5,300 employees were held responsible for the Wells Fargo scam yet no senior executives shouldered the blame. Were the company’s values aligned with the incident and repercussions? What are the values and how do we effectively apply them?
On the 8th of September, Richard Cordray, director of the Consumer Financial Protection Bureau announced that Wells Fargo would pay $185 million in fines for illegally creating unauthorized deposit and credit card accounts across the USA.
The saddest thing about Wells Fargo’s fraud is that no one is surprised. The leading Israeli humourist and gestalt master, Lenny Ravich said, “99% of bankers give a bad name to this profession. ” I would go as far as to say, many bankers nowadays are ashamed to introduce themselves as “bankers” in public presentations.
Wells Fargo’s stock price dove, shaving 24 billion dollars from its’ investors. 5,300 employees were fired, but surprisingly very few senior executives. Not one senior executive has taken action that shows personal accountability yet. To date, there have been no senior-level resignations nor returned personal windfalls generated from the fraudulant activities. On the contrary, Carrie Tolstedt, the former head of the consumer banking division, the executive directly responsible for overseeing the retail banking sector of the company where the fake accounts were created, was rewarded for her act. Instead of being fired and denied from a bonus, in July, Tolstedt was allowed to retire holding roughly $96.6 million in various stock awards.
The “Values” of Wells Fargo
John G. Stumpf’s vision and values for Wells Fargo as included in their website states: “We believe in values lived, not phrases memorized. If we had to choose, we’d rather have a team member who lives by our values than one who just memorizes them.”
These employees deserve to be fired because they committed criminal offences. They cheated. Regardless of core values all societies see stealing as a criminal act. However, when you are a low-wage employee whose livelihood depends on reaching an unrealistic sales target; your colleagues are all involved in a scam that clearly is making your bosses happy; you are being taken advantage of by your superiors in the organization. It seems that not only the leadership did not provide for efficient training and compliance, it is also avoiding taking responsibility.
On September 24th 2016, Former and present Wells Fargo employees filed $2.6 billion class action against the bank in Los Angeles County Superior Court. "The biggest victims of this scheme are a class of people that nobody else has talked about. The biggest victims of Wells Fargo's scam is the class of victims that were fired because they did not meet these cross-sell quotas by engaging in the fraudulent scam that would line the CEO's pockets," the class says in its 26 pages lawsuit.
Senior executives at Wells Fargo might ask themselves, “What are we doing wrong in the hiring and on-boarding process? What training and compensation models encourage so many of our employees or colleagues to cheat on our behalf?
Wells Fargo did practice the value of doing what’s right for the customer by faking their authorizations and charging them unknowingly. Did the leadership provide sufficient training for the values and code of ethics or supervisory effective compliance? How could they expect employees to follow the values while concurrently applying relentless pressure to acheive unrealistic sales targets?
Goals > Values?
From a leadership perspective, cross-selling and providing one-stop-shop services for the financial needs of your customers is a legitimate goal. Yet, there must be a balance between “greed goals” that feed the stock value and practicing the value of what’s right for the customer?
If you were a CEO, would fire two best-performing sales persons who contribute 60% of your company’s profits? Is it true that it is “kosher” to do anything for short term share value growth?
In 2002 an internal investigation in Ali Baba, found that these two sales persons were violating the values and paying off, Jack Ma, the funder and legandary CEO he had a painful decision to make. Not now when his company worth more than Wells Fargo bank, but at a time when this money was essential for Ali Baba’s survival.
Jack Ma said: “If we fire them immediately, the company will not have profit. If we do not kick these two employees out, then what does this signify about us? It would imply that our words are empty. "So we finally decided to let these two employees go."
Later on in an interview he said “We focus on the employees and the culture. Everybody is helping each other instead of just making money”
Would Jack Ma had opted to pressure employees to meet cross sales quotas? Once he dismissed a sales trainer for teaching mal practices. He said: “The training instructor was speaking about how to sell hair combs to monks. After five minutes, I got extremely angry and expelled the instructor. I thought the instructor was a cheat. Monks do not need combs in the first place.”
Should values be written or practiced?
In our work on Coach and Managing by Value across the globe with many of the best global organizations we continually see a crisis of “values in action.” There is a growing discrepancy between the stated values on the wall and values in action. The most common current employee training methods largely reinforce values using a push strategy which relies far to heavily on memorization and retention. Very few organizations actually practice what we and other like-minded value-driven consultants have been suggesting for the past 20 years (See: Dolan et al (2006) Managing by Values: A corporate guide to living, being alive and making a living in the 21st century (Palgrave MacMillan); or Dolan (2011): Coaching by Values. iUniverse).
There are many organizations fixated on the values their founders established years ago. Perhaps these need to be updated.
A common “old” value that we see in many companies is Team Work. Is that a value or a result? IDEO which is one of the most famous and successful design companies in the world chose to express Team Work instead as “We Collaborate.” These words have power. It is not a passive result but a dynamic action that inspires behavior that drives results.
Organizations spend billions of dollars on engagement surveys, profiling tools and tests, yet they seldom inquire about the personal values of their team members. As new generations grow into the workforce there is a need to help them connect with the core values of the organizations they serve and take ownership of them.
Millennials are looking not only for values; they want to have greater sense of purpose and meaning. Learning what their personal values are helps them to connect, to scan for similarities and to develop respect for diversity.
Questions to align value
This check-list may help you align your culture and values with those of your employees:
Parting words about board of directors and audit conflict
Nothing much will change unless we have a radical shift in mindset. We can’t expect the cat to guard over the milk. There is an inherit conflict of interest in the current business model where public companies appoint their boards and appoint their auditors. These individuals then get paid by the company and they have a personal interest not to lose their position by going against the management of the company when sometimes they should.
In public companies the role of the auditor is to protect the true owners of the company – the shareholders. Perhaps every stock exchange nominates the auditors. If the audit firms will be rotated every two years, the auditors will know that they will be audited too by a new firm, thus much more prudent. The public companies will pay a fixed fee to the stock exchange for auditing cost accordingly. The stock exchange will be able to get better price for volume using RFP system. When the auditors are working for the exchange to represent the public interest they will be more impartial, their duty and loyalty will be to their client and the audited companies will be transparent.
About the authors:
Avi Liran (Economist, MBA) is global leader on delivering delight, speaker and consultant to top companies on appreciative culture transformation. He is certified as a Coach by Value Expert. He is an angry social capitalist and humanitarian activist.
Dr. Simon Dolan is the Future of Work Chair at ESADE Business School and the creator of the Managing and Coaching by Values concept, methodology and tools. He can be reached at: email@example.com