At a recent leadership conference of U.S. executives, Wells Fargo CEO Tim Sloan was asked for his advice on how to manage a company through adversity and lead it into the future.
For Sloan, the leader of a company that has faced much adversity in recent years, the answer was clear: Respond to adversity with strength, commitment, and resilience.
“First and foremost, you have to have the belief and commitment in what you’re doing,” he said. “You have to be incredibly optimistic about the future of your company. You have to believe in what you’re doing.”
Carol Massar, Bloomberg News anchor:
It has been an interesting year for you guys, and I think there’s a, we’ve got a room full of executives who want to know how you’ve had to deal with essentially the crisis that Wells Fargo has gone through. Before we get to that, though, I also think you’re a great person to talk to about what the outlook is like.
Tim Sloan, Wells Fargo CEO:
Massar: What do you see the business environment like right now?
Sloan: Well, I think overall the economy continues to improve for a variety of reasons that we probably don’t have time to go through in detail, but you know our outlook is pretty consistent with the consensus at least here in the U.S., and that is we’ll have GDP growth in the second quarter of about 4 percent, and the likelihood is that we’ll have growth for the full year of about 3 percent. That’s a big improvement from what we’ve seen over the last few years, so that’s a good thing. There’s certainly some clouds on the horizon.
Massar: Do you guys talk about recession at all at Wells Fargo?
Sloan: You know we’re in the banking business, so we talk about recession all the time. When you think about the risks that we, I mean we’re in the business of taking risks, and when you’re in the business of taking risks you need to make sure that you’re all-inclusive in terms of the potential of when is the next downturn.
I remember in 2005 and 2006 where we were in this environment where people were talking about the new paradigm. That we’d never have another recession again and that technology had done this and that people thought about taking risks in a different way. You know, and from my perspective again being in this business. I mean we’re in a cyclical world. We’re in a cyclical business. The financial services industries sure are cyclical, so I think we need to be thoughtful about the fact that while the recovery has been relatively slow in the U.S., and candidly in most parts of the world since the Great Recession, it’s long. We’re now going to set a new record, and we’re setting new records.
So I think it’s something to be mindful of. We’re relatively optimistic for the next couple of years not because we’re worried about year three. It’s just that it’s hard to see what year three is going to look like.
Massar: The visibility. One thing that you did say to me, I think a week or two ago, was you said you see a lot of non-U.S. customers who have operations in the U.S. are committing to making more investments in the United States. You’re seeing that?
Sloan: Well, I think so. What the change in the corporate tax policy in the U.S. allowed is, it’s allowed us to be more competitive, and it’s created an environment where non-U.S. companies who have been moving, particularly manufacturing operations, here to reduce the risk to the supply chain, are now saying hey you know what, it probably makes more sense for us to have more of our operations here because this is such a vibrant market for them.
Massar: Right, I just talked to the Volvo CEO — just opened their first manufacturing facility in South Carolina — and a lot of what they’re manufacturing is for export.
Massar: But it’s really fascinating. Alright, so the elephant in the room.
Massar: Interesting couple of years for Wells Fargo.
Massar: And I think safe to say that many would say it was an epic mismanagement in terms of what happened at the firm.
Sloan: We made our share of mistakes. That’s correct.
Massar: Two million unauthorized accounts opened by employees. You guys paid $185 million in fines, enforcement actions. Workers were incentivized to basically open up those accounts. What have you learned?
Sloan: Well, first let me correct a couple things. We don’t know how many accounts that were opened were unauthorized. When we looked at some of the mistakes we made.
Massar: Well would you say one unauthorized account would be bad?
Sloan: One is too many. Right.
Sloan: One is too many, and that’s absolutely correct. But regardless, there was no question that we had an incentive plan in a part of our business, not across the entire company, but in our retail banking business that incented our team members in retail banking — most of whom did an incredible job during this period — but it incented them to be more focused on opening an account as opposed to providing good service and advice.
Massar: How does that happen though?
Sloan: I think it happens over time where you have a plan that tends to work for a variety of reasons, because when you looked at the customer service scores were improving during the same period. We were growing as a company. Our earnings were growing. Deposits were growing, primary, all the other metrics, but when you step back and look at it, we had an incentive plan that was just, just went off the rails.
And it was more than just an incentive plan, and I think this is a really important learning experience for all of us, and that was it created a management environment where many of our managers at the time in our retail banking business were more focused on managing to a plan than being good managers, and that really made the problem even a little bit more difficult. But look, we’ve acknowledged the mistakes we’ve made. We’ve taken responsibility.
Sloan: We’ve made fundamental changes in the company to the extent that any customers were impacted we will, we are, making it right by them, and then we’re moving forward.
Massar: How tough is it to manage though? As you’re making the changes, you’ve got to shore up your employee base, right, and maybe adapt the culture. When other things still continue to come out. And I think about there were some overcharges for auto loan and mortgage customers, government inquiries about your wealth management business related to 401Ks, a foreign exchange business inquiry. February of this year you had the Fed institute a cap on terms of your assets. How hard is it as you’re trying to right the ship come out with a new message, say we fixed it, and yet these things still continue to come out?
Sloan: It’s part of righting the ship. I mean one of the.
Massar: It’s all part of it.
Sloan: One of the promises that I made to all of our stakeholders when I took this role in October of 2016, was that we were going to look at every policy, every procedure, every product in Wells Fargo, the way that we did business, and if there was anything that we found that we needed to improve upon we were going to be very transparent about it. If any customers were impacted, we were going to deal with that, and we were going to change, and we have fulfilled that promise.
And sometimes that means most of what we found is absolutely right. That’s not a headline. That doesn’t get a story. That’s not exciting, but sometimes we’ve found things that we should have done differently. Should have never happened. Completely agree with that. You’ve got to take responsibility. You’ve got to own up to it. You got to fix it, and then you’re going to move forward.
Sloan, one of the keynote speakers at the third annual Bloomberg Breakaway CEO Summit in New York City, was interviewed by conference co-chair and Bloomberg News anchor Carol Massar.
The summit, which draws senior executives of middle market companies — those with revenues ranging from $10 million to $500 million — from across the U.S., also included high-profile industry celebrities Michael Bloomberg and Martha Stewart.
In the packed conference room, there was keen interest in Sloan’s view on what happened at Wells Fargo, what has been done to fix the problems, and how he has helped to clear a path for the company to re-establish its reputation.
“We’ve acknowledged the mistakes we made,” he said. “We’ve taken responsibility. We’ve made fundamental changes in the company. To the extent that any customers were impacted, we are making it right by them, and we’re moving forward.”