BREAKING: Wells Fargo CEO John Stumpf to resign, effective immediately, in wake of scandal over bank's sales practices.
Here's the background, as reported by the Miami Herald earlier this week:
John Stumpf has faced his company’s board of directors. He has faced his customers. He has faced congressmen and regulators. In the week ahead, he faces the ultimate judge — shareholders.
Stumpf is the CEO at Wells Fargo. He has held that position since the height of the housing boom. And he was the boss during what regulators called “a major breach of trust” when his bank opened hundreds of thousands of accounts that customers didn’t ask for. The bank has apologized and has agreed to pay a $185 million settlement.
This is a company that made $23 billion last year. It made $5.6 billion last quarter. The bank is due to report its latest quarterly results on Friday. This will be the first time Stumpf and his executive team have directly faced shareholders since acknowledging the phony accounts.
The bank’s reputation has been hurt. Credit rating’s agency Fitch cut the bank’s outlook from stable to negative even while admitting Wells Fargo is financially strong. Several stock analysts have reduced their earnings forecasts as they expect the bank to spend more money on compliance. The stock has dropped about 10 percent since news of the settlement.
Stumpf has given up at least $41 million of his own pay. He has promised to end the sales practices that led to the unauthorized accounts. He has accepted responsibility in his congressional testimony while telling senators he “led the company with courage.” That "courage," he said, included firing more than 5,000 Wells Fargo employees who participated in the sales program leading to the unwanted accounts. He told the panel, “I don’t want our culture to be defined by these mistakes.”
In a 2015 commentary published by Fortune, Stumpf described corporate culture as “understanding what you need to do each day — and why.” He also wrote “a company’s culture is rooted in how people behave.”
Despite the public outcry, congressional criticism and his defense of his bank, ultimately, it will be shareholders who decide if Stumpf has behaved as a boss should.
