- Wells Fargo Chief Executive Charlie Scharf apologized on Wednesday for remarks revealed in a Reuters report that showed he believes there is a dearth of Black talent to recruit.
- Scharf has been shaking the bank up with new hires since he joined Wells as CEO in October 2019.
- Scharf and his team have replaced many top decision-makers, and have had a chance to recruit a new slate of talent.
- Including Scharf, there are 17 execs on Wells Fargo’s operating committee. Of the eight leaders who have joined or will join during Scharf’s tenure, five are white men who overlapped with him at JPMorgan.
- Scharf emphasized in a statement this week that he has also appointed senior non-white leaders: the bank’s head of operations; incoming head of strategy, digital, and innovation; and the head of home lending.
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One year ago, Wells Fargo was preparing to announce a new chief executive after a six-month-long outside search: Charlie Scharf, the former BNY Mellon boss and JPMorgan veteran who could come in and scrub the scandal-plagued bank clean.
Wall Street analysts praised the hiring plans, Wells Fargo shares rose on the news, and a company statement noted Scharf’s business acumen, integrity, and passion for diversity and inclusion.
He joined later that fall and quickly replaced people around him with leaders he was familiar with from past positions. He started reshaping the senior leadership team and installing new top brass to help him turn things around.
Scharf had a unique chance to transform the firm’s management team to help him steer the fourth-largest US bank.
Of the eight new executives on Wells Fargo’s 17-person senior leadership team that have joined or are set to join on his watch, five are white men appointed to critical roles who he previously overlapped with at JPMorgan: COO Scott Powell, Vice Chairman of public affairs Bill Daley, CEO of wealth & investment management Barry Sommers, CEO of consumer lending Mike Weinbach, and Mike Santomassimo, the incoming chief financial officer.
Michael Cleary, the head of sales practices oversight and management — a newly created post — and Ray Fischer, the new head of cards, retail, and merchant services, also overlapped with Scharf at JPMorgan, the largest US bank. Both are white men.
The executive’s views on recruitment have come into focus this week after remarks that he made this summer about Black talent in finance on an internal call and in a company memo were revealed in a Reuters report.
The report also detailed a negative internal response from some employees.
“While it might sound like an excuse, the unfortunate reality is that there is a very limited pool of black talent to recruit from,” Scharf said in the June memo, seen by Reuters and confirmed by Wells Fargo.
Lawmakers including Rep. Alexandria Ocasio-Cortez and Sen. Elizabeth Warren, both known for critical views of the financial-services industry, lambasted his remarks.
“I dare @WellsFargo CEO Charlie Scharf to come before my @FSCDems Diversity and Inclusion Subcommittee and say that to our faces!” Rep. Joyce Beatty of Ohio, who questioned Scharf earlier this year about diversity and inclusion during a Financial Services Committee hearing, said in a tweet on Wednesday.
In July, the Wall Street Journal reported on the memo that included Scharf’s remark.
A Wells Fargo spokesperson referred Business Insider to a statement Scharf made on Wednesday in a company-wide memo that was also posted to the bank’s website: “I apologize for making an insensitive comment reflecting my own unconscious bias,” Scharf said.
Scharf emphasized in his statement that he has also appointed non-white senior leaders, including head of home lending, Kristy Fercho, and two members of the operating committee: head of operations Lester Owens, and Ather Williams III, who is the incoming head of strategy, digital, and innovation.
“Black executives are plentiful and have proved themselves ready to lead. If you don’t know them, you should,” the Executive Leadership Council, a Washington, DC-based organization focused on matters including improving diversity in company leadership, said in a Wednesday LinkedIn post to its page’s 60,000 followers.
A new, sweeping focus on diversity
The backlash centered on Wells Fargo comes as many of the largest firms in the financial services industry have pledged in recent months to improve the longstanding lack of diverse leaders in the business.
US banks and asset managers, including San Francisco-based Wells Fargo, started promising a wave of change amid a national reckoning on systemic racism sparked by the death of George Floyd at the hands of Minneapolis police.
Recruiters focused on the financial-services industry Business Insider have spoken with in recent weeks say firms are placing a heavier emphasis on searches focused on diverse talent, a feature that has been present for years, but has grown in 2020, some say.
For Wells Fargo, the urgency around instilling a culture of change and keeping up positive relations with customers is more acute than its peers.
The bank is still operating under a Federal Reserve-mandated limit on growth imposed in early 2018 as a response to the bank’s phony account scandal that came to light in 2016.
It’s tried to make diversity a more prominent centerpiece of its operations. In June, Scharf said in a memo to staff that it would tie executive compensation to efforts to increase diversity and inclusion among its ranks, Bloomberg first reported. He also set a goal to double the number of Black leaders at the bank within five years.
Scharf also said in his Wednesday statement that the bank was close to hiring a leader for a new unit, reporting into Scharf, that is responsible for advancing Wells Fargo’s internal and external diversity efforts.
It remains to be seen how Wall Street’s fresh commitments to diversifying leadership will play out. But the goals and promises at Wells Fargo and rivals are in place.
On Wednesday, Citi said in a statement that it vowed to usher in “anti-racist practices” in financial services, invoking a phrase that was hardly in the official big-bank lexicon even earlier this year.
The bank’s Chief Financial Officer Mark Mason, one of the most senior Black executives on Wall Street, had addressed the industry’s shortcomings in a post in late May: “These systemic problems will not go away until we confront them head on.”