explain how two specific governance strategies our course described failed wells fargo chegg

What is Wells Fargo praised for?

How much did Wells Fargo pay to settle a lawsuit?

What is the tension between corporate culture, financial incentives, and employee conduct illustrated by?

What happens if a bank does not hit its target?

Why did the report fault management?

Why was the report faulted for publishing performance scorecards?

Is Wells Fargo responsible for reputation?

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What Are the Real Lessons of the Wells Fargo Case?

SUMMING UP. Respondents to this month’s Wells Fargo “case study” identified problem symptoms, diagnosed causes, proposed remedies, and even suggested a title for a follow-on case.

Wells Fargo Forced To Pay $3 Billion For The Bank’s Fake Account Scandal

Wells Fargo announced that it will pay the substantial financial penalty to both the DOJ and the SEC. Roughly $500 million of the fine will be allocated to the SEC. The regulator will use the ...

The Wells Fargo Cross-Selling Scandal - Stanford Graduate School of ...

In this Closer Look, we examine the tensions between corporate culture, financial incentives, and employee conduct as illustrated by the Wells Fargo cross-selling scandal.

The Wells Fargo Cross-Selling Scandal

In recent years, more attention has been paid to corporate culture and “tone at the top,” and the impact that these have on organizational outcomes. While corporate leaders and outside observers contend that culture is a critical contributor to employee engagement, motivation, and performance, the nature of this relationship and the mechanisms for instilling the […]

What are the lessons learned from Wells Fargo?

Governance lessons from Wells Fargo include the fact that companies and boards need to look at their process first, before looking at the people. This is especially true in this case given the problems around abuse of cross-selling were so widespread. Unfortunately, the Company assumed it was the people, not the process.

How many primary values did Wells Fargo have?

Summary of some of the facts (I have not been following case and type too slowly to get them all down). Wells Fargo had five primary values:

What chapter does Lisa Servon write Unbanking of America?

Lisa Servon offers some more consumer-friendly observations Wells Fargo could adopt in chapter eight of her book, The Unbanking of America: How the New Middle Class Survives.

How much did Wells Fargo pay in 2016?

In September 2016, Wells Fargo announced that it would pay $185 million to settle a lawsuit filed by regulators and the city and county of Los Angeles, admitting that employees had opened as many as 2 million accounts without customer authorization over a five-year period….

What are the values of Wells Fargo?

Summary of some of the facts (I have not been following case and type too slowly to get them all down). Wells Fargo had five primary values: 1 People as a competitive Advantage 2 Ethics 3 What’s right for customers 4 Diversity and inclusion 5 Leadership

Did Wells Fargo file no action letters?

Of course, the scandal at Wells Fargo led to a flurry of shareholder proposals and no-action requests. “ The six so-called no-action request letters filed with the SEC are the most by the bank since the agency began posting such requests in 2007.” See Wells Fargo Locks Horns With Some Shareholders Over Proxy Proposals.

Did senior executives have cross selling?

Senior executives did not have cross-selling metric in their own compensation plan… although other statements lead me to believe the positive results from cross-selling did cascade into executive pay because some monies were clawed back. Wells Fargo clawed back executive pay related to cross-selling incentives.

Why did Wells Fargo succeed?

From the earliest days of banking in the west, the institutions succeeded because customers believed their money was safe.

Who was the CEO of Wells Fargo?

Former CEO John Stumpf seemed as out of touch as the head of a multi-billion-dollar corporation could be when he announced that the fraud was the fault of some 5,300 employees who were terminated. He initially failed to accept any responsibility for creating a culture where employees had to cheat, by creating false accounts, just to keep their jobs. It was not until the Senate Banking Committee hearing that Stumpf admitted responsibility for the failure. Unfortunately, he admitted that he had known about the scandal since 2013 and the company’s board had known about it since 2014. Wells Fargo had not even suspended the sales compensation plan that led to this fiasco, keeping it open until the end of the year. It was not until much later, when public pressure mounted after the House Banking Committee grilled Stumpf that the bank suspended its cross-selling sales incentive program.

