Wells Fargo and the Currency Traders: Another Incentive Plan Gone Amok

The Wall Street Journal has reported on yet another incentive mishap at Wells Fargo. This time, the bank, which had to let 5300 employees go for creating false or unauthorized accounts in order to earn incentives in the retail side, had a currency incentive plan that found the traders just making fees up. The higher the exchange fees earned, the higher the currency traders’ bonuses.Customers who questioned the size of their currency exchange fees were told of the “time fluctuation rate.” The “time fluctuation rate” was a rate that occurred only at the exact moment of the customer’s currency trade. It was the darnedest thing — the rates went up for customers only at the time they needed to make trades. Also, the rates were “fluctuating in time” even when the customers had signed agreements for their exchange rates.

The currency exchange customers of Wells were not involved in large trades and tended to not look closely at their transactions. When they did and complained, the bank made adjustments to quell rebellions. Restaurant Brands International, the owner of Burger King and other chains, received a $900,000 refund on its fees when it complained. The events became known as “the Burger King trade” within the bank.

The problem with the fees, like the problems with the fake accounts, went on for at least a decade at the bank. In the San Francisco currency exchange office, employees rang a big brass bell when a big trade went through. In one meeting, an employee expressed her concerns that the bell-ringing was not appropriate for celebrating high fees to customers. She was reprimanded, told that her conduct was offensive and unprofessional, forced to apologize to her managers, and demoted. She later left the bank. She was right to speak up and right to leave the bank.

The Wells currency exchange division has had extensive changes since October and employees there had to participate in compliance training. Internal and federal investigations are pending. If I were on the board or an executive at Wells, I would start looking at every bank operation. Start with incentive plans in every area and proceed from there.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD.

The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards.

Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader’s Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio.

She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News.

In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles.

Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.

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