Mike Cagney’s swift, unexpected departure as the CEO of Social Finance throws into question the path forward at one of the most successful companies in fintech.
Cagney was the unquestioned leader of SoFi, the online consumer lender that he co-founded with three fellow Stanford business school students in 2011. His co-founders have all left the San Francisco-based firm, as have several other high-level executives, and there is no obvious successor to Cagney.
Cagney, a onetime trader and hedge fund manager, was brought down by allegations that he fostered a workplace culture hostile to women. During his six-year tenure as CEO, the privately held company made more than $20 billion in student loans, mortgages and personal loans and attained a $4.3 billion valuation.
But Cagney’s emphasis on rapid growth — which his critics see as part of a testosterone-fueled corporate culture — may face a reappraisal once the company has new leadership.
“Would any CEO still be focused on growth at all costs?” asked one former SoFi employee, who spoke on condition of anonymity.
It was only a month ago that allegations of sexual harassment at SoFi’s loan processing office in Healdsburg, Calif., first surfaced. The accusations of misconduct quickly spread to SoFi’s corporate headquarters in the Presidio, the picturesque former Army fort near the Golden Gate Bridge. Soon Cagney was on his way out.
“It seems pretty clear that the board wants to get ahead of the news,” said James Wu, the CEO of MonJa, a data analytics firm for the online lending industry.
Cagney has resigned as the company’s chairman, and he will leave his job as CEO before the end of 2017, the company said Monday.
Tom Hutton, a venture capitalist who was an early investor in SoFi, was named the company’s executive chairman. He will lead the search for Cagney’s successor, a company spokesman said.
Steven Freiberg, a former CEO of E-Trade Financial who joined SoFi’s board in March, will take on expanded duties as the board’s new vice chairman.
Cagney’s departure throws another wrench in the company’s previously delayed plans to go public. As recently as this summer, Cagney was floating the idea of an initial public offering, though he declined to provide a specific time frame.
SoFi is only the latest highflying tech company to be waylaid by allegations of workplace harassment. In the most high-profile example, Uber Technologies CEO Travis Kalanick resigned in June following allegations that sexual harassment was tolerated at the ride-sharing giant.
Last month, Uber, also of San Francisco, hired an outsider as its next CEO. If SoFi takes the same route, the new CEO would likely be expected to change the corporate culture.
“The argument for an outside candidate is, there’s a need for a culture change, and an outside candidate can do that more easily,” said Todd Baker, managing principal at Broadmoor Consulting.
The list of internal candidates has been depleted in recent months. SoFi executives who have left this year Chief Revenue Officer Michael Tannenbaum, co-founder Dan Macklin and head of business development Catesby Perrin.
Chief Financial Officer Nino Fanlo — who was accused of inappropriate behavior around female co-workers — also left the company in May.
One important decision that Cagney made earlier this year was to apply for an industrial banking charter, and his successor will have to decide whether to continue that effort.
If SoFi becomes a bank, the firm would be subject to stricter regulation than it is today. But SoFi would also benefit from funding some of its loans with a stable base of low-cost deposits.
In addition, the firm would be able to offer deposit accounts, which would further its strategic goal of becoming a full-service financial services provider to its relatively young, affluent customer base.
Earlier this summer, Cagney acknowledged that an industrial banking charter is not a slam dunk, since the Federal Deposit Insurance Corp. has not issued one since prior to the financial crisis.
SoFi’s banking application has been met with opposition from progressive groups and community banks. But the company’s strategy is also being mimicked by two other fintech companies, including the payment processor Square.
“Strategically, it actually makes sense for them to get a banking charter,” said Wei Ke, who heads the North American financial services practices at the consulting firm Simon-Kucher & Partners.