John Stumpf, the embattled top executive of Wells Fargo & Co., announced his retirement plans Wednesday, effective immediately.
The decision by Stumpf, who is 63, to step down comes after he served nearly seven years as chairman and nine years as chief executive.
It also comes 34 days after Wells Fargo agreed on Sept. 8 to pay a combined $185 million in fines to resolve regulatory complaints — dating back to at least Jan. 1, 2011 — that branch employees and managers opened more than 2 million unauthorized checking and credit-card accounts in customers’ names to meet sales targets.
The sales target for Wells Fargo employees was to establish up to eight accounts per household, in part to make it more challenging for customers to transfer an account to one of the bank’s competitors.
Friday, Wells Fargo is scheduled to report its third-quarter earnings, which could include additional financial charges related to the fraudulent account scandal.
Media reports in recent days detail lawsuits, filed by current and former employees, that indicate the fraudulent account practice may have started soon after Stumpf became chief executive.
The bank named Tim Sloan, its president and chief operating officer, as chief executive. Sloan will retain his duties as president and has been elected to the board. Stephen Sanger, its lead director, was named as non-executive chairman. Sanger has been a board member since 2003.
Stumpf, a 34-year veteran of the company, did not mention the scandal in his brief statement. He had agreed Sept. 27 to forfeit $41 million and not take a salary while a special committee of independent directors conducts an internal investigation into Wells Fargo’s retail sales practices.
Although Stumpf had been fending off calls for his resignation from investors, analysts and members of Congress, he had insisted until Wednesday that he was the right executive to lead the bank out of the controversy. He was grilled intensely in two separate appearances before congressional committees.
“I am grateful for the opportunity to have led Wells Fargo,” Stumpf said.
“While I have been deeply committed and focused on managing the company through this period, I have decided it is best for the company that I step aside. I know no better individual to lead this company forward than Tim Sloan.”
It is not clear whether Stumpf’s retirement will be the end of his headaches related to the scandal.
A group of 13 U.S. senators — 11 Democrats and two Independents — said in a letter sent to U.S. Attorney General Loretta Lynch that they want Wells Fargo bankers to be held individually accountable for the scandal that has rocked the company and the industry.
“Every time the Department of Justice settles a case of corporate fraud without holding individuals accountable, it reinforces the notion that the wealthy and powerful have purchased a higher class of justice for themselves,” the senators wrote in their letter.
Tony Plath, a finance professor at UNC Charlotte, said “this result was all but inevitable for Wells Fargo.”
“There’s simply no way Stumpf’s career was going to survive an error as large and significant as this one that occurred under his watch at the bank, especially since the Office of the Comptroller of the Currency informed senior management at the bank as early as 2013 about cross-selling complaints reported by the bank’s customers, and the board learned the same information as early as 2014.”
Stumpf had decided that the fraudulent account issues weren’t a big enough concern for the board to declare them as material, which would have generated a warning to investors in bank regulatory filings. Stumpf told a Senate Finance Committee that he did not believe the fraudulent accounts would lead to a large financial risk.
Plath said the retirement “is clearly a career-ending move for the chief executive, but that may be just the tip of the iceberg here.”
“The real question that remains unanswered at this point is whether or not the corporate board at Wells Fargo, as it is presently comprised, will survive the crisis or face the same sort of fate as its chairman.”
At least 5,300 employees, mostly branch workers and their managers, have been fired in relation to their roles with the fraudulent accounts.
Before Stumpf’s retirement news, no top-level executives have been fired, but two have been allowed to resign, including Carrie Tolstedt in July, who was in charge of Wells Fargo’s retail bank division.
Sanger credited Stumpf, as have some analysts over the past month, with leading the bank through the 2008-10 financial industry crisis relatively unharmed, as well as overseeing the acquisition of a collapsing Wachovia Corp. in 2008 that gave the bank a true national presence.
“He helped to create one of the strongest and most well-known financial services companies in the world,” Sanger said.
“However, he believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges and take the company forward.
“The board of directors has great confidence in Tim Sloan. He is a proven leader who knows Wells Fargo’s operations deeply, holds the respect of its stakeholders, and is ready to lead the company into the future.”
Sloan said his “immediate and highest priority is to restore trust in Wells Fargo.” He joined the bank in 1987, becoming president and chief executive in November 2015.
The bank has told The Charlotte Observer it cannot rule out that 38,722 unauthorized customer accounts were established in North Carolina and 23,327 in South Carolina.
Stumpf, one of the country’s most powerful and well-paid bank executives, was paid $2.8 million in salary in fiscal 2015, with total compensation of $19.32 million.
The senators cited how Stumpf “personally benefited” from Wells promoting inflated retail account numbers to investors in terms of compensation.
Bowman Gray IV, a local independent stock broker, had said that “if this is truly a strong board, looking out for shareholder interests, they will ask Stumpf to resign in the name of changing the corporate culture. The board has some culpability here as well, being the governing body.”
“Unless the board takes some drastic steps, the bank runs the risk of becoming the symbol of profits over people in the age of megabanks.”