Richard Kovacevich
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Richard "Dick" Kovacevich is the CEO of Wells Fargo. A graduate of Stanford Business School, Kovacevich worked for General Mills before joining Citicorp. According to some calculations, he was the 7th highest paid CEO in the world in 2003.
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 instutitions). Kovacevich expanded Citibank aggressively into other areas such as mortgages.
He then joined Norwest Bank to become COO and head of the retail banking group. In 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. 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.
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 Mutual 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 Act.
- 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 FDIC insurance should be privatized, and that Fannie Mae and Freddie Mac should have no government backing in the event of a failure. He has also been very vocal against the expensing of stock options, and has twice disobeyed shareholder requests to do so.
