Richard Kovacevich
Encyclopedia
Richard M. "Dick" Kovacevich, (born October 30, 1943) is retired chairman of the board of directors and previous CEO of Wells Fargo & Company.
A native of Tacoma, Washington
, he grew up in Enumclaw, Washington
. At Stanford University
he received BS and MS degrees in industrial engineering, followed by an MBA degree from Stanford Business School in 1967. Early in his corporate career he was a planning and division general manager with General Mills
before joining Citicorp.
At Citicorp he was made head of regional retail banking
. Kovacevich was told by his team that Citibank had 30% market share but was losing 108 million dollars a year. Probing deeper, Kovacevich realized that they meant that Citibank had 30% checking account market share (in other words, 30 percent of all people who lived in the Citibank regions had a checking account with Citibank). In reality, Citibank only had 6% market share of deposits (the vast majority of money being in Savings and Loans, Credit Unions, and other institutions). Kovacevich expanded Citibank aggressively into other areas such as mortgages
.
He then joined Norwest Bank as chief operating officer and head of the retail banking group in March 1986. At Norwest, Kovacevich confronted a similar situation. Norwest was mostly centered in Minnesota
and Iowa
at the time, with a relatively small population in both states. Kovacevich realized the only way he could keep growing the company would be to expand beyond banking services, into investment and insurance services as well. Kovacevich theorized that eventually it would be impossible for any bank to continuously grow if it did not do this.
Kovacevich instituted the new strategies while serving as president of Norwest from 1989, chief executive officer from 1993, and chairman from 1995. The higher revenues, relative to stable fixed costs which this method produced allowed Norwest to purchase many other banks, culminating with the 1998 merger with Wells Fargo
. After the merger, he was given the positions of CEO and president of Wells Fargo. In 2001 Kovacevich was elected chairman as well.
Kovacevich is responsible for many trends currently found in the financial services industry:
Kovacevich has also pushed many controversial views. He believes that Federal Deposit Insurance Corporation
insurance should be privatized, and that Fannie Mae and Freddie Mac should have no government backing in the event of a failure (quite the opposite of the course actually pursued by the United States Congress
and the White House
when the two lenders became insolvent in September 2008). He has also been very vocal against the expensing of stock options, and has twice disobeyed shareholder requests to do so.
He relinquished the presidency of Wells Fargo to John Stumpf
in August 2005. On June 27, 2007, the board of directors elected Stumpf CEO, with Kovacevich retaining the chairmanship.
Besides Wells Fargo, Kovacevich is a director of Cargill, Inc., Cisco Systems, Inc., and Target Corporation
. He is also vice president of the board of governors of the San Francisco Symphony, vice chairman of the San Francisco Museum of Modern Art, and a member of Governor Arnold Schwarzenegger
's California Commission on Jobs and Economic Growth, the National Infrastructure Advisory Committee, and the Financial Service Roundtable.
In the political realm, he has been a member of Pete Coors
for Senate, Romney
for President, the National Republican Congressional Committee
, and the New Leadership for America Political Action Committee.
In September 2009 Wells Fargo announced Kovacevich will step down as chairman and a director at the end of 2009 and retire from the company in early 2010 after 23 years with the company.
A native of Tacoma, Washington
Tacoma, Washington
Tacoma is a mid-sized urban port city and the county seat of Pierce County, Washington, United States. The city is on Washington's Puget Sound, southwest of Seattle, northeast of the state capital, Olympia, and northwest of Mount Rainier National Park. The population was 198,397, according to...
, he grew up in Enumclaw, Washington
Enumclaw, Washington
Enumclaw is a city in King County, Washington, United States. The population was 10,669 at the 2010 census.The Enumclaw Plateau, on which the city resides, was formed by a volcanic mudflow from Mount Rainier approximately 5,700 years ago....
. At Stanford University
Stanford University
The Leland Stanford Junior University, commonly referred to as Stanford University or Stanford, is a private research university on an campus located near Palo Alto, California. It is situated in the northwestern Santa Clara Valley on the San Francisco Peninsula, approximately northwest of San...
he received BS and MS degrees in industrial engineering, followed by an MBA degree from Stanford Business School in 1967. Early in his corporate career he was a planning and division general manager with General Mills
General Mills
General Mills, Inc. is an American Fortune 500 corporation, primarily concerned with food products, which is headquartered in Golden Valley, Minnesota, a suburb of Minneapolis. The company markets many well-known brands, such as Betty Crocker, Yoplait, Colombo, Totinos, Jeno's, Pillsbury, Green...
before joining Citicorp.
At Citicorp he was made head of regional retail banking
Retail banking
Retail banking is banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and transactional accounts, mortgages, personal loans, debit cards, credit cards, and so forth.-Types of...
. Kovacevich was told by his team that Citibank had 30% market share but was losing 108 million dollars a year. Probing deeper, Kovacevich realized that they meant that Citibank had 30% checking account market share (in other words, 30 percent of all people who lived in the Citibank regions had a checking account with Citibank). In reality, Citibank only had 6% market share of deposits (the vast majority of money being in Savings and Loans, Credit Unions, and other institutions). Kovacevich expanded Citibank aggressively into other areas such as mortgages
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
.
