Wells Fargo Chairman and Chief Executive John Stumpf submitted his resignation, effective immediately, on October 12th after nearly a decade as the bank’s chief executive. His replacement, Tim Sloan, currently president of Wells Fargo, has already taken over as CEO. A bank spokesman was quoted as saying that there is “no severance payment or agreement related” to Stumpf’s resignation.
Stumpf resigned after media outage that 5,300 Wells Fargo employees, under pressure to meet unrealistic quotas, had opened accounts in customer’s names without their permission. At first, Stumpf gave the impression he wanted to lead to company forward, saying in an interview on CNBC’s Mad Money that he had no plans to resign. Nor did Stumpf resign after grillings by Capital Hill lawmakers, even though, at one point, Sen. Elizabeth Warren told him “You should resign.” Stumpf did step down from his seat on the Federal Reserve Advisory Council a few days after the Senator admonished him.
Wells Fargo’s massive misconduct originated in the community banking division, which was headed by Carrie Tolstedt. The bank announced her retirement in July; she will leave at the end of the year with praise from Stumpf, even though she headed the division during the entire time the illegal practices occurred. Wells Fargo is clawing back $19 million from Tolstedt and $41 million from Stumpf.
Well Fargo will pay $185 million in fines to the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the L.A. City Attorney’s office for their actions. The behavior included opening bank accounts in customer’s names without their knowledge and taking unauthorized credit card applications. Intense pressure to cross-sell drove sales associates to create fake contact information for the customer to open fake accounts, issue PIN numbers and then move a portion of the customer’s money to the newly created account. Customers would be charged an annual fee a credit card they never asked for, and, if there was an overdraft fee from the customer not having enough money in their account, because money was moved without permission, the customer would pay that as well. Ultimately, the bank’s shareholders will pay the price.
Stumpf’s downfall may have been the “There was no incentive to do bad things,” statement he made during an interview with the Wall Street Journal, even though several fired employees claim to have made calls to the company’s ethics line with information that directly contradicted his statement. While Stumpf’s compensation was not directly tied to meeting cross-selling goals, the fired branch-level employees have said that they had to meet their sales goals in order to keep their job. Wells Fargo had been firing low-level, $12 an hour employees for this behavior over a period of three years, yet no senior executives were fired. Stumpf’s insulation of senior executives and his willingness to shift the blame to low-level employees in interviews and during congressional hearings contributed to his fall from grace as well.