Wells Fargo & Co. might soon be the largest U.S. bank to hire a female CEO.
The scandal-plagued bank has lost two CEOs since 2016. Under pressure from Congress and scrutiny from regulators, the San Francisco-based lender is seeking a new leader, one Wells Fargo has said will come from outside the organization. Several candidates rumored to be on the short list for the top spot are women — a move that would be a first at the biggest U.S. banks in an industry lacking diversity in senior leadership roles.
Analysts said longtime JPMorgan Chase & Co. CFO Marianne Lake and Citigroup Inc. Latin America CEO Jane Fraser are potential frontrunners in the search. However, Lake was recently named head of consumer lending at JPMorgan in what some called a defensive move to prevent her from taking the top job at Wells Fargo.
Other women who have been cited as possible contenders include Bank of America Corp. Chief Operations and Technology Officer Catherine Bessant, Bridgewater Associates LP co-CEO Eileen Murray, and Ruth Porat, the CFO of Alphabet Inc. and Google LLC.
Media outlets have recently published stories about final contenders for the role, always citing unnamed inside sources. Wells Fargo Chair Elizabeth "Betsy" Duke said in the bank's April 23 shareholder meeting that "we do not plan to comment on such speculation or provide updates on our progress until we've made a final selection." The bank declined to comment further on its search.
Executive search expert Carll Wilkinson said Wells Fargo's board is "extraordinarily sensitive" to the political and regulatory headwinds it faces. He believes that a Wells Fargo board member or someone close to the CEO search leaked the rumor that the bank is seeking to hire a woman for the top spot. The move was "likely intentional" because the bank believed it would "play well in the court of public opinion," Wilkinson said in an interview.
Wells Fargo's hunt comes at a time when investors — including the likes of BlackRock Inc. and State Street Global Advisors Ltd. — are increasingly pushing companies around the globe to diversify their C-suites, boards and internal ranks with more women and minorities. U.S. banks have particularly come under fire as the largest depository institutions by assets are mostly led by white men. An S&P Global Market Intelligence analysis from 2018 found that only 40 publicly traded U.S. banks had female CEOs in 2017, representing just 4.31% of the industry.
The next CEO will have to "win over the confidence of the Washington class especially," Wilkinson said. "They love to rake big, bad, rich financial services CEOs over the coals. One of their favorite pastimes."
Since Wells Fargo's high-level scandals in 2016, regulators have fined the bank more than $1 billion, and the U.S. Federal Reserve set an unprecedented growth cap on its assets. The bank also faces continued criticism from Capitol Hill. Lawmakers from both parties put then-President and CEO Timothy Sloan under close scrutiny at a House hearing March 12.
Sen. Elizabeth Warren, D-Mass., is one of Wells Fargo's most outspoken critics. The presidential candidate has slammed the bank for failing to protect consumers and for failing to bring in fresh blood to lead the company following the scandals. Last week one of the bank's federal regulators, the Office of the Comptroller of the Currency, said it would review Wells Fargo's pick for its next CEO.
There are men on the rumored short list too.
General counsel C. Allen Parker, who was not at Wells Fargo when its sales scandal broke in 2016, is serving as interim CEO. Some believe he is also in contention to take the role permanently. And Cerberus Capital Management LP President Matthew Zames, who previously was JPMorgan's COO, has also been floated as Wells Fargo's possible next CEO.
As in many industries, leadership roles at financial companies are predominantly held by white men. The banking and broader financial industry "suffers from a significant demographic disparity issue" in that it is not well represented either by women or people of color, Wilkinson said.
Just four of the biggest financial companies — KeyCorp, Progressive Corp., Reinsurance Group of America Inc. and Synchrony Financial — are led by a woman, according to data compiled by executive compensation research firm Equilar Inc. Out of 86 financial companies in the Equilar 500, a subset of the largest U.S. public companies by revenue, 88% of named executive officers were male.
Although diversity "is not a small consideration," an individual's skills and expertise need to be paramount in Wells Fargo's search, said Courteney Keatinge, director of environmental, social and governance research at Glass Lewis.
Keatinge also cautioned that if Wells Fargo is specifically seeking a female chief executive, this could create a "glass cliff" scenario. The glass cliff phenomenon is the idea that women are put in precarious leadership roles at companies in crisis, setting them up to take the blame if there is not a successful turnaround. The term was coined in 2005 by Michelle Ryan and Alexander Haslam of the University of Exeter in response to a report in the U.K. Times that suggested female leaders have a negative impact on company performance.
It leads to a misconception that women are ineffective CEOs, Keatinge said in an interview. But she also acknowledged that a female CEO could come into Wells Fargo and turn operations around. "You can't tell whether or not it's a glass cliff situation until after you've fallen off the cliff," Keatinge said.
Piper Jaffray analyst Kevin Barker said the person has to understand the ins and outs of managing a big bank: he or she must know how to deal with commercial lending and regulators, run a large and complex organization, and recognize different risks and know how to assess them.
Wilkinson believes there are two necessary boxes the next chief executive will have to check: he or she must have "significant experience" running a major business unit at another megabank and be "extraordinarily savvy" with political and media relations.
But at the end of the day, a general profile can only get the search committee so far, the executive search expert said.
"You can talk all you want about the ideal profile, but the reality is, you're looking for a real live person," Wilkinson said. "It's only going to be real people who are in front of that board. They're going to have to make a decision based on that."