Once again a major financial institution has been caught raiding the cookie jar and its senior management is attempting to avoid blame by putting it all on the employees. According to Wells Fargo CEO John Stumpf, he tried to stop the unreliable underlings who were creating false accounts and opening new accounts for customers without their permission. Honest, he did.
None of this was approved, he says. The company never created any incentives for employees to do the wrong thing. It violates the sacred corporate culture. The blame—all of it—must and does lie with those mendacious minions at the bottom who let their greed get the better of them. Who could stop it? Certainly not him.
Caught Between Scylla and Charybdis
We have heard this sad song before from companies like the late, unlamented Enron. When someone pulls the curtain back on corporate malfeasance, the CEO and his C-level staff have only two options:
- Say they knew about it or encouraged it and thus admit their guilt.
- Claim they knew nothing about what someone else under their control was doing or they knew and couldn’t stop it. They thus admit to being incompetent at their jobs and undeserving of the ginormous salaries awarded them by an acquiescent Board of Directors.
Caught between the Scylla of incompetence and the Charybdis of guilt, they almost always choose incompetence. After all, no one gets sent to jail for being an over-paid screw up.
“I’m Shocked, Shocked, I Tell You”
Mr. Stumpf claims that the pressure that drove employees into allegedly illegal sales practices had nothing to do with the Well Fargo culture. He did his best to stop it.Ya gotta believe me, folks! Yeah, sure. Think about these four points, Mr. Stumpf, while you’re coming up with more excuses:
- Company culture starts at the top—always. If the employees “felt pressure to sell customers multiple products or services . . . to stay in their jobs or earn bonuses tied to sales goals,” it’s because someone much higher up set unreasonable sales goals and imposed them on their staffs under threat of termination.
- Unreasonable sales goals can drive illegal behavior. People without seven-figure salaries and golden parachutes need their jobs to support their families. Given a choice between doing something illegal or being fired, they often choose what seems like the safest option—the one the company wants—and assume the company will protect them. Clearly Wells Fargo employees never heard the sound of an oncoming bus.
- Employees report results to regional managers who report to area VPs, who report to . . . well, you get the idea. Mr. Stumpf is trying to tell us that nobody at the top paid attention to those numbers or wondered what drove them. Ridiculous. I’ll bet sales awards got handed out to the top producers and the executives presenting them knew exactly what was going on.
- Wells Fargo supposedly fired 5,300 employees over five years due to “improper selling.” That’s over 1,000 employees a year and a number like that is bound to get reported. Are we really supposed to believe that no one at the C level noticed or cared? Plus, five year does not constitute the blink of an eye. Employee churn that high costs money. Did the CFO never ask questions about what caused it—and for such a long time?
Seeking a Human Shield
According to The Wall Street Journal, Mr. Stumpf, “initially wouldn’t comment on who was ultimately responsible for the practices.” This would be laughable if it wasn’t so pathetic. I can just see him looking around wildly for a scapegoat, someone to serve as a human shield and keep the SEC from his door. He need look no further than Carrie Tolstedt, the former head of the Consumer Banking department. When she retired in July Mr. Stumpf called her “a standard-bearer of our culture.” Hmmm.
Why is it that top-level corporate executives who are so eager to appear tough and apply “lean and mean” tactics to those in the ranks, head for the hills when any finding of fault is aimed in their direction? They are so brave when they’re kicking down but cowards when it comes time to face the music.
Business publications tell us that these Big Men are masters of the universe, heroes of commerce, paragons of capitalism, and brilliant leaders. After all, they have to be if they’re going to be worth the megabucks they rake in. We’re disappointed enough when we learn that they have feet of clay. It‘s so much worse when they prove themselves craven as well.
A Few Wells Fargo Numbers
- 5 – Number of years the fraud took place
- 5,300 – Number of employees fired for misconduct
- 566,000 – Phantom credit cards accounts opened
- 1,500,000 – False transaction accounts
- $7,300,000 — Carrie Tolstedt’s cash and stock bonus over three years
- $9,000,000 — Carrie Tolstedt’s annual salary
- $45,000,000 — Amount Carrie Tolstedt would have forfeited if she had been fired
- $124,600,000 – “Retirement” package for Carrie Tolstedt in stock,options, and restricted shares
- $185,000,000 – Government fine assessed by the Consumer Financial Protection Bureau
Now the pièce de résistance. Wait for it:
- $1,500,000 – Amount of money Wells Fargo made on the sham deals.
That’s right. All this notoriety, a whopping government fine, a drop in their stock price, a possible Congressional investigation, a stupendous retirement package for the culprit in charge — and all they made on the scam was $1,500,000. Banks are supposed to know how to crunch numbers but Wells Fargo did a pretty bad job with these.
Adding up the fine and golden parachute alone means they are spending almost $310 million to make a million and a half. So much for these paragons of capitalism. They can’t even steal profitably.