Wells Fargo Scandal; What Happened and Why?

A Term paper on

Wells Fargo Scandal; What happened and Why?

                                         BY

ADEBUSUYI OMOLADE ROTOWA

Wells Fargo and Company, the America leader in selling add-on services to its customers, was established in 1852 as a pioneering stagecoach express company and banking services provider in California. In spite of its humble beginnings, Wells Fargo is now one of thirty Global Systematically Important Banks, and  has become a diversified multinational financial holding company, ranking first in market value in the nation and third globally in the financial services arena (Engstrand, 2013). Wells Fargo emphasized cross-selling of multiple solutions to customers because they believed it is a good sales practice, indicating and encouraging customer loyalty. For years, Wells Fargo has prided itself on putting this culture first and size second, with the culture built around the idea of all accounts in Wells Fargo. Its vision includes the mission of helping its customers succeed financially, supported by values such as; people as a competitive advantage, ethics, and what is right for customers (Heskett, 2017).

This carefully crafted image evaporated when Sales Staff were pressured to grow the number of customers’ accounts by nearly any means necessary. They wound up crossing some major ethical and legal lines and created a scandal that has hurt the bank in more ways than one (CSP, 2018). It was revealed that the San Francisco based bank had fired some 5,300 employees, roughly 1 percent of its workforce, for signing up customers for checking accounts and credit cards without their knowledge. Authorities said about 2 million sham accounts were opened going back to 2011, completed with forged signatures, phony email addresses, and fake PIN numbers, all created by employees who were hounded by supervisors to meet daily account quotas, thereby charging customers at least $1.5 million in fees for the bogus accounts (The Week Staff, 2016). 

A number of causes for the alleged fraudulent behaviour at Wells Fargo were put forth using the multiple level of analysis anchor, in which Organizational events were studied from three common levels of analysis: individual, team, and organization. These causes included;

• A misalignment between stated and actual organizational vision and values.
• A decentralized corporate structure resulting in the Community Bank’s Senior Leaders distorting the sales model and performance management system, fostering an atmosphere that prompted low-quality sales, improper and unethical behaviour (Levin, 2017).
• A leadership in denial, minimizing the scale and nature of the problem (Premachandra and Filabi, 2018). John Stumpf, The CEO, did not engage in investigation and critical analysis to fully understand the problem. Instead, he refused to believe that the sales model was seriously impaired, with his reaction invariably being that a few bad employees were causing issues, but that the overwhelming majority of employees were behaving properly. 
• A transactional approach to problem-solving. (Premachandra and Filabi, 2018).

Others are; inadequate auditing and poor control, questionable organizational (particularly human resource management) practices, and human behavior traits in general (Heskett, 2017).                         

REFERENCES

• Customer Service Profiles, CSP (2018). 3 Lessons Banks can learn from Well Fargo’s mistakes, CSP Happenings. Retrieved from http://www.csp.com/lessons-wells-fargo/#.W3GIHlBKjIU.
• Engstrand, I. (2013). Wells Fargo: California's Pioneer Bank. Journal of San Diego History, 59(1/2), 23-40.
• Heskett, J. (2017). What are the real lessons of Wells Fargo’s case? Business Research for Business Leaders, Harvard Business School. Retrieved from https://hbswk.hbs.edu/item/what-are-the-real-lessons-of-the-wells-fargo-case?cid=wk-rss.
• Levin, B. (2017). 6 ways Wells Fargo made its employees’ lives a living hell. https://www.vanityfair.com/news/2017/04/wells-fargo-john-stumpf-carrie-tolstedt.
• Premachandra, B. and Filabi, A. (2018). Under Pressure Well Fargo misconduct, leadership and culture. Pg 8.
• Reckard, E. S. (2013). Wells Fargo’s pressure-cooker sales culture comes at a cost. Los Angeles Times. Retrieved from http://www.latimes.com/business/la-fi-wells-fargo-sale-pressure-20131222-story.html.
• The Week Staff, (2016). Well Fargo’s Phony-Account Scandals, Explained. The Week Magazine. Retrieved from http://theweek.com/articles/649015/wells-fargos-phonyaccount-scandal-explained.