Source: Erik M./Pacific/Barcroft Images

‘Bad Apple’ Behavior or a Spoiled Barrel:

An Analysis of Wells Fargo’s Crisis Response to Alleged Culture Flaws

Submitted to the 2017 Arthur W. Page Society and Institute for Public Relations Case Study Competition

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Abstract

Who’s held accountable when deceptive practices are revealed in a company’s operations – those

conducting the unethical behavior or company leadership? Wells Fargo continues to publicly grapple with

this question as it mitigates damages from a fraudulent account scandal. Initial leadership response

seemingly laid blame on a few ‘bad apples,’ but former employees pointed to a cross-sell-driven culture

breeding bad behavior. The disparity between these viewpoints resulted in a controversy that gained

intense stakeholder attention. This case study examines Wells Fargo’s crisis response to the scandal, as

well as impacts to its financials, reputation and character.

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Table of Contents

Overview………………………………………………………………………………………..... 3

Company Background………………………………………………………………………... 3-6

1. Wells Fargo History……………………………………………….………………….... 3-5

2. Corporate Reputation…………………………………………………………………….. 5

3. Corporate Culture……………………………………………………………………… 5-6

Fraudulent Account Activity Timeline (2011 to 2016)…........................................................ 6-7

Wells Fargo’s Actions and Response……………………………………………………….. 7-10

Cultural Disconnect………………………………………………………………………… 10-14

1. Employee Response in the Media…………………………..………………………. 10-12

2. Corporate Values and Character…………………………………………………...... 13-14

Public Response…………………………………………………………………………….. 14-15

1. Media Response…………………………………………………………………...… 14-15

2. Policymaker Response………………………………………………………………….. 15

Shareholder Response…………………………………………………………………………. 15

Impact on Financials and Reputation…………………………………………………...… 16-17

Wells Fargo’s Challenges………………………………………………………………...… 18-19

References…………………………………………………………………………………… 20-22

Appendix A…………………………………………………………………………………...… 23

Appendix B………………………………………………………………………………...…… 24

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Overview

“If any of these things transpired, it's distressing and it's not who Wells Fargo is...”

- Wells Fargo statement to NPR, October 2016

On May 5, 2015, the Los Angeles City Attorney filed a lawsuit against Wells Fargo for allegedly

opening accounts without customer authorization. Sixteen months later, Wells Fargo announced it would

pay $185 million in fines and $5 million in customer remediation for fraudulent account activities

occurring between 2011 and 2015. The news media, customers and policymakers immediately sought

answers for how Wells Fargo, America’s ‘Main Street bank,’ allowed this to happen. Early comments

from company leadership, including the CEO and CFO, seemed to blame the activities on a few ‘bad

apples’ who did not reflect the company’s broader culture. Former employees countered the ‘bad apple’

claims with vivid accounts of a high pressure, cross-sell-driven work environment breeding unethical

behavior (Arnold, 2016, para. 1). The stark contrast between Wells Fargo’s preached “culture of caring”

and the deceptive actions of 5,300 employees left stakeholders wondering whether company leadership

recognized the potential cultural challenges and knew what actions were needed in order to right the ship.

While reading this case study, remember that the challenges discussed do not solely apply to

Wells Fargo and the highly scrutinized banking industry. A broad range of organizations, from car

manufacturers to government departments (Picoult, 2016, para. 6), have and will continue to be

confronted by empowered stakeholder groups for alleged deceptive business practices. To best manage

growing stakeholder demands for corporate authenticity, company and communications leadership must

be prepared to defend who a company is and how it acts.

Company Background

1. Wells Fargo History

Wells Fargo & Company (NYSE: WFC) is a financial services company headquartered in San

Francisco, CA. American businessmen Henry Wells and William G. Fargo founded Wells, Fargo &

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Company on March 18, 1852, in New York City. Wells and Fargo sought to capitalize on the California

Gold Rush by providing banking and express services in the west (Encyclopedia Britannica, para. 1). As

explained by the company, “[i]n the boom and bust economy of the 1850s, Wells Fargo earned a

reputation of trust by dealing rapidly and responsibly with people’s money” (2016b, para. 3). Wells Fargo

also operated and owned the largest stagecoach empire in the world from 1852 to 1918 (Wells Fargo &

Company, 2016b). The company continues to be linked with the stagecoach emblem, signifying its

heritage and the small-town values that built the business.