How much did Wells Fargo make on cross selling?

Wells Fargo made less than $400,000 on its fraudulent cross-selling. The reported fines and penalties of $185 million, pre-settlement investigation costs of $60 million, post-resolution remediation costs of $50 million and loss of market cap of over $6 billion, put the loss to the company at significantly higher.

How much was Wells Fargo worth before the scandal?

Before the scandal, Wells Fargo was worth some $240 billion, a far cry from a neighborhood bank; it is a worldwide financial services organization.

Will the Wells Fargo scandal continue?

The impact of the Wells Fargo scandal will continue for some time. It should be studied by every manager and compliance professional going forward for important lessons about ethics and compliance.

Should managers study Wells Fargo?

Every manager should study the Wells Fargo case for the valuable lessons to be learned. Some of the simplest and most effective are:

Is Wells Fargo cross selling?

What began as a legitimate, legal and beneficial business strategy became not only high-risk but illegal, because of the way Wells Fargo administered its approach to cross-selling. As with any sales initiative, if a company wants to push it, it will set up incentives to engage in such behavior, increasing commissions around the service or product being emphasized. Almost any product or service can present a substantial legal and reputational risk, if not properly managed.

What is Wells Fargo praised for?

Fortune magazine praised Wells Fargo for “a history of avoiding the rest of the industry’s dumbest mistakes.”. American Banker called Wells Fargo “the big bank least tarnished by the scandals and reputational crises.”. In 2013, it named Chairman and CEO John Stumpf “Banker of the Year.”.

How much did Wells Fargo pay to settle a lawsuit?

In September 2016, Wells Fargo announced that it would pay $185 million to settle a lawsuit filed by regulators and the city and county of Los Angeles, admitting that employees had opened as many as 2 million accounts without customer authorization over a five-year period. Although large, the fine was smaller than penalties paid by other financial institutions to settle crisis-era violations. Wells Fargo stock price fell 2 percent on the news (Exhibit 4). Richard Cordray, director of the Consumer Financial Protection Bureau, criticized the bank for failing to:

What is the tension between corporate culture, financial incentives, and employee conduct illustrated by?

The tensions between corporate culture, financial incentives, and employee conduct is illustrated by the Wells Fargo cross-selling scandal.

What happens if a bank does not hit its target?

If the branch did not hit its targets, the shortfall was added to the next day’s goals. Branch employees were provided financial incentive to meet cross-sell and customer-service targets, with personal bankers receiving bonuses up to 15 to 20 percent of their salary and tellers receiving up to 3 percent.

Why did the report fault management?

The report faulted management for failing to identify “the relationship between the goals and bad behavior [even though] that relationship is clearly seen in the data. As sales goals became more difficult to achieve, the rate of misconduct rose.” Of note, the report found that “employees who engaged in misconduct most frequently associated their behavior with sales pressure, rather than compensation incentives.”

Why was the report faulted for publishing performance scorecards?

The report faulted the company’s practice of publishing performance scorecards for creating “pressure on employees to sell unwanted or unneeded products to customers and, in some cases, to open unauthorized accounts.” Employees “feared being penalized” for failing to meet goals, even in situations where these goals were unreasonably high:

Is Wells Fargo responsible for reputation?

… We always consider the reputational impact of the things that we do. There is no manager at Wells Fargo who is responsible for reputation risk. All of our business managers in all of our lines of business are responsible.

How many employees were fired from Wells Fargo?

Wells Fargo announced in September 2016 that some 5,300 employees were fired. The action was taken by leaders who claimed they were unaware of the practice; nevertheless, the board replaced CEO John Stumpf and clawed back some of his compensation.

How long has Wells Fargo been in a contractual relationship with Wells Fargo?

It was disclosed this past July that an insurance company with which Wells Fargo had a contractual relationship had, over a period of nearly 12 years, been requiring as many as 800,000 of the bank’s auto loan recipients to take out insurance on autos that were already insured.

What is Wells Fargo's culture?

