Wells Fargo Board faults aggressive culture in sales scandal
- Author: Eleanor Harrison Apr 11, 2017,
Apr 11, 2017, 5:26
The Board of Directors of Wells Fargo & Company (NYSE:WFC) today released the findings of the previously announced independent investigation into the Company's retail banking sales practices and related matters.
The report also recommended that former CEO John Stumpf, who resigned over the scandal, lose an additional $28 million in compensation on top of $41 million he already forfeited. The bank has been fined in the amount of $185.0 million, after the Los Angeles City Attorney and Consumer Financial Protection Bureau found out that the bank's employees were committing fraud in order to meet company target sales. By early 2015, management told the board that corrective actions were working, the report says. But, actually such mass firings were quite common going as far back as "at least" 2002. In one instance, an "entire branch" in Colorado was caught breaking the rules by creating unauthorized debit cards.
As CNNMoney reported last week, one Southern California retail branch manager called the company's confidential ethics hotline to document what she believed to be unethical behavior - only to be fired last September after the company accused her of abusing alcohol.
"Oh the Wells Fargo wagon is a-comin down the street".
The scandal has cost the CEO, John Stumpf (and Warren Buffett's favourite banker) his job and millions of dollars in benefits, other senior executives lost retirement benefits and options, and others were censured.
The board also is under pressure.
"While we have already made significant progress in making things right with customers and addressing issues, including several issues identified in the investigation, the Board's comprehensive findings provide another important opportunity to learn from our mistakes".
Also covering Wells Fargo & Company's target, a total of 29 equity analysts have released a report on Wells Fargo & Company.
Wells has changed its sales practices, and called tens of millions of customers to check on whether they truly opened the accounts in question.
The Comptroller of the Currency's Office is now investigating the sales cultures at each of the large banks, with that investigation expected to last at least through the summer. She declined, on advice of counsel, to be interviewed for the investigation, the authors wrote.
"After decades of success, Stumpf was Wells Fargo's principal proponent and champion of the decentralized business model and of cross-sell and the sales culture", the report stated.
For years, Wells Fargo has been known in banking circles as a having an extremely aggressive sales culture.
"We strongly disagree with the report and its attempt to lay blame with Ms. Tolstedt", said Enu Mainigi, a lawyer with Williams & Connolly LLP.
Former Wells Fargo employees have described an atmosphere of fear, where they were scared of speaking up about illegal activity. Wells Fargo's vision is to satisfy our customers' financial needs and help them succeed financially.
WFC's most senior bank examine has been removed by a USA regulator in the wake of the bank's unauthorized accounts scandal. The review largely exonerated Sloan and many deputies.
In business parlance, "independent" directors are those who aren't members of management, but can directors who have been in place for 14 years or even eight really be judged "independent"? Wells Fargo team members volunteered 1.86 million hours in 2015, serving more than 40,000 nonprofits. And last week an influential shareholder advisory firm said investors should vote out almost the entire board of directors when the bank holds its annual shareholder meeting later this month.
Wells Fargo has sought to fix its corporate structure by putting more checks and balances under central control and prohibiting Sloan and future leaders from holding the dual roles of chairman and CEO like Stumpf did. However, he said the report found the board "took the appropriate actions" once it became aware of the problem.