Wells Fargo has since grown to become the third largest bank in the United States by assets. It

was ranked no. 27 on Fortune’s 2016 list of America’s largest corporations by revenue. The company is

divided into four primary business segments – wholesale banking, brokerage and retirement, community

banking and consumer lending – and offers approximately 90 separate lines of business (Carlozo, 2015).

According to the company’s September 2015 earnings report, the community banking division led all

other divisions, producing $13.6 billion or 62 percent of total company revenues (CSI Market, 2016).

Wells Fargo’s community banking division currently operates more than 8,000 retail banking locations

across the United States, making the division the face of Wells Fargo.

Source: CSI Market

Wells Fargo’s success captured the attention of Berkshire Hathaway’s Warren Buffett and in

1990 he announced to shareholders that he would be investing $290 million in the bank (Gandel, 2014).

From 1990 to 2015, Berkshire Hathaway continued to accumulate shares in Wells Fargo, which

culminated in a 10% ownership stake as of March 2016. In a February 2016 interview with CNBC,

Buffett called Wells Fargo ‘a terrific operation’ and said the company CEO John Stumpf had done a

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‘fabulous job’ (Stempel, 2016). As far back as 2009, Buffett explained to Fortune’s Adam Lashinsky that

“those guys [Wells Fargo] have gone their own way. That doesn't mean that everything they've done has

been right. But they've never felt compelled to do anything because other banks were doing it” (2009b,

para. 1). The company’s innovative approach to business focuses on consumers and midsize businesses,

in addition to cross-selling products and services. Lashinsky elucidated upon the bank’s approach, noting,

“Wells relentlessly cross-sells everything, including credit cards and mortgages (to consumers) and

treasury-management services and insurance (to businesses). Wells persuades each retail customer to buy

an average of almost six products, roughly twice the level of a decade ago” (2009a, para. 9).

2. Corporate Reputation

Wells Fargo is known as America’s ‘Main Street bank’ in contrast to its ‘Wall Street bank’

competitors. During the 2008 recession, when many banks struggled with the financial crisis, Wells Fargo

emerged comparatively unscathed (The Economist, 2013). The bank’s stability amidst crisis further

bolstered its image and reaffirmed the approval of major investors like Berkshire Hathaway’s Warren

Buffett. Wells Fargo ranked no. 74 in reputation out of the top 100 most visible U.S. companies among

the public in the 2015 Harris Poll Reputation Quotient – well ahead of its major competitors JP Morgan,

Citigroup and Bank of America. The company has also consistently appeared on Fortune’s Most Admired

Companies list – the “definitive report card on corporate reputations” (Fortune, 2016) – ranking 25 in

2016, 22 in 2015 and 35 in 2014. Further evidence of Wells Fargo’s broad recognition as one of the top

banks in North America, Global Finance named it as the ‘Best Developed Market Bank’ on its 2016 list.

3. Corporate Culture

Heralded as a business built on relationships and trust, Wells Fargo employees, directors and

executive officers are expected to follow its Code of Ethics, which stresses individual accountability and

seeking out guidance in situations of doubt. Actions are also to be guided by the company’s vision to

satisfy customer’s financial needs and help them succeed financially. Wells Fargo’s “culture of caring”

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asserts that “success depends on how much we care for each other, our customers, our communities, and

our stockholders” (Wells Fargo & Company, 2016a, para. 4). The company’s focus on people is further

reflected in its brand and slogan, “Together we’ll go far,” which emphasizes strong relationships. Wells

Fargo also promotes a “One Wells Fargo” mindset, meaning “we [Wells Fargo] show our customers we

know them at every moment of the relationship by making it easy for them to do business, providing

guidance to them, and ensuring they feel valued” (Wells Fargo & Company, 2016a, para. 9).

Source: The Vision and Values of Wells Fargo

Fraudulent Account Activity Timeline (2011 to 2016)

Between 2011 and 2015, Wells Fargo employees reportedly opened two million fraudulent debit

and credit card accounts without customer knowledge. Roughly 5,300 Wells Fargo staff members were

terminated over this same span of time for “sales-related misconduct” (Stumpf, 2016b, p. 3). In

comparing those terminated to Wells Fargo’s total retail bank branch workforce, the company fired

approximately one percent of employees each year for performing unethical banking practices.

