After more than a year of challenge and change, Wells Fargo CEO Tim Sloan says he is confident in the path that will transform the company at every level and rebuild trust with customers, team members, the general public, and other stakeholders.
Sloan said that with his leadership team, he set a course for recovery in late 2016, and he expects to foster transformative change and create a better Wells Fargo. For example, the company has made leadership changes, reformed a decentralized corporate structure, and laid out focused goals.
With many solutions and structures now in place, and others well underway, Sloan expects them to continue to have a positive impact in 2018: strengthening the company’s culture, helping customers succeed financially, engaging team members, and benefiting all stakeholders.
On Feb. 2, Wells Fargo announced a consent order agreement with the Federal Reserve focused on further enhancing the board’s governance oversight, and the company’s compliance and operational risk management.
“We take this order seriously and are focused on addressing all of the Federal Reserve’s concerns,” said Sloan. “It is important to note that the consent order is not related to any new matters, but to prior issues where we have already made significant progress. We appreciate the Federal Reserve’s acknowledgment of our actions to date.”
In a letter to customers, Sloan said, “I want to assure you that this consent order in no way affects our commitment to you or our ability to meet your current and future banking needs — providing you with the best service and advice.
“We have made great strides in improving our risk management and controls over the past year, and we agree with the Federal Reserve that there is more work to be done. We are committed to creating and implementing a robust plan as quickly as possible.”
In this Q&A, Wells Fargo Stories asked Sloan about developments at the company since he became CEO in October 2016 and what he hopes to achieve this year.
Q: You’ve been with the company for more than 30 years, leading some observers to question whether an “insider” can make the changes needed to fix Wells Fargo’s problems. How do you respond to that?
Well, first, I was honored and humbled to be named CEO. And despite the challenges of the past 16 months, I can say today that I have never been prouder to be a Wells Fargo team member, and I have never been more optimistic about the future of our company.
But it is a very fair question and my direct answer is: Look at what we have accomplished so far. I knew I had work to do in helping reassure our stakeholders that we would make the changes that had to be made to fix the problems, make things right, and win back their trust. We are making strong progress (PDF) and are on the right track. Our actions are far-reaching, and we are serious about fixing what went wrong and becoming a better bank.
We have made important changes to our leadership, as has our Board of Directors; senior leaders forfeited pay, including me; we’ve changed the way we compensate bankers in our branches, including eliminating product sales goals for retail bankers in branches and call centers; and we’ve made changes to strengthen internal checks and balances in our operations.
Our consent order agreement with the Federal Reserve is about the same — continuing to build on our progress when it comes to how we manage risk and compliance, and our board’s oversight. We appreciate the Federal Reserve’s acknowledgement of what we’ve done so far, and we want all of our stakeholders to know that we intend to stay the course. I know we can build on the momentum that started in 2017.
Q: You have said that Wells Fargo is a better bank now than it was a year ago, and, this year, it will be an even better bank. What does that entail?
Since I became CEO, my team and I have been focused on three main tasks. First, in response to sales practices, we’re transforming our Community Bank. Our retail bank has a strong new leader in Mary Mack, whose responsibilities have also recently been expanded to include our consumer lending business. We have revamped the incentives for our retail bankers who serve customers in bank branches and call centers by eliminating product sales goals. Today, Wells Fargo rewards teamwork and excellent customer experience, risk management, and team performance. Much more weight is now put on measures that take a longer view of our relationship with customers, as well as the direct feedback they give us.
We have also established new, stronger, and more proactive ways to audit our sales processes. For example, “mystery customers” are making as many as 18,000 visits to our branches this year, so we can inspect and review the experiences our team members are delivering to our customers. Also, our Internal Audit Group has increased its coverage and branch visits. Our Community Bank is a fundamentally different organization from the one that existed in 2016.
Second, we are reviewing operations and increasing accountability across the entire company. Oversight, compliance, and human resources are much more effective than a year ago and have far greater visibility and accountability across the entire company. Now when a concern emerges, we identify it quickly, we escalate it promptly, and we address it fully. We demand individual executive accountability. We have named new leaders in certain areas of retail banking, mortgage, and auto lending to ensure we are meeting the standards that customers demand of us.
Third, we are compensating customers who were affected by our mistakes. Our focus has been on casting a wide net to find customers who may have been affected by our retail bank sales practice issues so we can make them whole. We engaged a third-party consultant that reviewed more than 165 million retail banking accounts opened between January 2009 and September 2016 to identify financial harm stemming from potentially unauthorized accounts. We are providing refunds to customers based on this analysis.
We also entered into a $142 million class-action settlement that covers unauthorized account claims dating back to 2002. It allows customers to seek compensation for impacts to their credit score as the result of potentially unauthorized accounts. In addition, we will listen to the complaints of any customer who believes they may have been impacted from unacceptable sales practices and address their concerns.
Q: You have committed to looking across the company for any other weaknesses. Why is this important to do, and how much more work will be needed to complete the process of reviewing all sales practice areas?
We committed to examining practices of all of our businesses, and to do that with the right diligence and rigor takes time. We are steadfast in our commitment that, if additional problems are found in any area of business at Wells Fargo, we will act swiftly and decisively to make things right. And, we’ve committed to being transparent about the problems we find.
