The latest in the Wells Fargo scandals has me asking, why is America’s third largest bank ($1.95 trillion) still in business? And is its present CEO, Tim Sloan, the best person to head up the sanctions and changes the Federal Reserve mandated? The Fed has yet to remove the bruising penalties it imposed on Wells Fargo in February for “widespread consumer abuses,” saying it won’t lift the asset cap until it’s satisfied Wells Fargo has cleaned up its act.
Mr. Sloan’s capacity has been questioned by Senator Elizabeth Warren who called for Sloan’s resignation a year ago. John Taylor, The CEO of the National Community Reinvestment Coalition, has also questioned whether Mr. Sloan is the right person for the job. Can Mr. Sloan, an insider with 31 years of working within the present culture, be objective enough to make the changes needed to turn the bank around?
Wells Fargo’s latest scandal, that dozens of employees at its investment bank, Wells Fargo Securities, have doctored “after hours dinner receipts and charged them back to the company” doesn’t build confidence that the bank has “cleaned up its act!”
The company has fired and suspended at least twelve so far and is investigating dozens more. Apparently the individuals, who range from analysts to a managing director, allegedly altered time stamps on their dinner receipts so they would be eligible for reimbursement. In a statement to FOX Business, a spokesperson for the bank said: “We became aware that certain Wells Fargo Securities team members were not complying with after-hours meal reimbursement policies…We took action to address the issues and we continue to investigate the matter.”
In the last several years, Wells Fargo has had one scandal after another resulting from the wildly unrealistic sales and profit goals management demanded of employees. These include creating as many as 3.5 million unauthorized bank and credit card accounts; misrepresenting mortgage-backed securities; charging customers for mortgage fees they didn’t deserve; and forcing some customers into car insurance they didn’t need, which resulted in some customers having their cars repossessed.
Of all things, some customers were charged for pet insurance and other products they didn’t fully understand. The Bank has also had to set aside $285 million to refund foreign-exchange and wealth-management clients for incorrect pricing and fees.
And the list goes on and on. Some workers altered documents about business customers — a finding that reportedly sparked a Justice Department investigation. And this August it was disclosed that a “computer glitch” had caused hundreds of people to have their homes foreclosed on.
The bank did say it was “very sorry.”
Very sorry – and your house is mistakenly foreclosed on! That’s all they can say!
The continual customer abuses are appalling. All of this by the way from a bank that claims it has the best interests of its customers as its first priority. As they publicly state, “The Vision, Values & Goals of Wells Fargo details the enduring principles that guide all Wells Fargo team members in the work they do every day — in serving customers and helping each other.”
In a message to customers, CEO and President Tim Sloan has said, “Wells Fargo still has work to do. Yet we are a better bank today than we were a year ago, and we become better and stronger each day. Thank you for doing business with Wells Fargo. Our top priority remains earning your trust each and every day.” Employees who are entrusted to manage customers’ income and who lie on their expense reports do not earn trust!
William Klepper, a management professor at Columbia Business School who conducted a case study on the crisis at Wells Fargo said, “Wells Fargo is still trying to sweep up broken glass — but they’re finding it all over the place… The problems are far more pervasive than in just retail banking.”
Based on everything we’ve seen to date, the problems appear to be systemic, indicating a broken culture. A recent Harvard Business Review article defines culture as “…the tacit social order of an organization: It shapes attitudes and behaviors in wide-ranging and durable ways. Cultural norms define what is encouraged, discouraged, accepted or rejected within a group. When properly aligned with personal values, drives and needs, culture can unleash tremendous amounts of energy toward a shared purpose and foster an organization’s capacity to thrive.” (B. Groysberg, J. Lee, J. Price and J. Yo-Jud Cheng: HBR, January 2018)
A company’s culture goes way beyond the bank’s splashy marketing campaign claiming one is cleaning up its act or fancy slogans and posters. Public ads making promises it is not keeping do not earn trust and do not show it has a culture of integrity and respect for employees and customers.
Even if CEO Tim Sloan vowed to uncover mistakes of the past the egregiousness of the “mistakes,” misdeeds, fraudulent behaviors, lying and stealing that has been uncovered at Wells Fargo means a new culture must be established.
Leading organizations worldwide share several key attributes which have earned them the trust and loyalty of both employees and customers. Trust is the cornerstone of the organization’s culture from the top down throughout the organization.
It’s about way more than just uncovering mistakes. It’s taking action to assure they cannot happen again. #wellsfargo Click To TweetIt’s about way more than just uncovering mistakes. It’s taking action to assure they cannot happen again. Wells Fargo needs to dramatically replace a culture that has pervaded the organization and has made acceptable a culture that “encourages” such pervasive abuses toward employees as well as customers. It may even mean replacing the entire senior team.
In the Leadership Challenge, first published in 1987, the authors of this seminal work, James M. Kouzes and Barry Z, Posner spoke to a survey they conducted in their research for the book. They asked over 100,000 respondents what characteristics they most admired in leaders.
Consistently across the board, in many different countries with vastly different cultures, the answer stated was “… first and foremost that people want a leader (leaders) who are honest.”
It is the leaders of an organization who set the tone, who establish the culture, who get buy-in or not to the organization’s values and beliefs. Wells Fargo admits rebuilding trust with their team members, customers, communities, shareholders and regulators remain their top priority.
The overhaul the bank needs to make is not just uncovering mistakes. It’s setting a cornerstone of this is what we expect and it’s a brand new culture. #WellsFargo Click To TweetThe overhaul the bank needs to make is not just uncovering mistakes. It’s setting a cornerstone of this is what we expect and it’s a brand new culture. Do they have the capacity to truly implement needed change with management steeped in the old culture?
Time will tell.
Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