Dec. 21, 2013 The Los Angeles Times publishes a report on Wells Fargo’s alleged pressure-cooker

work environment and unethical employee behavior.

May 5, 2015 The Office of Los Angeles City Attorney Mike Feuer sues Wells Fargo for allegedly

opening fraudulent accounts without customer knowledge (see Appendix A). Sept. 8, 2016 Wells Fargo announces an agreement to pay $100 million to the Consumer Financial

Protection Bureau (CFPB), $35 million to the Office of the Comptroller of the Currency,

$50 million to the City and County of Los Angeles and $5 million for customer

remediation tied to allegations of staff opening unauthorized accounts (see Appendix B).

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Sept. 20, 2016 Wells Fargo CEO John Stumpf testifies before the U.S. Senate Banking Committee on

Banking, Housing, and Urban Affairs. Sept. 26, 2016 Wells Fargo stock price hits a 31-month low. Sept. 27, 2016 Stumpf forfeits $41 million in salary and stock, and will not receive salary while Wells

Fargo’s board investigates the unauthorized account allegations. Sept. 29, 2016 Stumpf testifies before the U.S. House of Representatives Committee on Financial

Services. Oct. 1, 2016 Wells Fargo eliminates sales goals for retail banking business.

Oct. 12, 2016 Wells Fargo announces Stumpf’s retirement and the subsequent promotion of former

Wells Fargo President and Chief Operating Officer Tim Sloan to CEO.

Oct. 24, 2016 Wells Fargo launches ‘Commitment’ television ad campaign.

Oct. 25, 2016 Sloan issues a company-wide address apologizing to team members and emphasizing

focus on restoring trust in Wells Fargo (2016, para. 6).

Dec. 1, 2016 Wells Fargo announces its Board of Directors amended company by-laws to require the

separation of the chairman and CEO roles.

Wells Fargo’s Actions and Response

In a December 2013 Los Angeles Times article, Wells Fargo spokesman Oscar Suris countered

claims of a supposed pressure-cooker work environment and scandalous sales tactics by explaining the

company’s strong stance on ethics and following the law. Reinforcing the seriousness of the matter, he

said, "when we find lapses, we do something about it, including firing people” (Reckard, 2013, para. 21).

The company also shared that it would create an Ethics Program Office to help ensure the bank’s broad

population understood its ethics policies (para. 22). Three years later, Wells Fargo would again have to

reinforce its stance on ethics as well as the actions the company would take to right wrongdoing.

On September 8, 2016, Wells Fargo issued a press release stating that Wells Fargo Bank reached

a settlement of $185 million with the Consumer Financial Protection Bureau (CFPB), the Office of the

Comptroller, and the City and County of Los Angeles regarding accusations of customers receiving

“products and services they did not request” (2016c, para. 1). The release outlined a series of actions

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taken by Wells Fargo, including third-party account reviews, customer refunds, employee terminations,

training updates, and process changes to ensure customers are aware of new account activity. The official

company statement referred to the settlement as a step toward “putting this matter behind us” (2016c,

para. 4). The same day, Wells Fargo sent an email to employees from CEO John Stumpf in which he

shared much of the same information, but also reaffirmed the expectation that team members “adhere to

the highest possible standards of ethics and business conduct” (2016a, para. 7).

Source: Wells Fargo Facebook Page

On September 13, 2016, Wells Fargo issued a press release regarding intent to eliminate sales

goals in its retail banking business. The change would be completed by January 1, 2017, to further ensure

team members act in the best interest of customers. Wells Fargo’s CFO, John Shrewsberry, shared this

news at the Barclays Global Financial Services Conference 2016 and also commented on how the

fraudulent account activity was predominantly carried out by a group “at the lower end of the

performance scale where people apparently were making bad choices to hang on to their job” (Marino,

2016, para. 2). Stumpf also commented on the isolated group, stating, “the 1 (percent) that did it wrong,

who we fired, terminated, in no way reflects our culture nor reflects the great work the other vast majority

of the people do” (Glazer & Rexrode, 2016, para. 17).