Its culture is built around the idea of One Wells Fargo, “imagining ourselves as the customer.”. Its vision includes the mission of helping its customers succeed financially. This vision is supported by values such as “people as a competitive advantage, ethics, and what’s right for customers.”.

What were the causes of fraud at Wells Fargo?

They included poor leadership, improper incentives, inadequate auditing and poor control, questionable organizational (particularly human resource management) practices, and human behavior traits in general.

When is accountability most direct?

Accountability is most direct when an entrepreneur has raised the funding from friends and family. In listed companies, the shareholder and the management are several layers removed from each other. Governance becomes a concept abstracted from the ideal that the management and the investors root for each other.

Who is the author of Goals Gone Wild?

Arie Goldshlager labels this “a classic case of Goals Gone Wild, referring to a paper by Harvard Business School colleague Max Bazerman. Goldshlager goes on: “Wells Fargo was asking its sales force to sell 8 products (‘Going for gr-eight’) to customers that needed fewer products.”.

Does Wells Fargo have HR?

Wells Fargo has no HR presence at the local level, which means there is no buffer between rogue managers and conscientious employees. Employees therefore just hunker down and passively do what they are told since they know they can be fired at any time at the whim of their manager. see more. Show more replies. −.

How much did Wells Fargo settle with the CFPB?

In September, Wells Fargo had agreed to a $185 million settlement with the Consumer Financial Protection Bureau (CFPB) and two other regulatory bodies, admitting it had opened unauthorized accounts for millions of its consumers.

Who is the CEO of Wells Fargo?

On October 25, 2016, Timothy J. Sloan, the new CEO of Wells Fargo bank, apologized to 1,200 of his employees in Charlotte, North Carolina. Sloan had been named to the company's top position two weeks earlier, when then-CEO John Stumpf resigned amid fallout from the banking scandal for which Sloan apologized.

What is Wells Fargo praised for?

Fortune magazine praised Wells Fargo for “a history of avoiding the rest of the industry’s dumbest mistakes.”. American Banker called Wells Fargo “the big bank least tarnished by the scandals and reputational crises.”. In 2013, it named Chairman and CEO John Stumpf “Banker of the Year.”.

How much did Wells Fargo pay to settle a lawsuit?

In September 2016, Wells Fargo announced that it would pay $185 million to settle a lawsuit filed by regulators and the city and county of Los Angeles, admitting that employees had opened as many as 2 million accounts without customer authorization over a five-year period. Although large, the fine was smaller than penalties paid by other financial institutions to settle crisis-era violations. Wells Fargo stock price fell 2 percent on the news (Exhibit 4). Richard Cordray, director of the Consumer Financial Protection Bureau, criticized the bank for failing to:

What is the tension between corporate culture, financial incentives, and employee conduct illustrated by?

The tensions between corporate culture, financial incentives, and employee conduct is illustrated by the Wells Fargo cross-selling scandal.

What happens if a bank does not hit its target?

If the branch did not hit its targets, the shortfall was added to the next day’s goals. Branch employees were provided financial incentive to meet cross-sell and customer-service targets, with personal bankers receiving bonuses up to 15 to 20 percent of their salary and tellers receiving up to 3 percent.

Why did the report fault management?

The report faulted management for failing to identify “the relationship between the goals and bad behavior [even though] that relationship is clearly seen in the data. As sales goals became more difficult to achieve, the rate of misconduct rose.” Of note, the report found that “employees who engaged in misconduct most frequently associated their behavior with sales pressure, rather than compensation incentives.”

Why was the report faulted for publishing performance scorecards?

The report faulted the company’s practice of publishing performance scorecards for creating “pressure on employees to sell unwanted or unneeded products to customers and, in some cases, to open unauthorized accounts.” Employees “feared being penalized” for failing to meet goals, even in situations where these goals were unreasonably high:

Is Wells Fargo responsible for reputation?

… We always consider the reputational impact of the things that we do. There is no manager at Wells Fargo who is responsible for reputation risk. All of our business managers in all of our lines of business are responsible.