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Charlie Scharf’s Comments Are Why You Want Him as Wells Fargo CEO

Last Updated September 25, 2020 8:41 PM
Laura Hoy
Last Updated September 25, 2020 8:41 PM
  • Charlie Scharf has apologized for insensitive diversity comments made earlier this summer.
  • His handling of the issue speaks to his willingness to tackle problems head-on.
  • That he made the comments at all shows he isn’t covering up potential problems at the bank.

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. 

Charlie Scharf, Wells Fargo, AOC
AOC tweeted that Scharf was the one without talent. | Source: Twitter 

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 Comments Highlight Transparency at Wells Fargo

Wells Fargo, WFC stock, Charlie Scharf
Wells Fargo has been struggling to come out from under its fake account scandal. | Image: REUTERS/Jeenah Moon

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 Honesty Reveals Key Buying Signal for Wells Fargo Stock

WFC stock, Wells Fargo, Charlie Scharf
WFC has more levers to pull in the months ahead because of its cost-cutting potential. | Source: Yahoo Finance 

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.

Public Misstep Makes Scharf a Good Pick

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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Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the securities mentioned.