many as 2 million fake accounts and had fired 5,300 employees. The bank has its own issues after a Consumer Financial Protection Bureau review found employees may have opened more than 2 million accounts and credit cards without consumers' permission.
Stumpf, 63, is resigning as both CEO and chairman.
What's more, while the bank has said that it will claw back $41 million in unvested options from Stumpf, it's not clear where that is coming from. "In the wake of the bank's recent sales practise scandal, Stumpf stated: "[It is] best for the company that I step aside". The bank said its president and Chief Operating Officer (COO) Tim Sloan would take over as CEO.
ISS, a proxy advisory firm, scored Wells Fargo poorly on its board structure in part because half the board has a lengthy tenure - seven members have served together for longer than nine years. But Stumpf will still retire with roughly $120 million in stock, deferred compensation and retirement benefits, according to an analysis by Chicago-based human resources consultancy Overture Group.
Wells Fargo & Company is a financial services and bank holding company.
No charges have been brought yet, but big bank critics Elizabeth Warren and Bernie Sanders are pushing the DOJ to look hard at Wells Fargo bigwigs.
A portion of Stumpf's bonus was directly tied to Wells Fargo's now-dubious account growth. The debacle unleashed a storm of criticism and setbacks for Wells Fargo, including losses of investment business with the states of California and IL.
The bank has also lost some retail customers, though Wells is still opening more accounts than it is closing, senior executives said on an internal call on Monday that was reported by the Wall Street Journal.
The Tim Sloan era has begun at Wells Fargo but the old problems remain.
"Wells Fargo must still convince depositors and investors that they are adjusting the culture to truly focus on serving clients", Yoshikami said.
"It's absolutely outrageous that whistleblowers contacted OSHA as early as 2009 about potential fraud at Wells Fargo, and yet these government bureaucrats failed to do their job", said Sen.
Nell Minow, vice chairman of ValueEdge Advisors, a governance consulting firm, said the move could be a signal that "we're really doubling down on a higher standard of oversight and professionalism" over the new CEO, Sloan, a longtime veteran of the company.