Wells Fargo: The Bank That Can’t Get Past

“It takes a long time to turn a big ship.”  No dispute there, but Wells Fargo’s fake-account scandal exploded in September 2016.  There should have been some slight tacking.

However, Wells, whose stock has declined 15% since the 2016 shock (other banks’ stock prices have grown exponentially, with some doubled in value), still misses internal control issues, such as employee fraud in checking cashing and clearing. When it comes to self-assessment of risk, Wells, well, does not seem to get it.

Wells has employees meeting daily, virtually and in-person, to review risks and proposals for eliminating those risks.  Still, Wells missed that fraud issue despite all the efforts. And the U.S. Comptroller of  Currency has already indicated that the best way to fix big banks such as Wells may be to break up those big banks into smaller banks where problems emerge more quickly and can be remedied.

The problem at Wells is and always has been its culture. Culture change is a tough slog.  It would not be unusual for a culture change to take five to ten years.  However, if there is no visible difference in seven years, i.e., the ship is not tacking, then the problems lie with the leaders.

Issues such as incentives, disciplinary processes, terminations, turnover, promotions, demotions, and consistency in all of the previous areas are critical.  Employee risk assessment groups cannot trump what employees see happening to them and their colleagues.  Wells has a soft skills problem and it has been trying to solve it with a rote, mechanized process.  Internal controls do not a culture make.  Internal controls are late-catches for bad behaviors.  Root out the bad behaviors and you may see some tacking.



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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