Wells Fargo (NYSE:WFC)
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2 Months : From May 2019 to Jul 2019
By Rachel Louise Ensign and David Benoit
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 (June 12, 2019).
Wells Fargo & Co. is having trouble getting top bankers interested in its open chief executive officer job.
The bank's board has approached a small group of top candidates, including JPMorgan Chase & Co. consumer banking chief Gordon Smith, PNC Financial Services Group Inc. CEO William Demchak and former U.S. Bancorp chief Richard Davis, according to people familiar with the matter. Messrs. Demchak and Davis took a pass on potentially replacing Timothy Sloan, who resigned in late March, the people said.
Wells Fargo continues to pursue Mr. Smith, who is JPMorgan's co-chief operating officer, but he has told confidants that he is reluctant to take the job and is likely to stay at JPMorgan, some of the people said.
Running the fourth-largest bank in the U.S. is one of the biggest jobs in the business, but it is not a universally appealing one. Wells Fargo's new CEO will have to juggle fixing problems in Washington, reviving key businesses and rehabilitating a corporate reputation damaged by many problems that came to light following the bank's 2016 fake-account scandal.
Any professional glory to be earned turning around the bank is likely years away. Wells Fargo has a long to-do list from regulators and is operating under an unprecedented growth cap imposed by the Federal Reserve in early 2018.
Mr. Smith, 60 years old, oversees JPMorgan's consumer operations and its community bank. He is considered a top candidate to run the bank if Chief Executive James Dimon departs suddenly, but his age makes him less likely to get the job if Mr. Dimon retires in around four years, as planned.
Mr. Smith would be an expensive hire. He is owed more than $50 million in long-term compensation, some of which Wells Fargo likely would have to cover. The British-born executive, who joined JPMorgan in 2007 from American Express Co., was paid $22 million in 2018.
It is unusual for big, publicly traded companies to go months without a permanent CEO, let alone a bank the size of Wells Fargo. Boards typically line up successors years ahead of time. The most recent big bank in a similar situation was the financial-crisis-era Bank of America Corp., which took nearly three months to name a replacement after Kenneth Lewis announced plans to retire.
Wells Fargo's general counsel, former Cravath, Swaine & Moore LLP partner C. Allen Parker, has been serving as interim CEO since Mr. Sloan's departure.
Prominent figures in the banking business have puzzled over the board's approach to the search, publicly and privately. Mr. Dimon recently took Wells Fargo directors to task for their succession planning.
"It's not responsible for a company -- just my own view -- to have a CEO leave with no plan in place," he said at an investor conference in late May. "I don't personally understand that."
Whatever succession planning the board had done was upended when Mr. Sloan, a 31-year Wells Fargo veteran, resigned. Finance chief John Shrewsberry had been considered a potential successor, people familiar with the matter said, but the board decided to look for an outsider after the Office of the Comptroller of the Currency and the Federal Reserve, the bank's main overseers in Washington, expressed dissatisfaction with its response to its troubles.
There are other factors complicating the search. Warren Buffett, whose Berkshire Hathaway Inc. is the bank's largest shareholder, spoke out against hiring anyone with Wall Street roots. Regulators, too, are taking an active role in the process.
The OCC must approve the new CEO under the terms of an agreement the bank entered into last year. The regulator has sent the bank a letter that outlines what it expects it to do in the process of vetting potential candidates, according to people familiar with the matter.
The CEO search got off to a slow start. Once Mr. Sloan's departure was announced, it took the board weeks to hire an executive search firm.
The firm, Spencer Stuart, started with the small group of top candidates, including Messrs. Demchak, Smith and Davis, with extensive experience in Main Street banking, according to people familiar with the matter. Mr. Demchak said he had no plans to leave PNC on his bank's quarterly earnings call in April; he and Mr. Davis told Wells Fargo representatives that they don't want the job, some of the people said.
The CEO search has set off a guessing game around the banking business. Yet some people considered worthy candidates by their peers recently hadn't heard from recruiters, according to people familiar with the matter.
That could reflect the influence of Berkshire Hathaway, which owns 9% of the bank's shares.
In an April interview with the Financial Times, Mr. Buffett said Wells Fargo's new CEO "shouldn't come from Wall Street" and "probably shouldn't come from JPMorgan or Goldman Sachs." Berkshire Vice Chairman Charlie Munger told The Wall Street Journal " we don't like the Wall Street crowd that is making the damn decisions."
That hasn't stopped employees at rival banks from speculating about their executives landing the job. On April 1, Citigroup Inc. employees emailed each other a fake Wall Street Journal article that said the bank's Latin America head Jane Fraser would replace Mr. Sloan.
--Andrew Ackerman and Liz Hoffman contributed to this article.
Corrections & Amplifications Gordon Smith is CEO of JPMorgan's consumer and community bank. An earlier version of this article incorrectly said CEO of the consumer and commercial bank.(June 11, 2019)
Write to Rachel Louise Ensign at firstname.lastname@example.org and David Benoit at email@example.com
(END) Dow Jones Newswires
June 12, 2019 02:47 ET (06:47 GMT)
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