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A week later Wells Fargo issued a statement outlining Stumpf’s commitment to regaining the

trust of customers, team members and the American people (2016d, para. 7). The release included

multiple quotes from Stumpf’s earlier testimony before the U.S. Senate Banking Committee. In his

testimony, Stumpf claimed responsibility for the fraudulent account activity while also clarifying that

Wells Fargo never encouraged team members “to provide products and services to customers they did not

want or need” (2016b, p. 1). He explained how the unethical behavior did not reflect the business culture

nor strategy as cross-selling is only successful when products are wanted and used. Stumpf went on to

recite a series of actions taken between 2011 and 2016 to weed out unethical behavior, such as proactive

monitoring, training updates, changing incentive compensation, downplaying sales goals, and establishing

a new oversight office and compliance program (2016b, p. 2-4).

On September 29, 2016, Wells Fargo announced the company was escalating the timeline for

ending product sales goals to October 1, 2016. Stumpf shared this update in his next testimony before the

U.S. House of Representatives Committee on Financial Services. In early October, Wells Fargo issued

media statements noting regret for the loss of business with the Chicago City Council and the City of

Seattle. The company also commented on losing business in Ohio, stating the company “values the State

of Ohio's business and will fight to earn it back” (Egan, 2016d, para. 5).

Source: Wells Fargo Twitter Page

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In the wake of continued scrutiny, Wells Fargo announced that Stumpf would step down and the

company’s President and COO Tim Sloan would assume the role of CEO, effective October 12, 2016. An

article detailing Sloan’s experience and leadership style was posted on the company’s online journal the

next week. The brief introduction was followed by the posting of a company-wide announcement on

October 25, 2016, in which Sloan confronted the company’s many challenges and the long road ahead to

recovery. He referenced a “wide array of actions to address sales practices issues” (2016, para. 29),

including new leadership and performance plans as well as Ethics Line process reviews. Further,

independent culture experts will be consulted to identify weaknesses and team members will be surveyed

to better understand their perspective of the company (2016, para. 30). Also released in late October,

Wells Fargo launched a 30 second television ad featuring the iconic stage coach and reinforcing its

commitment to make things right. The company’s YouTube posting of the video encourages visitors to

click through to a Wells Fargo webpage titled “We're building a better Wells Fargo.”

Source: Wells Fargo YouTube Page

Cultural Disconnect

1. Employee Response in the Media

Testifying before the U.S. Senate, Wells Fargo CEO John Stumpf spoke to the company’s broad

reach and population, noting how “one in every 600 working adults is a member of the Wells Fargo team”

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(2016b, p. 1). According to Glassdoor.com, a job site featuring company reviews from employees, Wells

Fargo employees rate the company 3.4 out of 5 and approximately 65% would recommend working there

to a friend (Wells Fargo Reviews, 2016). The company is also a three-time award winner for strong

employee engagement, and it’s been consistently applauded for efforts in diversity and LGBT

employment. However, the former employee accounts flooding the media after the company’s September

8, 2016, announcement generally neglect to note these accomplishments. Rather, they portray a tense,

high-pressure work environment driven by impractical sales quotas.

In a 2013 Los Angeles Times article, former employees explained how “top Wells Fargo

executives exhort employees to shoot for the ‘Great 8’ - an average of eight financial products per

household” (Reckard, para. 37). Varied personal accounts emphasize how supervisors as well as their

direct reports would often work unpaid overtime to try to achieve high sales goals. Former employees

claimed that those who fell short of the goals risked being chastised in coaching sessions or fired for poor

performance. Employees shared how they talked family and customers into unnecessary products and

services, and, in some instances, escalated to opening accounts without customer knowledge.

The former staff members quoted in more recent articles from the Los Angeles Times, The New

York Times, CNN Money and NPR span the country, reinforcing the far reach of the alleged unethical

banking practices. Dennise C., a former teller and banker in Houston, recounted to The New York Times

how she transferred multiple times hoping the environment would be different at another Wells Fargo

branch, but it was the “same story” (Cowley, 2016, para. 20). In addition to transfer attempts, several

former employees said they tried to alert Human Resources and/or call an ethics hotline to disclose the

unethical banking practices. Bill Bado, a former Wells Fargo banker in Pennsylvania, told CNN Money

that he was terminated eight days after sending an email to Human Resources (Egan, 2016c, para. 6). The

article goes on to cite a former Wells Fargo HR team member who claims there was a “method” to “fire

employees ‘in retaliation for shining light’ on sales issues” (para. 11).

