Article originally published in the American City Business Journals on September 26, 2016
Over the past few days, it has become evident that within the Consumer Banking Division of Wells Fargo, the culture is even more toxic than has originally been reported.
In a Sept. 21 CNN Money article headlined, “I called the Wells Fargo ethics line and was fired,” reporter Matt Egan writes that the news organization spoke with a number of Wells Fargo employees who were fired for reporting unethical practices on the ethics hotline and to the bank’s human resources department.
These unethical practices consisted of opening more than 2 million bogus accounts in customers’ names as well as selling products to customers they didn’t want or need, driven by a financial incentive system run amok.
Former Wells Fargo employees confirmed to CNN Money the bank’s practice of firing employees who reported unethical practices.
Egan spoke with a former Wells Fargo human resource manager who said, “The Bank had a method in place to retaliate against tipsters … It could be as simple as monitoring the employee to find a fault, like showing up a few minutes late on several occasions.”
A former employee who spoke with CNN Money was banker Bill Bado, who “refused orders to open phony bank and credit accounts.” He called the ethics hotline and notified human resources. Eight days later, he was fired for being late to work.
The Wells Fargo document titled “Our Code of Ethics & Business Conduct, Living our Vision & Values” states, “If you’re faced with an ethical dilemma and you’re not sure what to do, ask these questions: Is it legal? Does it comply with our policies? Is it consistent with our values? Is it consistent with our long-term goals and interests? Would I be comfortable with my decision, if it’s made public?”
During his testimony to the Senate Banking Committee on Sept. 20, Wells Fargo CEO John Stumpf said, “Each team member, no matter where you are in the organization, is encouraged to raise their hands … we want to hear from them.”
Certainly, Wells Fargo’s actions are not consistent with its policies or the words of its CEO.
Quoting from Wells Fargo’s ethics document, “When you contact the Ethics Line, the interview specialist will listen … and then write a summary report of the call. The summary will then be provided to Wells Fargo for assessment and further action. The Audit & Examination Committee of the Board oversees the investigation of concerns raised about accounting, internal accounting controls, or auditing matters.”
It is common practice for an audit committee to hear all hotline reports, not just those about “accounting, internal accounting controls or auditing matters.” Was the unethical and fraudulent behavior at bank branches reported to the Wells Fargo Audit and Examination Committee? If not, what board committee were those Ethics Line calls reported to? What actions did the committee take?
In a Sept. 24 article in The Wall Street Journal headlined, “Wells Fargo Taps Law Firm Amid Calls for Pay Clawbacks,” Emily Glazer writes that the bank has hired Shearman & Sterling to provide advice on clawing back compensation awarded to Stumpf, President Timothy Sloan, and Consumer Banking Vice President Carrie Tolstedt.
Glazer also writes it’s reported that “there has been tension among directors over following ‘good corporate governance’ versus the ticking clock the board faces to move quickly on the matter, given public calls for changes.”
The board must chart a new path going forward. Stumpf, as well as those who took part in the retaliation against whistleblowers need to be replaced. The board must ensure that the culture within the bank changes. Wells Fargo must regain the confidence of its employees, investors, government regulators and the public.
Stan Silverman is the former president and CEO of PQ Corp. He also is founder and CEO of Silverman Leadership and is vice chairman of the board of trustees of Drexel University. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.