Wells Fargo CEO John Stumpf announced his immediate retirement today. He wasn’t the first bank CEO to preside over a scandal, so why did he fall when others survived? There are four reasons.
First, this scandal was easy for the public to understand. This wasn’t about complex derivatives or mortgage securities, where other banks have faced big losses or regulatory penalties. This was cheating customers with everyday banking products, like checking accounts and credit cards. It was easy for people to be outraged.
Second, the problem left an obvious paper trail of damaging evidence. Correspondence and other documentation clearly showed that Wells Fargo ignored the problem for years. The final blow for CEO Stumpf might have been the release just a few days ago of letters from a former Wells Fargo branch officer – who was later fired – alerting her supervisors to the problem of fake customer accounts years before Mr. Stumpf said he became aware of the problem. Those supervisors today are senior regional executives. At least for now.
The third reason for Mr. Stumpf’s exit is that he mishandled the crisis. The bank’s initial responses were weak and tone-deaf to the growing outrage among customers, the public and, most of all, legislators. Mr. Stumpf’s fall might have been inevitable given the scale and duration of the problem, but his poor response (for which the bank’s board also shares a healthy share of the blame) gave him little hope of recovering.
And, yes, the reaction from public officials – especially in an election year – was the fourth reason for Mr. Stumpf’s fall. Banks have become a favorite target for politicians, and banks continue to give plenty of reasons to be vilified. Congressional hearings – and decisions by state treasurers to halt business with the bank – prolonged the crisis, too. But Wells Fargo might have had a little more time to manage the crisis if a presidential election wasn’t just weeks away. One of the most divisive election campaigns in memory has made people angry and agitated, and Wells Fargo is feeling their rage.
The departure of a CEO following a scandal is a major event, and usually signals the end-phase of a crisis. But for Wells Fargo, the crisis might continue, and other changes – including more executive departures – could be ahead.