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Source: CNN Money

Some former employees described difficulty in finding a new job post-termination from Wells

Fargo. For Bado, “it put a permanent stain on his securities license, scaring off other prospective bank

employers” (Egan, 2016c, para. 25). A former employee recalled a coaching session in which branch

management allegedly made such a threat, telling her “if you're bringing down the team then you will be

fired and it will be on your permanent record” (Arnold, 2016, para. 18). Some employees claimed that

they developed physical reactions, such as stomach aches, chest pains and panic attacks. For example,

Angie Payden, a former Wells Fargo banker in Wisconsin, told The New York Times she became addicted

to drinking hand sanitizer to cope with the pressure (Cowley, 2016, para. 10-11).

Several of the media outlets sharing the employee accounts sought comment from Wells Fargo.

For The New York Times, the company refused to comment on individual accounts, but reiterated ongoing

efforts to promote a customer-focused culture and alleviate pressures to sell unwanted products (Cowley,

2016, para. 3). A step further in NPR, Wells Fargo stated, “if any of these things transpired, it's distressing

and it's not who Wells Fargo is” (Arnold, 2016, para. 35). A stronger response came in the form of a

company-wide address from newly appointed CEO Tim Sloan on October 25, 2016. Sloan apologized to

staff “for the pain you have experienced as team members as a result of our company’s failures” (2016,

para. 2). He acknowledged problems within the corporate culture and the need for employees to feel safe

discussing these issues openly. Directly referencing the previous ‘bad apple’ comments, he noted the

company’s failure to “acknowledge the role leadership played” (para. 27).

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2. Corporate Values and Character

Republican Senator David Vitter asked John Stumpf if it was normal “for one percent of a

business unit to be fired over fraud” (Oran, 2016, para. 15). In other words, is the work culture healthy if

a small percent of your workforce consistently acts counter to company values? Former IBM Chairman

Lou Gerstner penned a commentary on the clear disconnect between values and action occurring at Wells

Fargo and, more broadly, across the corporate world. Gerstner noted how companies rely on a list of

values to define their culture; however, “people do not do what you expect but what you inspect” (2016,

para. 5). Cultures are created through employee interpretations of both leadership action and work

systems that reinforce company priorities, like compensation and recognition. On the company’s website,

Wells Fargo defines culture “as understanding our vision and values so well that you instinctively know

what you need to do when you come to work each day” (2016a, para. 1). While company leadership and

communications may have consistently shared “customer-first” value statements and ethics policies, a

high sales quota environment could have conceivably communicated a different set of priorities.

Better Banking Project founder Susan Ochs also commented on culture influences and Wells

Fargo’s alleged leadership blind spot, stating Stumpf “called this an operations and compliance issue,

perhaps not realizing that both of those functions influence corporate culture” (2016, para. 11). In

contrast, new CEO Tim Sloan recognized the need to fix culture issues in his company-wide address

(2016, para. 9). He has also noted the importance of behavior, referencing leading by example and

reinforcing customer focus as part of his leadership style in Wells Fargo’s online journal (Randolph,

2016, para. 12). Among these shifts, Sloan affirmed that the company values will not change, stating,

“Our failures are not the result of our values. I suspect they are the result of some of us forgetting to be

guided by them” (2016, para. 36).

Connecting company values to employee behavior is central to the concept of corporate character.

The Arthur W. Page Society defines corporate character as “the definition and alignment of mission,

purpose, values, culture, business model, strategy, operations and brand to create the unique,

differentiating identity of the enterprise” (2012, para. 3). Inconsistencies in any of these elements weaken

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corporate character and may impact perceptions of authenticity and trustworthiness. Strong character is

especially important in today’s world of empowered stakeholders who demand greater transparency and

honesty (Arthur W. Page Society, 2012b, para. 23). For Wells Fargo, unethical employee behavior

questions whether the ‘Main Street bank’ is actually more akin to traditional ‘Wall Street banks.’

Passionate responses from the public and various stakeholder groups illustrate a strong sense of betrayal,

which may have a long-term impact on Wells Fargo’s reputation and customer relationships.

