It is said that time flies, but as a business ethics keynote speaker, consultant and book author, I would say that rather than time flying, day by day, the actions of an unethical organization build, expand and then come raining down on the unethical. The rains are slowly drowning the reputation and financial outlook for once mighty Wells Fargo.
It started in 2016
Some feel that 2016 was the start of an ethically pivotal period for the United States. On top of many other news items, it was in 2016 when the Wells Fargo retail banking employees were pressured to push unnecessary accounts on their customers. Tens of millions of accounts were opened “overnight,” without customers granting permission. In doing this, the bank artificially raised revenues to make quotas.
Had that highly unethical action been perpetrated on their customers and nothing else, there might have been some legal damage but it could have been somewhat contained. However, the management and systems in place, were so feckless and uncaring, that it was not uncommon for customers to complain of “surprise” overdraft fees, illegal vehicle repossession, wrongful home foreclosures and illegal fees and interest charges.
According to Allison Marrow (CNN, December 20, 2022):
“In 2020, the bank paid $3 billion to the Justice Department and Securities and Exchange Commission after admitting that, between 2002 and 2016, it pressured employees to meet ‘unrealistic sales goals that led thousands of employees to provide millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers’ identities.”
In all, 16-million customers were affected. Of the $3 billion, $2 billion is being returned to the customers fleeced by the management team with the remainder being doled out in legal penalties.
The ‘high-powered’ executives
In the overall scheme of things, Wells Fargo (ex-) CEO John G. Stumpf and his sales guru Carrie L. Tolstedt were given a relative wrist-slap of $2.5 million in legal penalties. They are wealthy people. They could afford the penalty. They had no stake in how much pain they inflicted on decent people; they didn’t care.
In their unethical actions you might think they felt remorse but as a business ethics motivational speaker, consultant and ethics book author I have seen far too many situations of this nature where the perpetrators rationalized everything away.
One thing is known: nothing has been the same after the scandal. The organization claims it has cleaned up its act.
“We and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted,” said the company.
But is it enough? The pervasive sentiment in banking circles is that Wells Fargo was such an awful player, that they may never regain their status.
“This latest litany of lawbreaking cannot be fairly characterized or dismissed as mere ‘mismanagement,’” wrote Dennis Kelleher, CEO of the nonprofit Better Markets, calling for regulators to consider breaking up the bank. “This type of longstanding pattern and practice of illegal activities is more frequently seen in criminal enterprises, not at gigantic US banks. Any other business in America with such a recidivist record of breaking the law…would almost certainly have already been shut down.”
Those are damning charges and, in fact, U.S. Congressional members want a thorough investigation. Some are calling for the bank to be broken-up.
What this scandal and the ensuing penalties have shown is what happens when just a couple of fraudsters, believing themselves above the law, can do to almost bring down a major organization. Whether Wells Fargo will ever full recover or will die a slow death remains to be seen. Nevertheless, it does show us that unethical behaviors can destroy the most solid of companies.
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