Q: What progress has been made to ensure that team members who have an issue can raise it safely?
Having a workplace where everyone feels empowered to raise their hand when they see something questionable is a priority of our senior leadership team, and we’ve taken a number of steps to address that priority.
We conducted our own internal review of our EthicsLine for team members to report possible misconduct, and we also hired an outside third party to review our approach and make recommendations on how we can operate in the best way for our team members and customers. Over the course of last summer and fall, we implemented those recommendations. We’re working now to make it easier for team members to submit a report online. We also created the Conduct Management Office, a group that is authorized to work independently across Wells Fargo to drive consistency in the way we receive, research, and resolve issues, and generally oversee how we respond to concerns raised by team members — as well as complaints from customers.
Q. What are examples of how the culture is changing at Wells Fargo?
We’ve expanded the lines of communication between team members and management on an unprecedented scale, and team members have responded well to that new level of openness. At each of my bimonthly Town Hall meetings, which are broadcast and streamlined online companywide, we’ve implemented unscripted Q&A sessions in which team members can directly share their comments and questions with leadership. We’ve also leveraged technology in that effort. Team members are invited to share their views on our in-house social network and our corporate news site. There are also frequent live chats available for team members to interact with company leaders.
Overall, I believe we are cultivating a culture in which our leaders welcome any and all credible challenges, even ones they may find disagreeable. In my own meetings with the senior leaders who comprise our Operating Committee, I encourage all of them to weigh in on a decision even when it relates to a part of the business outside their own area of responsibility. We are also formally reaching out for more input and feedback from outside the company and have created a Stakeholders Relations group to facilitate that input.
Q: How have you ensured that team members remain engaged amid all the changes taking place?
First of all, I’ve met face to face with many of them across the country, through town halls, small group meetings, and individual conversations. I’ve let them know how much I believe in them; that they are the backbone of this company and only through their hard work can we fulfill the hopes we all have for Wells Fargo’s success in rebuilding trust. To reinforce that, we’ve announced new restricted stock awards to qualified team members and have instituted four additional days off for 2018, including two “personal holidays” team members can use for religious, family, cultural, patriotic, community, or diversity observances. In addition, we are raising our minimum hourly pay to $15 an hour for U.S. team members starting in March and are reviewing the pay of all other team members to make sure they are being compensated appropriately relative to the new minimum pay.
Q: What role does innovation play in energizing Wells Fargo’s team members and culture?
Innovation is one of the strongest forces mobilizing our company — and momentum is gaining through the capable leadership of Avid Modjtabai. With her at the helm of our Payments, Virtual Solutions and Innovation group, we’re creating advanced mobile banking tools, artificial intelligence capabilities, card-free ATM technology, personal finance apps, and the list goes go on. Our team members are at the forefront of this creative energy. They fuel our innovation culture, which is widely recognized as being a leader in the industry. And that is a fact that really makes me proud of our team members. It is exciting to see innovation and technology being used to build stronger relationships with our customers. Innovation is at our core, and we see the potential to make banking faster, easier, smarter, and safer — for our customers and the financial services industry.
Q. What are you looking for in leaders at Wells Fargo?
First, optimism. It’s one of the traits that our senior leadership team discusses as critical at all levels of the organization, particularly given our journey to transform Wells Fargo and rebuild trust. We need our leaders to demonstrate a willingness to embrace change and rally people around change in a way that is productive, positive, and inspiring. Hand in hand with that, resilience is also tremendously important — having the mindset and perseverance to bounce back quickly when things don’t go as planned or when situations call for adjusting course. Finally, I would say inclusiveness. We’re better when we invite diverse perspectives to the table and take the time to really understand various viewpoints. We’re better decision makers when it comes to business, we’re better coaches and managers, and we cultivate a stronger culture where people feel more valued and committed.
Q: Given your new additional responsibilities since being named CEO, how have you maintained your connections to the causes, community organizations, and charities that have been so vital to you in past years?
Part of making sure we’re the strongest bank we can be is continuing to stay connected to and invested in the communities where we all live and work. Even in a year as difficult as 2017 — one of the most challenging in our company’s 166-year history — our team ranked No. 1 in terms of time and financial contributions made to nonprofits as part of employee giving campaigns measured by the United Way. So I have stayed inspired — and frankly, our entire senior leadership team has been inspired — to continue supporting the causes we have always been involved in. In the case of my family, homelessness in the Los Angeles area is a major focus because we have seen the impact that the right programs can make.
Q: What does the future hold?
We said a year ago there would be tough, challenging days in our journey to rebuild trust. And that is still the case today. Rebuilding trust with customers and the public takes time, but we will keep at it for as long as it takes.
In the meantime, we are confidently moving ahead. Last March, I established six goals that set the bar for Wells Fargo to become the financial services leader in customer service and advice, team member engagement, innovation, risk management, corporate citizenship, and — last, because all of these goals feed into it — shareholder value. These are goals that, in one sense, reemphasize what has always been part of our corporate culture, and in another sense, take our vision and values to the next level. Our commitment to these goals will demonstrate to our customers that we are truly on their side and focused on growing our relationships with them into the future.