Professor Elam

Friday Sept 9, 2016

Wells Fargo was fined $185 M by various agencies. for creating unrequested bank accounts and collecting fees on them.

Rumblings of account impropriety have been in the open since 2013, when an LA Times investigation first revealed that sales pressures led Wells employees to cut legal and ethical corners. “Wells Fargo is the nation’s leader in selling add-on services to its customers,” the paper wrote at the time, in an article that would go on to get the attention of the Los Angeles city attorney and lead to the city’s 2015 suit against the bank. ”I’m not aware of any overbearing sales culture,” then-CFO (and current COO) Timothy Sloan told the Times. 

All the while, Wells CEO John Stumpf has been frank about his desire to get Wells credit cards in the hands of his customers. “I am not going to be satisfied until every creditworthy customer who calls us their bank carries our credit card,” he said in 2014.

In ACCT 5308 we study ethical behavior and corporate governance. And we learn that proper ethical behavior is a result of the 'tone at the top.'  What is implied in the tone of the remarks above by the CFO and current CEO?

Worse, half of all the bank accounts in the USA are now in the custody of four or five large banks, WFC is one of them. It is unusual that finally a company actually admitted complicity in such an act.

“Our entire culture is centered on doing what is right for our customers,” Stumpf said in a company-wide memo Thursday. “However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action. Today’s agreements are consistent with these beliefs.”

This news came out Sept 9, 2016. As I write the Dow is down 269 points, WFC dropped 70 cents along with the overall market.

This is just another example of Too Big To Fail. The government pockets a hefty fee, the guys at the top keep their jobs and bonuses, and 3,500 employees get pink slips for doing what the guys at the top wanted.