When Tim Sloan became CEO of Wells Fargo last year, the bank’s image was in tatters.
While Wells Fargo came out of the financial crisis looking like the model child, news that its employees had created some 2.1 million phony credit and debit card accounts for customers over a five-year period turned the bank into a pariah. Making the problem even worse: Then-CEO John Stumpf played down the scandal and even appeared to siphon all the blame to “a couple bad apples”—coming off as tone deaf in the process. Stumpf eventually resigned, and saw a portion of his pay clawed back by Wells Fargo’s board.
It was in that atmosphere, with the public still crying out for blood, that 57-year-old Sloan took on the position of CEO last October. But as Sloan told the audience Wednesday at Coins2Day Brainstorm Tech, he did at least have one thing on his side: guiding words from the bank’s biggest shareholder, Berkshire Hathaway CEO Warren Buffett.
Sloan recalled Buffett telling him to “move quickly and to ask a lot of the team.” Sloan went on: “We [talked about], for example, when he stepped into Salomon Brothers and had a reputational issue, and then some of the changes that he made, and it was a good guide for me.”
A failure to move quickly was one of things Wells Fargo was criticized for in the wake of the scandal. News of the fake accounts only became widespread in 2016, after the CFPB levied a fine on the bank. But it emerged that the bank, and Stumpf, may have known about the scandal as far back as 2005. Several whistleblowers also came forward saying they had been admonished when they tied to report early signs of a problem to the company’s Human Resources department.
Buffett has called Wells Fargo’s phony accounts scandal a “big mistake.”
“The big mistake was when whenever sufficient information had come back that this is producing a counterproductive effect … that’s the moment of truth,” Buffett said on CNBC in May. “If you don’t do it immediately and you let it run for a while, now you’ve got the ultimate problem.”
The Oracle of Omaha certainly has seen several cases in which the reputation of a financial institution he owned has been dragged through the mud. Buffett made a $700 million investment in one-time bond-trading powerhouse Salomon Brothers back in 1987, becoming the company’s largest shareholder. But by 1991, Buffett was forced to intervene, running the firm for about nine months, after Salomon got in trouble for illegal bidding in Treasury auctions. In testimony before Congress that year, Buffett would say, “Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.” The changes he made at Salomon were swift and sweeping. Among them, was a decision to reduce 1991 bonuses by $110 million, and peg those bonuses to performance, The Los Angeles Times reported.
In the end, Buffett came out on top when he sold the firm to Travelers for $9 billion in 1997, doubling his own investment in the process.
“We are so fortunate to have arguably the world’s greatest investor as our largest shareholder,” Sloan said at the conference, where he also introduced Wells Fargo’s new “Control Tower.”