Several of my Kellogg students have asked my “opinion” of the Wells Fargo scandal that has captured significant media attention over the past several weeks. I must say that as a former CEO and a current Kellogg professor teaching values-based leadership, only one word comes to mind: UNBELIEVABLE!!!

Let’s start with the facts: It appears that several thousand (yes, I said thousand!!) Wells Fargo employees created more than two million (yes, I said TWO MILLION!!!) fake accounts (both deposit accounts and unauthorized credit card applications) without customer consent over the past five to seven years. On September 8th, 2016 Wells Fargo announced that it was paying a fine of $185MM to Los Angeles city and federal regulators to settle the charges. In an attempt to explain its actions, Wells Fargo stated that they had fired 5,300 employees over the past five years. A few obvious questions come to mind:

  1. Could Wells Fargo possibly have had that many truly “bad actors” in the company?
  2. Did the company encourage the behavior that led to these criminal activities?
  3. If they didn’t encourage the behavior, how could these acts have gone on for so long without executive management not being aware of it?
  4. And finally, after the actions came to light, why did the CEO, John Stumpf, not take actions consistent with a values-based leader?

Let’s examine each of these:
In my experience over the past 37 years, I have seen situations where a few nefarious people can do great harm, but THOUSANDS of people in one institution? Really? I don’t think so. It appears that the bank encouraged the behavior by setting unrealistic sales quotas and bonusing the results. Forbes Magazine stated that CEO Stumpf had a slogan of “Eight is Great!”, stating that each Wells Fargo customer should have eight Wells Fargo products. Did that set unreasonable expectations for employees? It does appear the behavior that led to this crisis was encouraged by management.

Well, as the behavior was exposed, what did CEO Stumpf and the board of directors do in addition to explaining that 5,300 employees were fired? It appears very little. No senior executive was fired. Also, it took a scolding in front of the U.S. Senate Banking Committee for the board to force Stumpf to personally forfeit $41MM in bonuses and stock awards. Here’s a particularly memorable quote from Senator Elizabeth Warren (D-MA) at the Senate hearing:

“You haven’t resigned, you haven’t returned a single nickel of personal earnings, haven’t fired a single executive…..it is GUTLESS LEADERSHIP!”

Yes, CEO Stumpf stated that he is “deeply sorry”. But is that the full response of a values-based leader? Shouldn’t leaders take responsibility? What really caused this crisis? While I clearly don’t know the answer, I can only picture two possible scenarios:

  • Either some executives were aware of what was going on and should be held accountable;
  • The executives were not aware of the actions of 5,300 employees and should therefore be held accountable (i.e., be fired) for being completely unaware and clueless of their employees’ actions.

If there is a third scenario, I cannot imagine what it is.

It is clear this story has several more chapters. Last week ex-employees filed a class action suit seeking $2.6 billion in damages. Is it any wonder why the approval level of business executives is so low and many Americans believe the “system is corrupt”?

One last thought: What should Mr. Stumpf have done? Here’s my “opinion”:

  • Before the incident, make sure all Wells Fargo employees understand the VALUES of the organization, set clear expectations, and hold people accountable with clear consequences of their behavior
  • Don’t put sales quotas in place that encourage behavior in conflict with the values
  • Fire the executives responsible for encouraging the bad behavior…not just the lower level employees
  • When you become aware of the issue, take responsibility immediately, and recommend to the board that your (and other executives’) compensation be significantly reduced

As always, I am interested in your thoughts and comments!




(Editor’s Note: You may also want to read about how Harry handled a serious crisis of his own as CEO of Baxter International in 2001 when the company’s malfunctioning dialysis equipment resulted in several deaths; you can read the article here: Harry Kraemer’s Moment of Truth)