Wells Fargo CEO Charlie Scharf has been in the spotlight for all the wrong reasons this week as he apologized for racially insensitive comments he made back in June. When speaking about a lack of diversity among Wells Fargo’s upper management, Scharf commented that there was “a very limited pool of Black talent to recruit from.”
The remark wasn’t well-received , especially in today’s climate of social unrest regarding racial injustice. Rep. Alexandria Ocasio-Cortez quickly condemned Scharf’s comment on Twitter, putting the blame squarely onto the CEO’s shoulders.
There’s no question that Scharf’s remarks were offensive— he apologized soon after they went public, saying he’d work to improve recruitment at Wells Fargo.
Scharf’s handling of Wells Fargo’s diversity issues, though clumsy, underscore precisely why he’s the kind of CEO investors should support. He’s transparent, open, and honest about the company’s shortcomings—a trait that’s hard to find anywhere, let alone in the executive suite.
While some employees were understandably offended by Scharf’s remarks, others said his openness was refreshing and inspired trust :
The meeting was incredibly constructive. … I walked away being incredibly surprised at how genuine and sincere he is.
Wells Fargo has been marred by a fake account scandal, and the firm has been working to rebuild trust among clients and investors. Scharf was brought onboard to do just that, and so far, he’s made good on his promises to keep investors informed about what’s happening with the business.
Sharf’s comment regarding the firm’s Black talent pool highlights a shortcoming in the firm’s recruitment process. While it certainly didn’t help the firm’s image, it shows that Scharf is willing to reveal those shortcomings to work on them.
Scharf’s willingness to be frank with investors was apparent during the firm’s July earnings call when he described the bank’s spending issues:
The third-party spend here is extraordinary. The things that we rely on outside people to do is beyond anything that I’ve ever seen
The bank’s efficiency ratio sits above 71% , much higher than most of WFC’s peers. That, Scharf says, is something he can fix through cost-cutting efforts.
Inefficiency isn’t a positive trait for any business, but considering banks are likely to struggle in the months to come, looking to WFC stock for improving earnings could be a smart play. All of those cost savings will likely turn into an earnings bump, offering a compelling buy-proposition.
Scharf’s comments shouldn’t be applauded, but the fact that he’s owned the company’s shortcoming, apologized for the offense, and promised to do better sends a strong message to shareholders. They can rely on what Scharf says because he isn’t just putting things out there that they want to hear.
For a company making a comeback from a deceptive scandal, that should go a long way in regaining investors’ trust.
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