Off message: Stumpf harrumphs as his reputation slumps
The Wells Fargo CEO was cornered by Elizabeth Warren during Capitol Hill hearings, but even when he was called ‘gutless’, he did not fight back. By John Anderson.
Senator Elizabeth Warren, a fierce, articulate and passionate critic of Wall Street
From time to time this column has analysed the performance of bank chieftains appearing before governmental bodies. We’ve looked at how people such as Bob Diamond, Stuart Gulliver and others have deported themselves during grillings from irate lawmakers.
However, never before have we seen anything like the non-performance that Wells Fargo chairman and CEO John Stumpf put in recently before the US Senate banking committee.
His particular nemesis on the committee was US senator Elizabeth Warren, a fierce, articulate and passionate critic of Wall Street and the banks.
If it had a prize fight between the two, Stumpf would have been called out on TKO before the end of the first round.
It was an amazing demonstration of passivity in the face of a gruelling interrogation by Warren. The YouTube version of the showdown has more than 180,000 views, which is rather amazing given the subject matter. As the social media migration goes, it is now going viral on Facebook and will forever be embedded in the digital archives.
By way of context, Stumpf was called before the committee after the bank had been fined $185 million for a whole series of illegal sales practices, including opening up fake bank accounts to meet cross-selling quotas.
The idea that the chairman of the board would portray himself in such a non-assertive manner flies in the face of how most bank chieftains would like to be perceived
When it came time for Warren to conduct the questioning, she employed two tactics that overwhelmed the hapless Stumpf.
First, she asked three simple questions. Have you resigned because of this scam? Have you returned one nickel of your own compensation because of it? Have you fired any senior executives because of their role in it?
The stumped Stumpf barely got a word in before Warren delivered a truly chilling verdict on her victim. By noting that his version of accountability was to push the blame for all on this onto lower level employees, she called it “gutless leadership”.
Let’s consider all the slings and arrows that banking leaders have had to endure at the hands of elected: Diamond was considered arrogant; Fred Goodwin incompetent; and Gulliver aloof… but I don’t recall anyone being called “gutless” before.
And here’s what it made it all the worse. Stumpf just sat there taking it, like a deer caught in the headlights. On the few occasions that he managed to speak, he only dug himself in deeper.
On several occasions he tried to mitigate the situation by reminding Warren that only 1% of the workforce was engaged in the improper conduct. Considering the bank fired 5,300 people because of what happened, the idea of invoking a “1%” clause is pretty lame.
So after getting entirely torched in the first few minutes, things only got worse.
Warren pounded home the notion that Stumpf and his senior executives were able to drive up the price of Wells Fargo stock by emphasizing the bank’s ability to cross-sell accounts – the very activity that prompted the illegal sales activity.
Poor Stumpf tried lamely to portray cross-selling as a way to deepen the relationship with clients. Every time he did, Warren brushed it away by calling it a “scam”.
Then just when you thought poor Stumpf was going to be wheeled away on a stretcher, Warren pulled out her stiletto and went to work one last time.
Why, she asked, did Stumpf not fire Carrie Tolstedt, the executive who oversaw the cross-selling operations involved in the scandal? Tolstedt, who was allowed to retire, was able to secure a retirement package worth more than $100 million in stock, stock options and other awards.
The senator then ratcheted up her indignation when Stumpf indicated he would leave any decisions to the HR committee or the board of directors.
All in all, it was an incredibly passive performance on two levels. Stumpf showed no emotion during the repartee with Warren. While he started the overall session with a formulaic apology that was so jargon filled as to render it meaningless, there was not a hint of regret during his testimony.
Even worse was his constant suggestion that the matter was in the hands of the board of directors. The idea that the chairman of the board would portray himself in such a non-assertive manner flies in the face of how most bank chieftains would like to be perceived.
The Stumpf/Warren face-off is going to continue to attract viewers who will be wondering how wooden Wells Fargo has been in redressing this scandal and how inert the chairman was when his institution was under attack.