CG Wells Fargo

WELLS FARGO
(The Bank you TRUSTED is BUSTED)

Background
• One of the biggest banks in the U.S.
• Headquarters- San Francisco, CA
• Founded- March 18, 1952 by Henry

Wells and William Fargo
Main services: banking, mortgage,

investments, insurance, and financial
consulting.
• Wells Fargo appeared to have an exemplary board on paper, consisting of independent directors
who held regular meetings.
• The company's policy limited the independent directors to serving on a maximum of three
boards, excluding Wells Fargo.
• The board also exhibited diversity among its members. Shareholders elected the directors
annually, and the board committees covered various operational and risk areas.
• The board boasted experts in different fields, such as Elaine Chao, who had experience as the US
Secretary of Labor and possessed a Harvard MBA, providing valuable insights into sales and
human-resource matters. Cynthia Milligan brought her expertise as a bank regulator and lawyer.
Issues
• Managers hound employees to meet unreachable quotas
• Employees had access to customer’s personal information
• Employees subscribed customers to products
o Forge Data
o Enroll into Online Banking & Bill-Paying products
o Open credit card account
o Receive compensation for each new enrollment
• 2 million ghost deposit & credit card accounts were
opened
• Drove customer to purchase identity theft protection
• Fired 5,300 employees linked to the scandal
- Opportunity: salesperson have access and monitor customer accounts
- Motivation: meet sales goals or get fired
- Rationalization: It is normal, managers approve it (Corporate Culture)
TIMELINE
TIMELINE
2 million bank accounts or credit cards
May 2011-May 2015 were opened or applied for without
customers’ knowledge or permission
September 08, 2016 The alleged misconduct was revealed.
The bank announced that it would be
September 13, 2016 ending its controversial employee sales
goals program effective Jan 1, 2017.
It was announced that the FBI and federal
prosecutors in New York and California
September 14, 2016 were probing the bank over the alleged
misconduct.
The House of Representatives Financial
Services Committee opened an
September 16, 2016 investigation into the bank’s alleged
misconduct.
TIMELINE
Stumpf appeared in front of the Senate
September 20, 2016 Banking Committee.
A group of Senate Democrats asked the
Department of Labor (DOL) to open an
September 22, 2016 investigation into whether Wells Fargo
violated the Fair Labor Standards Act (FLSA)
2 forme Wells Fargo Employees filed a suit
September 26, 2016 against the Bank.
The bank’s independent directors announced
that Stumpf will forego $41 million worth of
September 27, 2016 promised compensation as well as his usual
salary as they launch an independent
investigation.
TIMELINE
Stumpf went back to Capitol Hill for hearing
September 29, 2016 with the House Financial Service Committee .
14 senators sent letter to AG Loretta Lynch
urging the Justice Department to “thoroughly
October 05, 2016 investigate the culpability of senior
executives” at Wells Fargo
Shortly after markets closed , word came that
Stumpf was out. The bank said that he would
October 12, 2016 retire as CEO and Chairman effective and
immediately.
TIMELINE
California AG Kamala Harris launched a
criminal investigation into whether Wells
October 19, 2016 Fargo employees committed false
impersonation and identity theft as part of
the accounts scandal.
Wells Fargo began running television Ads in
October 24, 2016 an effort to restore trust in its brand.
The bank disclosed in regulatory filings that
October 03, 2016 the U.S. Securities and Exchange Commission
(SEC) was investigating its sales practices.
Root Cause: Unreasonable Corporate
Expectations
• Banks turned into “Stores”
Customers were seen as potential upsell opportunities
• Number of daily meetings between managers and bankers doubled
Pressure to have new sales report every hour
• Bad sales were punished with:
- forced attendance at 7 am conference calls
- several hours of cold-calling random people after the close of the

business
• Bankers encouraged to sell to friends and family as perfect strategy to

meet sales goals
Even low credit profile customers were pushed to apply for credit card
Concept of Cross-selling
• Cross-selling is a sales and marketing strategy employed in the banking
industry and other sectors where companies aim to sell additional products or
services to existing customers. It involves offering complementary or related
products to customers who have already purchased or shown interest in a
particular product or service.
• benefits banks by driving revenue growth, improving customer retention,
enhancing customer experiences, and gaining a competitive advantage.
• The more products that a customer has with Wells Fargo, the more information
the bank has on that customer, allowing for better decisions about credit,
products, and pricing.

