Even though Wells Fargo (WFC) chief executive John Stumpf has been named “banker of the year” and counted as one of the world’s most influential executives, he hasn’t been a household name -- until this month.
Stumpf is now a lightning rod in a fresh debate over banking ethics, financial crimes and whether financial misdeeds are appropriately punished by regulators. Wells Fargo was slapped with alast week after regulators found its employees had covertly opened more than 2 million accounts that may not have been authorized by customers.
Questions about Wells Fargo’s culture and executives have only grown following the disclosure, with the public and lawmakers asking how such practices were allowed to occur within the bank. Stumpf, who has blamed the problem on bad employees, will testify this Tuesday at a Senate banking committee hearing on the scandal and its regulatory response.
“I have no respect for him because he’s blaming the employees,” said Julie Miller, a former Wells Fargo branch manager and a member of the Committee for Better Banks. Of Stumpf, she added, “I’m sorry, but you are the one who designed this culture; you are the one who approved these goals.”
Since the wrongdoing was disclosed, Stumpf has defended his firm’s practices, telling The Wall Street Journal that employees had “no incentive to do bad things.” Wells Fargo, however, has said it will drop the practice of setting branch-level sales goals, which some critics say encouraged employees to engage in questionable behavior.
“We know that this happened and we regret it and take responsibility for it,” said a Wells Fargo spokeswoman. “We have made improvements over the past several years to make sure team members aren’t being pressured to sell products.”
Miller said she saw a shift soon after Wells Fargo took over management of her Wachovia branch in Allentown, Pennsylvania. Wells Fargo bought Wachovia in 2008.
“Wells Fargo doubled our goals and decreased our performance pay,” she said. “Every year the goals went up more and more. Everyone was on anti-anxiety medication.”
Stumpf told The Journal that the bank sought to prune the bad apples from its ranks, firing about 5,300 workers over five years because of improper selling. The bank has a workforce of about 270,000. In Miller’s view, though, employees engaged in such behaviors because they were scared of losing their jobs if they didn’t meet their sales goals, while managers looked the other way for the same reason.
“The 1 percent that did it wrong, who we fired, terminated, in no way reflects our culture nor reflects the great work the other vast majority of the people do,” Stumpf told the publication. “That’s a false narrative.”
Stumpf has touted his connections to legendary investor Warren Buffett, whose Berkshire Hathaway owns a 9.5 percent stake. Stumpf, who says he plays online bridge with Buffett, has called him “the best person the world’s ever known.” Buffett, for his part, has so far remained silent through the scandal.
Here are five things to know about Stumpf ahead of the congressional hearing.
He grew up in a family of 11 kids. Stumpf was one of 11 children on his family’s Minnesota dairy farm, an upbringing that he has credited with forming his view on teamwork and culture. “We had tough times, and we were poor, but we got through it because we were in it together,” he wrote in an essay in Fortune. “That experience really helped me see the value of what we now call culture.”
He joined Wells Fargo through a merger. Stumpf started working at a bank called Norwest in 1982 in its loan administration department. For the next decade and a half, he climbed through Norwest’s ranks, becoming the regional president for Norwest Bank Texas. When Wells Fargo bought Norwest in 1998, Stumpf was appointed as the head of its new Western Banking Group. He was named CEO of Wells Fargo in 2007.
Stumpf oversaw a $175 million settlement over racial bias. The clandestine account-opening scandal isn’t the only blemish on Wells Fargo’s reputation. In 2012, the company settled accusations that its independent brokers had discriminated against black and Hispanic borrowers during the housing boom by putting them in costly subprime mortgages. Wells Fargo didn’t admit wrongdoing.
He has espoused a hard-line on “wrongdoers.” Asked in a National Press Club interview about a Justice Department investigation into alleged illegal financial conduct, Stumpf said “wrongdoers ... ought to be held responsible. And that’s the way we run our company.”
Stumpf is vowing that he won’t resign. Stumpf, who was paid $19.3 million in 2014, told CNBC that he won’t step down. “I think the best thing I could do right now is lead this company, and lead this company forward,” he said. Still, if he leaves, Stumpf could have a lucrative payout. His “post-employment payment” would be $24.3 million, according to a regulatory filing. That doesn’t include his retirement benefits.