In times of crisis, companies often push a lawyer into the limelight.
Troubled banking giant Wells Fargo looks to be doing the same over two years after a fake accounts scandal derailed the company’s good guy image. On Thursday, CEO Tim Sloan announced his retirement, making way for interim CEO and President C. Allen Parker—the firm’s General Counsel.
Rather than appointing a permanent chief executive from within, Wells Fargo’s board has elected to seek out a candidate outside of the firm as the internally-promoted Sloan continues to take on waves of criticism for his handling of the bank from lawmakers.
“[Sloan’s] decision, and today’s announcement, reflect that commitment and his belief that a new CEO at this time will best position the Company for success,” said Board Chair Betsy Duke in a statement. “We will immediately initiate an external search and have selected Allen to serve as interim CEO.”
The news comes two weeks after one of Sloan’s many trips to Capitol Hill, where he withstood a grilling about his pay and the bank’s multiple scandals. Following initial news of the bank opening fake accounts for customers in 2016, Wells Fargo as also fined in 2018 unfair mortgage fees.
At the hearing, U.S. Rep. Maxine Waters (D-Calif.) called for ouster, incensed in particular by Sloan’s $2 million bonus and overall 5.7% pay boost in 2018, for a grand total of $18.4 million.
“It was very clear from Mr. Sloan’s testimony that Wells Fargo has failed to clean up its act,” said Rep. Waters.
The Office of the Comptroller of the Currency meanwhile wrote in an email the same day: “We continue to be disappointed with Wells Fargo Bank’s performance under our consent order and its inability to execute effective corporate governance and a successful risk-management program.”
Wells Fargo is also currently in talks with the Justice Department and Securities and Exchange Commission negotiating a resolution to its fake accounts scandal.
Rumors in mid-2018 suggested that the board had been seeking to remove Sloan—but the CEO and Wells Fargo’s board rebuffed the idea, with Sloan saying he is prepared to stay onboard until he turned 65. Today, Sloan is 57.
To abate Washington’s ire, the bank does need an outside CEO, says Brian Kleinhanzl. an analyst with Keefe, Bruyette, & Woods.
“Sloan was never viewed as a transformational leader,” says Kleinhanzl. “He was viewed as capable, and as someone who could fill in. But to the extent you need a wholesale change—a company insider was less likely to make those wholesale changes in businesses, risk management, and personnel.”
Parker, 64, was appointed General Counsel shortly after Wells Fargo’s woes began. Previously, he was a presiding partner at Cravath, Swaine & Moore—a law firm where he focused on risk management and public relations among other business development strategies.
The interim CEO may also have some pull in Washington. Parker previously represented U.S. Secretary of State Henry Kissinger, and is friendly with former Securities and Exchange Commission Chair Mary Jo White, Reuters reports.
The banking sector is no stranger to placing a lawyer in the top seat in times of trouble. Notably, current Bank of America CEO Brian T. Moynihan, was placed in the position in 2009 as the firm faced criticism over its role in the Financial Crisis. Moynihan has served as general counsel, as well as head of consumer banking and president of investment banking.