After the first in what would become a series of revelations about corporate malfeasance at Wells Fargo (NYSE:WFC) became public, it was fairly obvious that heads at the top would have to roll. And roll they did: In October 2016, shortly after the bank was socked with $185 million in fines from various regulators, CEO John Stumpf resigned. It was a chance for the board to tap a new leader who could really reset the tone. But the board didn't, instead promoting COO and President Tim Sloan, an exec just as connected to the troubles as Stumpf had been. Fast-forward to last week: Sloan resigned, effective immediately.
In this segment of the Motley Fool Money podcast, host Chris Hill and Fool senior analysts Aaron Bush, Ron Gross, and Jason Moser discuss how the bank has handled the after math of the fake-accounts scandal, and what success it could have from here in shifting the narrative, and the company's culture.
A full transcript follows the video.
This video was recorded on March 29, 2019.
Chris Hill: Wells Fargo back in the spotlight this week as CEO Tim Sloan resigned effective immediately. Sloan was installed as CEO in October of 2016 to clean up the mess caused by the scandal involving millions of fake accounts. Jason, I don't want to pat us on the back, but when I think about that point in time, we were all sitting around this table saying, "Wait a minute, Sloan's been at Wells Fargo for a long time. Is he really the person to clean up the mess that he probably had a hand in helping to cause?"
Jason Moser: I mean, I'll pat you on the back if you want. I feel like right. We've talked about this for a long time. It's astounding that it ultimately came to this, but here we are. Where I grew up, we call this going around your rear end to get to your elbow.
Ron Gross: [laughs] I've never heard of that!
Moser: It seems to be the most inefficient way to get from point A to point B. Listen, he should have never been promoted to CEO, in my opinion, because he was part of that executive team that was culpable in all of these crises. It's not a crisis, it's crises. There are some big problems that they still have to figure out. The board, whomever was in charge of ultimately assigning him that CEO role, they automatically put themselves in a position where they had to be defensive. They had to get out there and justify why they would give this hire to an internal candidate. If you bring in someone externally, then it's really easy to spin the narrative that you're trying to change the culture of the company. So I feel like they could have just made that leap from the very beginning. They didn't. Obviously, they're going to do it now. A lot of qualified candidates out there. I imagine they'll have this resolved pretty quickly, but then it's going to be up to that new CEO to really spin the story in a new direction and get over all of these problems they've been having.