Wells Fargo – a
name that was highly respected in the United States in the financial circles; A
bank that has done immensely well for itself in the past one hundred and sixty
odd years. This elite bank has however in the month of September got embroiled
in a highly embarrassing scandal, wherein about 2 million bank and credit card
accounts were opened without customer authorization to meet the impossibly high
sales targets. These sales figures led to soaring stock prices, the profits
from which were then pocketed by the CEO, John Stumpf. When the fraud was
detected by USA’s regulatory agencies, John Stumpf went ahead and fired about
5,300 employees, which was almost 1% of Wells Fargo’s total workforce. The
matter is now subjudice with hearings going on in the US house of Senate, and
charges are being pressed against the CEO to resign and undergo criminal
investigations.
Time travel to 1852...
In 1852 Henry Wells and William Fargo founded Wells Fargo and
Co. to serve the western part of United States. Wells Fargo opened for business
in the gold rush port of San Francisco. They catered to banking services
including buying and selling of gold. Their hallmark was attention to detail,
trust and loyalty to customers. The company went on to do very well and soon
opened branches all across America. They would also do express delivery of
money or drafts or gold via stagecoach (there lies the answer to a historically
significant logo), railroad, steamship or via telegraph.
Their brand became a household name especially among the
elite class. Soon after, they started delving in corporate responsibility and
into responsible lending. A very important clientele was the armed forces,
whereby servicemen could take home and vehicle loans at reasonable rates of
interest and for a comfortable duration.
The controversy that
led to the derailment of the stagecoach...
September 8, 2016 was when the various regulatory
authorities in USA like the Consumer Financial Protection Bureau, the Los
Angeles City Attorney and the Office of the Comptroller of the Currency, fined
the bank $185 million, alleging 2 million fraudulently opened bank and credit
card accounts. Not only that, there are allegations of forced closure of
delinquent vehicle loans of US marine corps and other servicemen, while they
were away on duty. Their vehicles, post acquisition by Wells Fargo, were
immediately auctioned to recover the due amount. There are rules against
harassing armed forces officials in USA which were violated by Wells Fargo
rather blatantly.
Then again there are questions on the organizational culture
of the bank. There are stories of branch managers locking the exit doors to
prevent their employees from leaving their respective workstations before
completion of day’s work. Employee harassment has come up as one of the charges
against the bank, a case under the Fair Labour Standards Act.
The chip on CEO, John Stumpf’s shoulder earned as a result
of an extremely successful organization, seems like the biggest burden for him
as of now. There are investigations against the bank from all fronts, be it
customer, its employees or its concept of ‘responsible banking’. Things look
rather torrid with FBI also commencing its investigations as well as
class-action suits filed against the bank.
All is definitely not well with Wells Fargo! A lesson for all
organisations that are ruthlessly ambitious and brutal in their delivery.
-Monica Mor, Sr. Faculty, INLEAD
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