Wells Fargo & Co. (NYSE: WFC), the fourth largest commercial bank in the United States is looking for a CEO. Wouldn’t you think that potential candidates would be breaking down the door to the bank in an effort to attain that position?
Not so, according to reports coming out from the search process.
Rachael Louise Ensign and David Benoit report on the front page of the Wall Street Journal that the bank “is having trouble getting top bankers interested in its open chief executive officer job.”
According to the article, the bank’s board has approached a small group of top candidates, "but..."
The Wells Fargo situation is that of a corporate turnaround.
And, the top position has now been open since March.
Even other leaders of the banking industry are surprised at the delay in selecting a new leader.
As Ms. Ensign and Mr. Benoit report, even Jamie Dimon, CEO of JPMorgan Chase & Co. (NYSE: JPM) has spoken out about the approach that Wells Fargo’s board has taken to the search.
For example, 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.”
Especially, as I noted above, if the situation is one of a corporate turnaround.
The thing is, what is happening may be representative of the problems that were going on inside of Wells Fargo for some period of time.
Ms. Ensign and Mr. Benoit reference the fact that things started falling apart for the bank in 2016 following “the bank’s 2016 fake-account scandal.”
So, Wells Fargo has fallen from the top of the pinnacle, for prior to the 2016 scandal, the bank had been considered to be one of the better-run banks in the country. My have the mighty fallen.
And, since the “fall from grace” the board has had trouble at the top spot.
Thus, we have the fourth largest commercial bank in the country that is now having problems dealing with the internal issues that have come to light over the past three years; having problems “fixing problems in Washing DC,” and finding a replacement willing to take on the CEO position and turn the bank around.
Not a pretty picture.
More and more one sees the Wells Fargo dilemma as one that relates to the Board of Directors.
I can only speak to this situation from the standpoint of an individual that might want the opportunity to turnaround the fourth largest commercial bank in the United States. The reason that I take this position is that I have successfully completed three bank turnarounds in my career. The banks were not as large as Wells Fargo, but, to me, the issue here has nothing to do with the size.
One of the things that the new CEO facing a turnaround situation must have is the authority to make the changes he or she feels is necessary to turn the corporation around. In a real sense, that authority needs to be complete.
In the three bank turnarounds that I was engaged in, I felt that I had the authority to do to the bank, what I believed was necessary to successfully complete the job.
This was the major concession I needed to take the job.
Now, this doesn’t mean that I was not accountable for what I was doing, or completely free just to do anything I pleased. I had full responsibility to see that there was complete transparency in all that was done and that the board and the shareholders were fully aware of what was happening.
Full transparency is so important because that responsibility was what keeps the leader of the turnaround “in line.” That is, full transparency keeps the CEO to make "rational" actions because everyone knows everything, and this, I have found, keeps people from doing anything improper.
The refusal of so many possible candidates points to this problem. In my mind, the top-notch candidates being mentioned for the position are backing off from the position because they feel that the bank’s board will not keep their hands out of the process.
The potential candidates see a situation where, if they became the new CEO, they would not have the authority they think they need in order to successfully carry out their job. And, I believe, they can point to the actual experience of the bank over the last three to five years.
The board problem is not a new one and it is a real problem, one that will continue to hinder progress for the bank until it is fixed.
The news that top-quality people are turning the opportunity down is now out for the investment world to see. Wells Fargo shareholders should be very, very upset with the news. Something needs to be done. With this information now publicly exposed, investors should raise the concern as high as necessary to get something done.
One might expect that Warren Buffett, whose Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) is the bank’s largest shareholder, would be a very important factor in getting the board back on the right track. We shall see.
So far, all Mr. Buffett has said is that the new CEO should not be from Wall Street. Maybe he needs to be a little more vocal about the makeup of the board, itself.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.