After a long siege by federal legislators and other officials seeking to gain retribution for Wells-Frago’s missteps with their operations, CEO Timothy Sloan stepped down from the top position at the firm last week.
Replacing one of the five moving parts of an organization is always a challenge, as we’ve previously discussed. But this replacement will be particularly difficult. The Wells’ Board has determined that they will reverse the tradition of selecting a CEO from the pool of long-term employees at the company (Sloan was a 31-year veteran) and choose someone from the outside, saying that that is “the most effective way to complete the transformation at Wells-Fargo.” The task will be to find the candidate that can get the company on the “right side” of banking regulators as well as steer it through a number of business challenges. As Sloan discovered, in his 2 1/2 years on the job, that will indeed be a challenge. CEO Sloan inherited a situation where sham accounts had been set up at branches in an effort to garner the perks of these additional accounts for the employees – the more accounts, the better the rankings. The discovery of these efforts kicked off government investigations into all of Wells’ banking practices, ultimately resulting in unprecedented growth restrictions of the company by the Federal Reserve. In response to these edicts as well as to the need for modernization, Wells is attempting to pare back its branch network, shed other unneeded businesses, and cut billions in costs for the future while at the same time encourage deposit growth after the scandal. One can easily see that Sloan, as a career banker, didn’t sign on for these kind of challenges. Analysts have said that getting the “banking giant back on track is a challenge for ‘a really good risk player.'” So, someone from Vegas, perhaps – ? (I jest.) The chance to run one of the largest banks in the U.S. doesn’t come along all that often and when it does, the job almost never goes to an outsider – banks, traditionally, hire from inside so that they can spend years in vetting the CEO candidates. The WSJ comments that whomever gets the top job at Wells gets the chance to “earn professional glory” as well as a multi-million dollar salary. But the risk of failing to fix the battered institution is huge and, if not accomplished by the incumbent, could definitely mar a successful career. Other analysts, however, see the opportunities. “It’s one of the biggest gigs in banking. Anybody who’s a really really good risk player recognizes that going into an enterprise when it’s got some bumps and bruises is the best time to join,” cites one analyst. Wells Fargo with its sprawling retail network and much smaller trading business looks more like a very large regional bank than it does a Wall Street giant. There is speculation that the CEO search might reach out to current incumbents at JP-Morgan Chase or even to individuals who have banking backgrounds but also some Washington experience and/or current finance executives at large companies like Alphabet and Google. Without a doubt, it will be an interesting process to monitor and observe.
ALL THE MOVINGS PARTS – The CEO is the first-among-equals of those moving parts because that individual sets the tone for the rest of the company.