Case Study: Wells Fargo, Crisis and Scandal Executive Summary

1. Executive leadership of Wells Fargo threatened employees with their careers if they were unable to execute the Going for Great strategy to open eight accounts per household. Other national banks average three accounts for reference. This defining strategy for Wells Fargo was not because of calculation and analysis of their customer’s needs to best serve them, CEO John Stumpf rationalizes it was because, “it rhymed with “great.” Perhaps our new cheer should be: “Let’s go again, for ten!”” (2010 Wells Fargo National Report 6). These quotas were the same for bankers in a town with a population of 5,000 as a banker in a town of 500,000 people. To meet these unreasonable goals, the lower-level employees opened fake accounts, usually using one of their earlier or current customers' information. This enabled a poor working environment, radiated poor leadership, and set unattainable goals for employees, which led to this scandal.

2. Within Wells Fargo’s internal environment, problematic dimensions included dishonest leadership, scandalous cross-selling strategies, and a toxic corporate culture. In 2015, CEO Stumpf sent an open letter to his employees sharing his vision for the company’s values, saying, “We start with what the customer needs–not with what we want to sell them” (Keoun par. 2). This vision now seems quite hollow considering that his employees illegally opened more than two million accounts to hit goals and obtain raises higher than most bankers’ salaries. These two million accounts were a part of the cross-selling strategy to open unauthorized credit and debit cards, as well as even opening life insurance policies. The toxic culture put in place by upper management and perpetuated throughout the company is best described by a former employee and veteran that said, “I was in the 1991 Gulf War. This is sad and hard for me to say, but I had less stress in the 1991 Gulf War than working for Wells Fargo” (Linnane par. 1).

3. Wells Fargo has historically had a very decentralized structure of operation. This is problematic when top-level management is not acting ethically and setting unreasonable goals for lower-level employees. The organizational structure of a company creates clear responsibilities, including a line of authority, but in the case of Wells Fargo, they took a dictatorship-style approach that has leaders giving orders from the top without much consideration. Therefore, employees in small towns had the same quotas and sales goals as employees in large cities. This style of management and lack of support for employees are one of the main reasons why this scandal occurred for as long as it did.

4. A relevant concept from Chapter 4 that can diagnose this scandal would be the idea of the corporate culture. Considering the Competing Values Framework, Wells Fargo classifies as having a Market Culture due to their results orientation. The opportunities for large bonuses instilled a competitive nature within the companies’ employees, which, paired with the toxic culture and unreasonable stress, functioned as a catalyst for fraud to occur.

5. Having a Code of Conduct and Manual of Ethics already active to help examine decisions from leadership, as well as holding them accountable, would help to create a more sustainable environment for employees. This solution path would reduce unnecessary stress faced by employees, the fraudulent activity resulting in fees faced by customers, and billions of dollars in fines already collected against the company. Another solution could be an increase in congressional oversight over Wells Fargo. Several regulators, including the OCC and CFPB, had supervisory authority which should be sufficient to detect fraud, especially considering there were millions of illegally opened fraudulent accounts. More congressional oversight could help mitigate scandals such as these in the future.

Works Cited

Wells Fargo & Company. “Annual Report 2010.” Wells Fargo History, 18 June 2019, https://www.wellsfargohistory.com/annual-report-2010/.

Keoun, Bradley. “How 'Going for GREAT' Tarnished Wells Fargo Chief's Reputation.” TheStreet, TheStreet, 12 Sept. 2016, https://www.thestreet.com/investing/stocks/how-going-for-great-tarnished-wells-fargo-chief-s-reputation-13701809.

Linnane, Ciara. “Wells Fargo Worker SAYS Employment at the Bank Was More Stressful than Gulf War Military Service.” MarketWatch, MarketWatch, 26 Jan. 2020, https://www.marketwatch.com/story/wells-fargo-worker-says-employment-at-the-bank-was-more-stressful-than-gulf-war-military-service-2020-01-23.