BNY Mellon's Charles Scharf faces tough job
By Rachel Louise Ensign and Justin Baer
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 28, 2019).
Wells Fargo & Co. named Bank of New York Mellon Corp. Chief
Executive Charles Scharf as its new CEO, ending a six-month search
for a leader capable of restoring the bank's battered reputation
and improving its standing with regulators.
Wells Fargo said Mr. Scharf will join the bank as president and
CEO on Oct. 21. He succeeds C. Allen Parker, Wells Fargo's general
counsel, who has been serving as interim chief since Timothy Sloan
resigned in late March.
Mr. Scharf, 54 years old, spent four years as the CEO of Visa
Inc. before taking the top job at BNY Mellon in July 2017. Before
joining Visa, he ran JPMorgan Chase & Co.'s sprawling consumer
operation.
Wells Fargo's primary regulator, the Office of the Comptroller
of the Currency, has approved Mr. Scharf's appointment. The bank's
shares closed up 3.8% Friday. BNY Mellon's shares closed down
4.5%.
Mr. Scharf has a tough job ahead of him at Wells Fargo, which
has been struggling to right itself since a fake-account scandal
erupted at the bank three years ago. Atop his agenda is getting the
bank back in the good graces of regulators unsatisfied with its
response to problems exposed by the sales scandal. The bank's
operations also have suffered, and falling interest rates threaten
to further cut into profit.
He will tackle the challenge from afar. Mr. Scharf will remain
in New York but told investors on a call Friday morning that he
will make frequent trips to San Francisco, where Wells Fargo is
based, and Charlotte, N.C., where many of its employees work.
The arrangement is unusual but not unprecedented. Bank of
America Corp. chief Brian Moynihan lives near Boston, though the
bank is based in Charlotte and has a trading hub in New York.
Mr. Scharf has experience with turnarounds. He was tasked with
overhauling BNY Mellon, a bank that handles much of Wall Street's
boring but vital back-end work, such as tracking the value of
securities. He slashed expenses but has been reluctant to set
concrete targets for the revamp. Revenue growth has been muted, and
the stock was down 10% in the past year before Friday's CEO
announcement.
At BNY Mellon, Mr. Scharf installed trusted lieutenants in top
roles, including chief financial officer and head of human
resources. He declined to say if he would replace any of Wells
Fargo's senior executives.
Some of Mr. Scharf's measures were unpopular with BNY Mellon
employees, people familiar with the bank said. He removed all
private offices, including those reserved for members of the bank's
executive committee, and pushed to restrict staff from working from
home. Following a companywide backlash, Mr. Scharf earlier this
year clarified to employees that the new policy didn't completely
ban remote work.
Mr. Scharf had assured colleagues this year he wouldn't leave
New York -- or BNY Mellon -- for another job, and members of his
executive team didn't find out about his imminent departure until
Thursday when he came to the bank's headquarters to deliver the
news, the people said.
"This was a surprise," said Todd Gibbons, the longtime BNY
executive tapped to replace Mr. Scharf.
Wells Fargo first reached out to Mr. Scharf after Mr. Sloan's
departure was announced, people familiar with the matter said. Mr.
Scharf didn't pursue the job because he wasn't willing to leave New
York, the people said.
In recent weeks, Wells Fargo director Charles Noski, a retired
Bank of America executive, reached out to Mr. Scharf, the people
said. The two men serve together on the board of Microsoft Corp.
Mr. Noski persuaded Mr. Scharf to give the CEO job more thought,
and Wells Fargo assured him a move to San Francisco wasn't
required, the people said.
"I thought that's where I would be for the rest of my career,"
Mr. Scharf said of BNY Mellon on the investor call Friday. "I
certainly didn't anticipate this opportunity coming along."
Mr. Gibbons said he planned to keep BNY on the path set by Mr.
Scharf. "If people expect me to slow the change agenda, I think
they'll be mistaken," Mr. Gibbons said. "There's an energy here
that wasn't here a few years ago."
At Wells Fargo, Mr. Scharf will inherit an overhaul heading into
its fourth year.
Until September 2016, when the sales scandal erupted, Wells
Fargo enjoyed a sterling reputation as a bank that dodged the worst
abuses of the financial crisis. Mr. Sloan, a Wells Fargo veteran,
took over as CEO at the height of the scandal, following John
Stumpf's resignation. By that point, the bank's folksy image was in
tatters.
In the years since, the bank has replaced a number of top
executives, reorganized entire divisions and revamped its pay
structure to prevent the kind of abuses that cropped up in its
branches, but problems have continued to pop up throughout the
bank.
The setbacks have frustrated regulators. In February 2018, the
Federal Reserve took the unprecedented step of capping the bank's
growth, citing risk-management deficiencies. A few months later,
the Consumer Financial Protection Bureau and the OCC imposed a $1
billion fine on the bank for misconduct in its auto- and
mortgage-lending business. The OCC said it found risk-management
deficiencies that "constituted reckless, unsafe or unsound
practices," leading to improper charges to hundreds of thousands of
consumers.
Regulators stepped up their pressure on the bank earlier this
year. Mr. Sloan resigned, and the bank's board began looking for an
outsider to replace him.
The search was the subject of intense speculation in the banking
business and beyond. Warren Buffett, whose Berkshire Hathaway Inc.
is Wells Fargo's largest shareholder, said the bank should avoid
hiring someone with Wall Street roots, complicating the search.
Wells Fargo's board focused on a small group of top executives
at the biggest banks and the CEOs of large regional lenders. In the
first months of the search, several top candidates told Wells Fargo
they weren't interested in the job.
Mr. Scharf's annual target pay is $23 million, according to a
regulatory filing. Wells Fargo will pay him about $26 million for
his forfeited BNY Mellon stock, the filing said.
David Benoit contributed to this article.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com and
Justin Baer at justin.baer@wsj.com
(END) Dow Jones Newswires
September 28, 2019 02:47 ET (06:47 GMT)
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