SAN FRANCISCO—John Stumpf, the embattled chairman and CEO of Wells Fargo who has been slammed by Congress for the scandal in which bank employees created more than two million sham accounts, has resigned.
The resignation of Stumpf, 63, is effective immediately. Several reports stated he will not receive any severance package, although he has earned more than $100 million during his career with the bank. Wells Fargo said Stumpf will be replaced by President and Chief Operating Officer Timothy Sloan.
As CUToday.info reported Stumpf faced mounting criticism from lawmakers, particularly during his testimony in front of the House Financial Services Committee and Senate Banking Committee last month.
During the Senate hearing, Committee members emphasized the seriousness of the matter to Stumpf, saying that the issue at hand is “fraud,” not anything less.
Sen. Sherrod Brown stated that what went on at Wells Fargo is clearly fraud, and should not be characterized as anything else. “This is not giving products and services to customers that they don’t need—like a mix up of Christmas presents under the tree. This is fraud,” he said.
The toughest commentary came from Sen. Elizabeth Warren who told Stumpf, "You should resign...You should be criminally investigated."
Rep. Michael Capuano compared the Wells Fargo scandal to the massive fraud that occurred at Enron. Capuano said that those who lead Wells Fargo reminded him of "the guys who ran Enron." Capuano said Stumpf is "clearly and unequivocally guilty" of a range of crimes, including conspiracy to commit fraud, conspiracy to commit identity theft and racketeering,”
During both testimonies Stumpf apologized for the actions of the bank but denied that management was involved in the wrongdoing that led to $185 million in fines against the bank from regulators.
Wells Fargo fired 5,300 employees over a five-year period who were involved in the phony account openings that led to fees even though the customers were unaware of them.
Several former Wells Fargo employees have come forward recently stating that the bank’s management placed extensive pressure on staff to reach unrealistic sales goals of eight products per household, called the “Great 8,” employees stated.
As CUToday.info reported, Wells Fargo recently announced it has launched an internal probe of the scandal and that Carrie Tolstedt, the executive who oversaw operations that included the phony accounts, left the bank ahead of her planned retirement. The bank stated she will also not receive a bonus or severance. Reports indicated that Wells Fargo will reportedly also seek to “claw back” $19 million in compensation paid to Tolstedt. Tolstedt had been due approximately $124 million at retirement.
Prior to Stumpf’s resignation, the bank also reported that Stumpf would forfeit much of his 2016 salary, as well as $41 million in stock awards. The company's board of directors also had stated that while it’s investigating its own sales practices, Stumpf would work for free.
According to Wells Fargo, Stumpf was paid $19.3 million in total compensation during 2015, in part because the bank continued to grow accounts.
Stumpf, 63, had been chief executive since 2007 and chairman of Wells Fargo’s board since 2010 (see chart on Stumpf’s annual earnings below).
The LA Times reported that Stumpf is not set to receive any severance, according to public filings. However, he still will retain more than $100 million in vested stock, plus accumulated pension and 401(k) benefits exceeding $24 million, according to the filings.
“I am grateful for the opportunity to have led Wells Fargo,” Stumpf said in a statement the Times reported. “While I have been deeply committed and focused on managing the company through this period, I have decided it is best for the company that I step aside. I know no better individual to lead this company forward than Tim Sloan.”
This week, the bank announced several management changes, including naming a new head of its wholesale banking unit, which Sloan had previously led, the Times noted.
“It’s a great privilege to have the opportunity to lead one of America’s most storied companies at a critical juncture in its history,” Sloan said in a statement that appeared in the Times. “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.”
Sloan will not inherit the company’s chairmanship. That role will go to former General Mills executive Stephen Sanger, now the company’s lead independent director. Critics of the bank had called not only for Stumpf’s resignation but for the bank to separate the CEO and chairman roles, the Times stated.