He then joined Norwest Bank as chief operating officer and head of the retail banking group in March 1986. At Norwest, Kovacevich confronted a similar situation. Norwest was mostly centered in Minnesota
Minnesota
Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...
and Iowa
Iowa
Iowa is a state located in the Midwestern United States, an area often referred to as the "American Heartland". It derives its name from the Ioway people, one of the many American Indian tribes that occupied the state at the time of European exploration. Iowa was a part of the French colony of New...
at the time, with a relatively small population in both states. Kovacevich realized the only way he could keep growing the company would be to expand beyond banking services, into investment and insurance services as well. Kovacevich theorized that eventually it would be impossible for any bank to continuously grow if it did not do this.
Kovacevich instituted the new strategies while serving as president of Norwest from 1989, chief executive officer from 1993, and chairman from 1995. The higher revenues, relative to stable fixed costs which this method produced allowed Norwest to purchase many other banks, culminating with the 1998 merger with Wells Fargo
Wells Fargo
Wells Fargo & Company is an American multinational diversified financial services company with operations around the world. Wells Fargo is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization. Wells Fargo is the second largest bank in deposits, home...
. After the merger, he was given the positions of CEO and president of Wells Fargo. In 2001 Kovacevich was elected chairman as well.
Kovacevich is responsible for many trends currently found in the financial services industry:
- Calling branches "stores", instead of "branches". This is a reference to both the diversified products they sell, beyond normal banking products, and also to the sales focus the employees have. Washington MutualWashington MutualWashington Mutual, Inc. , abbreviated to WaMu, was a savings bank holding company and the former owner of Washington Mutual Bank, which was the United States' largest savings and loan association until its collapse in 2008....
and other banks at the present time are currently calling their branches "stores". - Expansion into non-traditional banking businesses, such as investments and insurance. This culminated in the Gramm-Leach-Bliley ActGramm-Leach-Bliley ActThe Gramm–Leach–Bliley Act , also known as the Financial Services Modernization Act of 1999, is an act of the 106th United States Congress...
. - Integrated cross-sell strategy. This strategy is to market most products only to existing customers, primarily by employees, instead of each product line attracting its own customers via its own marketing. This method can be cheaper and more successful.
Kovacevich has also pushed many controversial views. He believes that Federal Deposit Insurance Corporation
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation is a United States government corporation created by the Glass–Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. , the FDIC insures deposits at...
insurance should be privatized, and that Fannie Mae and Freddie Mac should have no government backing in the event of a failure (quite the opposite of the course actually pursued by the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
and the White House
White House
The White House is the official residence and principal workplace of the president of the United States. Located at 1600 Pennsylvania Avenue NW in Washington, D.C., the house was designed by Irish-born James Hoban, and built between 1792 and 1800 of white-painted Aquia sandstone in the Neoclassical...
when the two lenders became insolvent in September 2008). He has also been very vocal against the expensing of stock options, and has twice disobeyed shareholder requests to do so.
He relinquished the presidency of Wells Fargo to John Stumpf
John Stumpf
John Stumpf became Chairman for Wells Fargo & Company in January 2010. He was named Chief Executive Officer in June 2007, elected to Wells Fargo’s Board of Directors in June 2006, and has been President since August 2005....
in August 2005. On June 27, 2007, the board of directors elected Stumpf CEO, with Kovacevich retaining the chairmanship.
Besides Wells Fargo, Kovacevich is a director of Cargill, Inc., Cisco Systems, Inc., and Target Corporation
Target Corporation
Target Corporation, doing business as Target, is an American retailing company headquartered in Minneapolis, Minnesota. It is the second-largest discount retailer in the United States, behind Walmart. The company is ranked at number 33 on the Fortune 500 and is a component of the Standard & Poor's...
. He is also vice president of the board of governors of the San Francisco Symphony, vice chairman of the San Francisco Museum of Modern Art, and a member of Governor Arnold Schwarzenegger
Arnold Schwarzenegger
Arnold Alois Schwarzenegger is an Austrian-American former professional bodybuilder, actor, businessman, investor, and politician. Schwarzenegger served as the 38th Governor of California from 2003 until 2011....
's California Commission on Jobs and Economic Growth, the National Infrastructure Advisory Committee, and the Financial Service Roundtable.
In the political realm, he has been a member of Pete Coors
Pete Coors
Peter Hanson Coors is a U.S. businessman and entrepreneur. He currently is the Chairman of the Molson Coors Brewing Company and Chairman of MillerCoors, a joint operating venture, announced October 9, 2007 and completed June 30, 2008. Molson Coors headquarters are located in Colorado and...
for Senate, Romney
George W. Romney
George Wilcken Romney was an American businessman and Republican Party politician. He was chairman and CEO of American Motors Corporation from 1954 to 1962, the 43rd Governor of Michigan from 1963 to 1969, and the United States Secretary of Housing and Urban Development from 1969 to 1973...
for President, the National Republican Congressional Committee
National Republican Congressional Committee
The National Republican Congressional Committee is the Republican Hill committee which works to elect Republicans to the United States House of Representatives....
, and the New Leadership for America Political Action Committee.
In September 2009 Wells Fargo announced Kovacevich will step down as chairman and a director at the end of 2009 and retire from the company in early 2010 after 23 years with the company.