Wells Fargo CEO John Stumpf’s inept performance before the Senate Banking Committee this week was startling on many levels.
I grew up in Minnesota near Stumpf’s hometown in roughly the same era. He has long nurtured the reputation of a decent, humble guy with small-town values, befitting the Prairie Home Companion image of us sober, stoic Minnesotans.
It has worked for Stumpf, 63, who has run Wells Fargo since 2007 and earned more than $19 million last year. But with a record $185 million fine on his resume and many powerful people demanding change, the good-guy image is fading
At the Sept. 20 hearing, Stumpf proved no match for the senators who pounded him for his inattention to the bank’s sales-practices scandal. Politicians such as Sen. Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio clearly relished the opportunity to grill the oh-so-nice Minnesotan. Even Republicans typically in sync with U.S. bank leaders slammed the Wells Fargo CEO’s responses.
Stumpf repeatedly declined to offer his opinion on how the Wells Fargo board should respond to the scandal, in which more than 2 million sham accounts were opened dating back many years. Anyone familiar with corporate America knows that is an evasive answer: Influential CEOs like Stumpf inevitably control their boards — as long as the stock price isn’t tanking. If a director asks too many questions deemed obtrusive — “John, why are we firing 5,000 people?” or “John, do we really need to pay you 500 times more than the lowest-paid Wells Fargo employee?” — he or she doesn’t remain a director too long. Analysts don’t ask such questions either, for fear of being excluded from future information sessions. And the press, which should be asking the questions, has increasingly limited access to CEOs.
Now that Wells Fargo shares have declined more than 5% since news of the scandal emerged, the board meetings will suddenly become a lot more interesting.
Call it sour grapes, but it’s also telling that no one on Wells Fargo’s board has deep roots in North Carolina, one of the bank’s most important states because of the Wachovia takeover in 2008. Note to Mr. Stumpf: Some successful North Carolina business leaders — Dan DiMicco? Mackey McDonald? Al de Molina? — could add a lot to your board.
At the hearing, Stumpf also never explained why he seemed so oblivious to the firing of more than 5,000 employees involved in the scandal. The most senior executive fired was an area president, undergirding a prevailing view that corporate leaders will fire rank and file employees in a heartbeat, while not taking any personal responsibility. Carrie Tolstedt, the boss overseeing retail banking, left quietly this summer with a $125 million severance. No doubt she, Stumpf and Wells Fargo’s PR team hoped her name would never appear in print again. Oops.
It’s hard for a lot of us Minnesotans to say it straight; we much prefer to please people and avoid drama.
But when Stumpf shows up to face tough questions from Congress next week, let’s hope for more honesty and, perhaps, a dose of humility.