This podcast was recorded on Oct. 13, 2016

Mark Reeth: Let's talk about an out-of-work CEO, John G. Stumpf, the former CEO at this point of Wells Fargo announced his departure very abruptly on Wednesday. People had been calling for his head ever since this whole Wells Fargo debacle came to light, but it came as a surprise that he just stepped down not just so abruptly, but also because the board of directors over at Wells Fargo had begun an investigation into what had happened at the company and hadn't made any sort of ruling at all about if they were going to fire him or keep him or just punish him or whatever they would've decided. That was way down the road and he just said, "No thanks, I'll see you later." What is your take on John G. Stumpf pulling the rip cord and getting the heck out of there?

Jason Moser: I honestly probably would've done the same thing, I think. The bottom line is when you're in a position of leadership like this, you're assuming responsibility for everything that goes on within the entire company, whether or not you even directly had anything to do with it. The buck has to stop somewhere. We look all of the time at these CEOs, we talk about these just absurd pay packages that they get and these golden parachutes that they get. It's a point of constant criticism, and I think fairly so. There are a lot of pretty crappy CEOs out there that make a lot of money.

Now, I'm not going to put Stumpf in that classification. I don't want to make light of the situation. I mean, we're talking about a guy who did lose his job, but on the flip side there, there was an incentive structure set up in these banking centers within Wells Fargo that really begged for this behavior. Having worked at a big bank, I've seen this type of behavior as well. I mean, the incentive structure was just set up that way. No. 1, I think it's worth nothing that Wells Fargo is not unique, I think, in this case. I mean, there are other banks that set up these types of incentive structures as well. I'm very certain that Brian Moynihan, the CEO of Bank of America, and other banking CEOs all over the country are going through their incentive structure with a fine-tooth comb right now.

Mark: That's true.

Jason: There's got to at least be this feeling that you got to keep ... you got to be looking over your shoulder a little bit because I don't know that this investigation necessarily stops with Wells Fargo, but I think this is something that had to happen. In order for this bank to be able to turn the page and move forward, you have to be able to assume new leadership there. I think ultimately it was the right thing to do. I think it's going to be very interesting to see how they put this behind them because it's not like, oh, everything is better, right?

Mark: That's certainly true.

Jason: I mean, it's interesting, I saw Elizabeth Warren on Twitter, who's been obviously very critical of this and rightly so, she said on Twitter yesterday, "As I said, Wells Fargo CEO Stumpf should resign, return every nickel he made during the scam, and face DOJ SCC investigation. He's one for three." Stumpf is sitting there thinking, man, this is going to drag out for a while. He doesn't want to have to worry about running a company, recovering that company's brand in the face of having to deal with this personal crisis as well.

Mark: Sure, makes a lot of sense. You mentioned the other banks out there going through their own structures very closely. One of the things that Tom Gardner really focuses on, really emphasizes when he invests in a company is corporate culture. It's something he takes very seriously for our Fool One members, you know that probably pretty well. How, as an investor, as your average man on the street investor, how do you analyze a company's corporate culture so that you can make sure you know something like this might be coming down the pipeline someday or make sure that nothing like these incentives are in place? I feel like that's got to be very difficult for the man on the street to see unless he has that insider access to a company. What's your take on analyzing corporate culture?

Jason: Well, I think you said it right there. It is extremely difficult to actually pinpoint. We talk about this a lot. It's very easy to look at a stock and come up with the valuation side of it, looking at its competitive advantages, just sort of the basic fundamentals of the business at hand. When it comes to leadership, you really have to be able to dig in a little bit further, look at things like incentive structure, look at things like track record, do a little Google-fu there and understand where this leadership has been, what they've done in the past, because everything up and to this point led us to believe that Stumpf was a great CEO doing a wonderful job.

Mark: 2013 banker of the year.

Jason: Yeah, and he had the endorsement of Warren Buffett, who obviously is somewhat of a decent track record itself. This shows how quickly that can change. I think the challenge for the new CEO, Mr. Sloan here, you can't just make this leap that because he's now the CEO, everything is going to be better because he's been with the bank for a long time as well and he's served in executive positions from chief financial officer to chief operating officer and everyone in between. I think to assume he wasn't at least partly aware of what was going on would be a bit naive. With that said, I think they probably replaced Stumpf with the right guy. He at least knows how this bank works and because he wasn't in the spotlight before, he can probably help them turn the page here.

Back to your question: How do you assess culture? It's extremely difficult to do and it requires, honestly, some judgment and I think that the longer you are a stock analyst like we are here, the more experience you get with it, the more companies you analyze, the more leadership teams you see, and then you can say, "OK, well how important is culture versus what the CEO's vision is? Is the CEO imperative to this company's success or is this company in a cruise control mode, so to speak?" A lot of different things come into play here and every situation is unique.

Mark: Speaking of a unique situation, Timothy J. Sloan is the new, up-and-coming CEO of Wells Fargo. Wells Fargo announcing third quarter earnings on Friday. Talk about being thrown into the deep end of the pool. He has to deal with all of the obvious questions that are going to come from all of this scandal, as well as replacing Mr. Stumpf and talking about how he's going to lead the company in the future, and on top of that he's going to have to talk about third quarter earnings, which presumably a lot of people are going to have questions about how much of that money came from these accounts that were set up under fake names and fake email addresses. Real quick, what's your take on Wells Fargo? How is Tim going to handle Friday? How are investors going to feel on Friday?

Jason: Well, I think this quarter is going to be just the tip of the iceberg. I think this is just the first in a number of quarterly releases where he's going to have to at least address this to an extent. The best thing he can do is to get out in front of it immediately, take accountability for it, don't try to pawn this off on anyone else, but speak forward. Talk about moving forward. I think that Wells Fargo, because they have such a big position as the mortgage banker of our country ... we consider the housing market here and the trillions of dollars that the housing market makes up, Wells Fargo is a major part of that. It is the market leader when it comes to mortgage banking.

The benefit there is that with all of that exposure in the mortgage business, they can really push their consumer banking as well. They have a brand. They have identity. They have a unique position in today's banking world where it's not so easy just to go close your banking account and go elsewhere because you have so many things tied to your checking accounts now where it becomes a lot more difficult just to go ahead and switch. I think they have a great opportunity here to try to make amends, go ahead and really work on building that brand, talk about their vision of the future as opposed to harping on the past. Of course, analysts aren't going to give them a full pass on that. They're going to ask questions about that, but I think anything he can do to frame it as forward-looking as possible, not talk about what happened but what they want to do in order to try to help rebuild this brand's identity and culture and really the mind share that the brand has gained throughout the years.

Mark: Yeah, the goodwill.

Jason: That's going to be crucial. Again, I've always been of a mindset that we're going to hear a lot of people complain about this. You can go on Twitter. You see people all the time fussing about what happened. It's one thing to complain about it. I think a lot of people out there probably say they just want to go close their banking account, but at the end of the day they're probably not because it's not that easy to do. I think that for Wells Fargo, it would be very easy for them to dangle a little carrot out there for account holders to say, "Listen, we're sorry. Here's what we want to do to try to make amends going forward." Obviously adjust the incentive structure so that nothing like this happens again because this really was all about incentive structure to begin with.