Wells Fargo’s Cross-selling Sales Culture
• Pressure cooker cross-selling sales culture
• Aggressive sales goals and mantras like “Going for Gr-

Eight”, “Eight is Great” and :Run it like you own it”
• Incentive Programs like JUMP INTO JANUARY, FLY INTO

FEBRUARY and MARCH INTO MARCH
“The fraud appears to have stemmed from CEO John
Stumpf’s mantra to employees which proved to be
burdensome for bank employees as they struggled to
meet demanding quotas and satisfy even more
demanding demanding managers”
Corporate Government Issues
The Wells Fargo scandal of 2016 involved several corporate governance issues that came to light as
a result of improper sales practices carried out by the bank's employees.
• Lack of Board Oversight
• Incentive System
• Risk Management
• Whistle-blower Retaliation
• Board Composition and Expertise
• Lack of Accountability
Impact
• the fake accounts scandal severely damaged Wells Fargo's reputation

and eroded trust among its customers and investors
• skepticism surrounding its business practices, which has had a

negative impact on its overall performance and financial stability.
• it prompted widespread reforms and regulatory changes aimed at

enhancing the integrity and stability of the industry as a whole.
Measures by Wells Fargo post SCANDAL
• enhancing customer service and communication practices, promoting
transparency and accountability within the organization, and strengthening
compliance and ethics programs.
• launched a substantial marketing campaign aimed at repairing its reputation and

re-establishing trust with the public. This included advertising efforts that
emphasized the company's commitment to ethical business practices and
superior customer service.
• engaged with customers and stakeholders through social media and other
channels to foster dialogue and understanding.
Lessons learnt & Key Takeaways
• The importance of a centralized corporate structure and centralized,

independent control functions
• Board and senior management responsibility to investigate red flags and

require more detailed reports and concrete action plans
• Bolstering ethics and compliance culture
• Greater consideration of systemic causes
• Taking a broader approach to risk and consumer harm

THANK YOU

CG Wells Fargo

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CG Wells Fargo

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WELLS FARGO

(The Bank you TRUSTED is BUSTED)

• Headquarters- San Francisco, CA

• Founded- March 18, 1952 by Henry

Main services: banking, mortgage,

Customers were seen as potential upsell opportunities

• Number of daily meetings between managers and bankers doubled

Pressure to have new sales report every hour

• Bad sales were punished with:

- forced attendance at 7 am conference calls

- several hours of cold-calling random people after the close of the

• Bankers encouraged to sell to friends and family as perfect strategy to

services to existing customers. It involves offering complementary or related

products to customers who have already purchased or shown interest in a

particular product or service.

• benefits banks by driving revenue growth, improving customer retention,

enhancing customer experiences, and gaining a competitive advantage.

products, and pricing.

• Aggressive sales goals and mantras like “Going for Gr-

• Incentive Programs like JUMP INTO JANUARY, FLY INTO

a result of improper sales practices carried out by the bank's employees.

• Lack of Board Oversight

• Board Composition and Expertise

• the fake accounts scandal severely damaged Wells Fargo's reputation

• skepticism surrounding its business practices, which has had a

• it prompted widespread reforms and regulatory changes aimed at

• launched a substantial marketing campaign aimed at repairing its reputation and

• The importance of a centralized corporate structure and centralized,

• Board and senior management responsibility to investigate red flags and

• Bolstering ethics and compliance culture

• Greater consideration of systemic causes

• Taking a broader approach to risk and consumer harm

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