Wells Fargo's board would benefit from examining what JPMorgan CEO Jamie Dimon and his board did following the 2012 "London Whale" scandal that racked up nearly $6.2 billion in losses, said BoardProspects' Rogers.
The New York bank paid more than $900 million in fines and admitted it violated federal securities laws. Dimon took a salary cut for one year, the board's lead independent director undertook an independent review and pay was clawed back from senior executives.
"The goal in the aftermath of that was to try and get the reputation of JPMorgan back, and the way to do that is through this investigation but make it very transparent," Rogers said.
For now, it's apparent that Wells Fargo has "serious corporate governance issues" in areas including human resources and internal controls, said Rafferty Capital Markets analyst Dick Bove, who has a sell rating on the stock. "It may take two years to adjust," he said.
Once the largest bank in the U.S. by market value because of the premium its shares commanded, Wells Fargo has now dropped below JPMorgan, which was already larger in terms of revenue and assets. The bank's stock has fallen 9% this month to $45.88, while the broader S&P 500 gained 0.3%.
"What the problem is, is complexity," Georgetown Law Professor Donald Langevoort said in a phone interview, "that what is going on is so widespread and involves so many kinds of behaviors that it becomes difficult to dig into the compliance issues with respect to everything that might be amiss."
That poses particular challenges for the 63-year-old Stumpf, who joined the board in 2006, became CEO in 2007 and chairman in 2010. He still must answer outstanding questions from the Senate Banking Committee, and House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican, has said his panel will undertake a separate probe.
"This is a fine example of why you need an independent chairman," said Boston University's Hurley. "If you are a large organization, you need a chairman, not a lead director, but an actual chairman who is different from the CEO."
Langevoort doesn't totally agree: If corporate governance is strong, the separation of the roles doesn't matter very much, he said.
"On the other hand, if there are material weaknesses in the control environment, then the fact that the CEO also claims that chairmanship role probably compromised governance further," he said.
There's already speculation about who might replace Stumpf if he doesn't survive the crisis, Bove wrote in a note to clients, and in that case, the roles of chairman and CEO would probably be separated.
Even if some executives are forced out, "the company has a deep bench of management talent and established succession plans in place" so its valuation wouldn't suffer, said RBC Capital Markets' analysts who have an "outperform" rating on the stock.