CEO Weasel Words from Wells Fargo

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.

John Stumpf

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:

  1. Say they knew about it or encouraged it and thus admit their guilt.
  2. 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 executive in charge but that does not absolve him.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.

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. 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.

8 thoughts on “CEO Weasel Words from Wells Fargo

  1. Yeah it was greed, clear and simple in my view. Th egood news here is that the “clawback clause” has been invoked, and it’s still not over. WF is likely going to take out the CEO, and do MORE clawbacks with him and the female VP before its all done. Let’s see how this evolves!

    As for robots being attributable to the loss of jobs and a general decline in manufacturing in the U.S. or elsewhere, I submit the following for your reading pleasure:
    https://www.brookings.edu/blog/the-avenue/2015/04/29/dont-blame-the-robots-for-lost-manufacturing-jobs/
    Sure, jobs have been lost, but it’s not as bad as you would seem to suggest or concern yourself about for the future. There’s more on this, but pro and con.

  2. I agree with everything you’ve said here Aline. My only comment would be that at least in this case, it’s really not as simple and straightforward as you’ve stated or inferred. By the way, watch out for the “Claw-back Clause” on this one that may kick in any day now. I certainly hope so.

    Check it out:

    https://en.wikipedia.org/wiki/Clawback

    …And I gotta’ say that I really wish you’d guys would get off the “AI/robots” kick. Our legislators can do something about H1-B visa abuse if they wanted to. Off Shoring and Robots not so much, as they’ll likely continue to be up to companies to decide what is best for their bottom line. And I’d venture to guess that you’d likely do much the same if you had investors and a boardroom to report into.

    • If Wells Fargo invokes the claw-back clause, Mike, it will be only because bad publicity forced them to do so. I’m doing my part in that regard. As for robots, the decline of manufacturing is a big factor among those who support Donald Trump. Robots will only make it worse. Yes, the execs have a fiduciary responsibility to their investors. I only wish they had one to their employees as well.

      • Let’s hope they do invoke it, even if it is due to the bad publicity – they should do this, as this woman clearly violated their corporate governance if not the law. And I’m glad you bring this up, and are doing your part! Please keep doing this!

        As for your other comment, I’m going to see what I can find out about the decline in manufacturing in the U.S. I tend to doubt that robots have much to do with it, and in today’s world, I’m guessing that the loss of jobs in this sector because of robots is a lot less than we might think.

  3. I have no problem with the Free Market; profit is a good thing.

    Profit at the cost of ETHICS (never mind law)… profit at the cost of YOUR FELLOW CITIZENS (e.g., H1-B visa abuse, offshoring, AI/robots)…

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