Friday, September 9, 2016

Wells Fargo and corporate responsibility

Wells Fargo employees were caught opening accounts and issuing credit cards in their customers' names without those customers' consent. The bank has been fined $185 million and over 5,000 employees have been fired as a result.

Let me observe that the numbers are a little weird. $185 million is a good-sized lottery jackpot, but it's barely a scratch in terms of what a profitable financial institution the size of Wells makes. A fine ten times that amount would have made a bigger impression on both Wells and the public.

On the other hand, at least 5,300 people were canned. That's a huge number. Usually an ethical breach is confined to one person, or a single division with an amoral leader. What does it say about Wells that so many people were deemed guilty of nakedly illegal behavior?

Employees have complained that they were under intense pressure to sell more services to existing customers, and the only way to satisfy management was to resort to the blatant fakery for which Wells is now apologizing. (The New York Times featured a banner ad for Wells on both the home page and the page for the article on the scandal. I didn't click on it but I've no doubt it leads to some kind of damage-control statement.)

The Times piece is inclined to make excuses for Wells, citing regulators' concern that "the bank lacked the necessary controls and oversight of its employees" and quoting one analyst who claimed, “It is way out of character for one of the cleanest banks around.... It’s a head-scratcher why so many employees felt comfortable crossing the line.”

It's not a head-scratcher at all! They crossed the line because their managers made the company's priorities crystal-clear: sell or bust. Only someone completely lost in the financial services industry's distorted picture of itself could be puzzled by what happened.

As for internal controls, those are for catching lone miscreants among a population of basically honest workers. Wholesale fraud is too big for controls to, well, control. It's too easy to bypass controls when so damned many people want to subvert them.

Canning over 5,000 people says that there's something deeply rotten in Wells' corporate culture. Yet I haven't heard that any members of Wells' executive management team were among those fired.

Why not? Are we supposed to believe that upper management was not responsible for the company's culture, that they didn't set the tone?

When the guys at the bottom are under such intense pressure, the fat asses at the top are applying that pressure.

The fine is too small and nobody who really counts has been fired (or is looking at jail time). This story had better not be over.

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