Public Response

1. Media Response

Source: Mike Luckovich, Atlanta Journal-Constitution

Following Wells Fargo’s announcement of the $185 million agreement, national news sources

were immediately consumed with the reasons why. Major business news sources such as The Wall Street

Journal, Bloomberg and the Financial Times reported daily on the progression of the Wells Fargo

scandal. Coverage was further fueled as Wells Fargo confirmed they had terminated 5,300 employees for

unethical banking practices. Reporters, such as CNN Money’s Matthew Egan, called the scandal

shocking” (2016a, para. 6) and painted a disparaging picture of Wells Fargo in the press. News coverage

did not slow as the days and weeks progressed, especially as pressure from the U.S. Congress escalated

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and former CEO John Stumpf seemed to blame the account openings on individual employees rather than

the bank’s culture (Glazer & Rexrode, 2016). Contradictory accounts from former employees surfaced to

combat Stumpf’s statements and media coverage shifted to a focus on Wells Fargo’s corporate culture.

2. Policymaker Response

For weeks following the announcement of the settlement, Wells Fargo, and, more specifically

CEO John Stumpf, was villainized in the media and interrogated by policymakers. Most notably, U.S.

Sen. Elizabeth Warren (D-MA), who has historically challenged big banks, stood out as the main

opponent of Stumpf in a series of Senate hearings (Egan, 2016b). Warren demanded Stumpf’s resignation

and questioned his leadership abilities, asking “If you [Stumpf] have no opinions on the most massive

fraud that's hit this bank since the beginning of time, how can it be that you get to continue to collect a

paycheck” (Egan, 2016b, para.11). Following Stumpf’s retirement, Warren continues to criticize Wells

Fargo for requiring “customers affected by its unauthorized accounts scandal to go through arbitration

rather than allowing them to sue” (Barlyn, 2016, para. 1).

Shareholder Response

Notable shareholders, such as Berkshire Hathaway’s Warren Buffett, were initially reluctant to

comment on Wells Fargo and the fraudulent accounts. When Buffett’s silence finally broke, he labeled

the scandal as a “terrible mistake,” yet asserted that Wells Fargo is “still a great bank” and decided

against selling any shares (Aitken, 2016, para. 1). In contrast, other investors filed a class action suit

against the bank in September 2016 claiming Wells Fargo misled investors regarding its sales practices

and resulting financial performance. Furthermore, certain religious organizations made headlines when

they publicly condemned the bank and filed a shareholder resolution to fully review business standards

(Bryan, 2016). In response to shareholder concerns, Wells Fargo’s Board of Directors amended the

company by-laws to require the separation of the Board Chairman and company CEO roles.

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Impact on Financials and Reputation

Although Wells Fargo announced it would pay $185 million in fines and $5 million in customer

remediation, the larger financial detriment was the loss in future business. Several states decided to

suspend business with Wells Fargo for one year to hold the company accountable for its perceived lack of

ethical standards. California, Massachusetts, Illinois and Ohio sanctioned the company for a culture

“compromised by greed,” in the words of U.S. Sen. John Kasich (R-OH) (Egan, 2016d, para. 2).

According to CNN Money, the loss of business from Illinois alone will cost the bank millions in fees

(Lobosco, 2016). Moreover, the spate of negative news sent shares of Wells Fargo plummeting down to a

two-and-a-half year low on September 26, 2016 (Egan & Gogoi, 2016).

Source: Yahoo Finance

In addition to financial losses, Wells Fargo’s reputation took a hit as the scandal garnered national

coverage. Initial outcry was reported in national media outlets ranging from major television networks to

social media channels such as Twitter and Facebook. As the story developed and former employees came

forward with accusations of unrealistic goals and intense pressure to perform, Wells Fargo continued to

lose esteem in the public eye. According to a study completed by management consulting company cg42,

negative perceptions of the brand rose to 52% from 15% and 54% of customers said they would not bank

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with Wells Fargo compared with 22% before the fraudulent account scandal (2016). Further, in

September 2016, JPMorgan claimed the title of World’s Most Valuable Bank, which had been held by

Wells Fargo since 2015 when it surpassed the market value of The Industrial & Commercial Bank of

China (Lorenzetti, 2015).

Source: cg42

With negative perceptions of the bank rising, one major concern is how the scandal will affect

new customer accounts and, perhaps more importantly, Wells Fargo’s ability to retain customers. cg42’s

research states “[w]hile only 3% of Wells Fargo’s customers report being affected by the scandal, a full

30% claim they are actively exploring alternatives and 14% have already made the decision to switch

banks as a result of the scandal. This represents $212B of deposits and $8B of revenues at risk” (2016, p.

