Learning from Wells Fargo

Although I was a pretty decent student in college my best grade there wasn’t an A. It wasn’t even a B. It was a “C Minus Over an F.” The reason I considered it my best grade – even though it certainly wasn’t my highest one – is that I’d earned it by ignoring the professor’s instructions about the assignment. Learning to follow instructions – even in this costly way – was more valuable to me (particularly over time) than was doing well in any of my other classes.

While learning from one’s own missteps may be the most effective form of instruction, the missteps of others can be helpful too, and in the world of business education a time-honored vehicle for facilitating such learning is the case study. In that regard, I was pleased to see that Ethical Systems  has just published an excellent case study for the ethics realm, Under Pressure: Wells Fargo, Misconduct, Leadership and Culture. which was created by Bharathy Premachandra, Ethical System’s 2017 Bryan Turner Intern in Business Ethics, and Azish Filabi, the organization’s Executive Director. The study is written principally for use in the classroom, but I believe that it can be a helpful tool in the corporate compliance & ethics program world as well.

By way of background: “About a year ago, Wells Fargo announced a settlement of $185 million with federal regulators after admitting to having opened millions of unauthorized customer accounts, falsifying bank records, forging customer signatures and contact information, and even manipulating/transferring funds between accounts to charge overdraft fees, all without customer knowledge or consent.” Moreover, since then a second scandal has emerged at the bank, concerning fraudulent auto insurance sales practices.

Applying well respected ethical cultural and leadership models to the case, the study’s authors identify and describe various infirmities with the bank’s culture contributing to these unhappy developments. Included are those concerning incentives (e.g., “It was reported that some branch and district managers considered only sales performance for overall performance rating. Hence, for many, this meant that selling more than your colleagues was a prerogative and failing to do so meant penalization, transfer and even termination.”); leadership (“the complicity of leadership went hand-in-hand with the high pressure, numbers-focused sales culture”); employee selection systems (“Even before new hires joined the Bank, they were socialized to think that winning over competitors, at any cost, is a priority”); and informal systems (“Decentralization encouraged independence and self-reliance, which on the one hand had benefits for financial performance, but on the other hand likely fueled unethical behaviors through lack of oversight and accountability for how business goals were accomplished.”) The authors also note that formal compliance systems – such as the hotline and associated non-retaliation policies and procedures – were evidently not “built into the bedrock” of bank’s culture.

There is, in sum, a goldmine here of ethical learning for business organizations of various kinds, and I hope that C&E professionals will use it to inform key aspects of their respective programs – such as risk assessment, training and board oversight.

I should emphasize that I’m not suggesting that the full report be made required reading throughout a company. (It is 23 pages.)

But I do think that a company-specific version can be created for any given organization and used to facilitate  a discussion regarding the key points in the study. For instance, seeing the shortfall at the bank regarding ethics in the employee selection process would probably give many other organizations suggestions for their own improvement in that area.

Of course (and to borrow from Tolstoy –  sort of) every company is somewhat different when it comes to C&E needs and optimum solutions. But there is a lot of commonality in these areas too.

And in any event, the main alternative to learning from the missteps of others is learning from one’s own. That was a painful exercise for me in college, but is presumably many times worse for those who do so in the “real world.”


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