3). Increased scrutiny of the bank also prompted additional investigations into Wells Fargo’s business

practices by FINRA, the Department of Justice and the SEC, which may result in a regulatory downgrade

by the Office of the Comptroller of the Currency (Glazer & Witkowski, 2016). Consequently, the

fraudulent account scandal may have initially cost the company $190 million in fines and remediation, but

the true loss is yet to be fully realized as reputation damages continue to play out.

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Wells Fargo’s Challenges

Following years of alleged fraudulent activity, Wells Fargo generated a relatively modest $2.6

million in fees from the creation of unauthorized accounts. To further clarify, Fox Business reporter Steve

Tobak said the fees amount to approximately $1.30 for the average consumer (2016). Several recent bank

scandals exceed these financial returns, and yet, the Wells Fargo scandal generated headline after

headline. Sheelah Kolhatkar, staff writer for The New Yorker, hypothesized why the Wells Fargo scandal

was so highly publicized, noting “Unlike the Libor scandal, in which global interest rates were

manipulated, or the creation of credit derivatives by people who knew they were likely to fail, the creation

of bogus accounts at Wells Fargo required no special math or financial-modelling skills” (2016, para. 2).

She also highlighted how easy it is for people to empathize with the deceived customer and the terminated

lower level employee. To put it simply, the Wells Fargo scandal is highly accessible and relatable for a

broad range of people, which spells trouble for the company’s once strong reputation.

Source: Twitter

Wells Fargo is countering such perceptions of Wall Street banking practices and employee

victimization by promoting its commitment to making things right and implementing a series of

initiatives, such as surveying employees, consulting culture experts and doubling down on core company

values. Wells Fargo CEO Tim Sloan acknowledged that it will be a long road to not only fix the corporate

culture but also strengthen character and regain trust. Banking experts and consultants agree the fix

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initiative will require a substantial investment, noting how “Executives will have to dismantle and rebuild

systems of sales incentives and performance management that date back two decades” (Freed & Reckard,

2016, para. 4). Dov Siedman, CEO of LRN, a company that advises organizations on ethics and

regulatory compliance, also commented on Wells Fargo’s need to restructure and the broader applicability

of employee incentive issues. He explained that the Wells Fargo scandal is “no different than a

pharmaceutical giant whose people are more interested in selling pills, as opposed to truly making

patients healthy” (Simon, Warren & Siedman, 2016, para. 13).

Whether it is pills or financial products, companies rely on quotas and goals to help drive the

business forward. However, do the sales tactics and compensation structures support the company’s

purpose and values? Are employee success measures helping shape a healthy corporate culture? These are

the types of questions Wells Fargo, and organizations across industries, must ask to evaluate whether

daily frontline operations truly align with the company’s purpose, vision and values.

Communications teams play a critical role in promoting company direction and employee

expectations. Further, communications may have responsibilities for monitoring and shaping the work

culture. Therefore communications leadership must consistently evaluate the connections between

company identity and operations to validate direction as well as reinforce consistency with both internal

and external audiences. When operational inconsistencies draw stakeholder scrutiny, communications

leadership should also be prepared to manage the narrative. Following Wells Fargo’s September 8, 2016,

announcement, the company’s ‘Main Street bank’ narrative began to crack under allegations of greed and

abuse. The company responded with increased communications, greater transparency and a commitment

campaign to minimize damages. As Wells Fargo navigates the long road to recovery, communications

will continue to play a pivotal role in engaging concerned stakeholders, promoting company

improvements and again solidifying the company’s once reputable narrative.

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References

Aitken, R. (2016, November 13). Berkshire Hathaway's Buffett Says Wells Fargo's A 'Great Bank,'

Holding Stock. Forbes. Retrieved from

http://www.forbes.com/sites/rogeraitken/2016/11/13/berkshire-hathaways-buffett-says-wells-

fargos-a-great-bank-holding-stock/#7021d8e65739 Arnold, C. (2016, October 4). Former Wells Fargo Employees Describe Toxic Sales Culture, Even At

HQ. NPR. Retrieved from www.npr.org/2016/10/04/496508361/former-wells-fargo-employees-describe-toxic-sales-culture-

even-at-hq Arthur W. Page Society. (2012a). Building Belief: A New Model for Activating Corporate Character and

Authentic Advocacy. Retrieved from http://www.awpagesociety.com/thought-leadership/building-belief

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Appendix A

24

Appendix B