“Don’t invest in crowd funding where you could be competing with our lending efforts.”
Wells Fargo Ethics administrators recently sent every bank employee the equivalent of this message. Crowd funding raises cash by avoiding traditional lenders, like ordinary banks. Instead, the platform matches capital to private individuals. Good bye Wells Fargo, hello peer-to-peer lending.
Banning this form of investment by staff seems sensible. The bank’s compliance guardians say this will avoid any potential conflict of interest. Nobody wants to run a company with the employees doing similar business on the side. The decision also highlights some of the complexities in making ethics stick within a large organisation.
“Why should the bank tell me where to put my savings?
is how the bank’s quarter of a million staff perhaps saw their situation.
Not so, say the ethics guardians. What you do with your personal money matters to us: “…exit from existing investments as soon as practical”.
The bank is the fourth biggest in the US, with over 6,500 branches in 40 US states. Octopus-like, its tentacles spread into retail, commercial, and corporate banking. It offers investment management, insurance, equipment leasing, venture capital help and lots of mortgages.
This financial leviathan recently claimed the top spot in 2013 for profit, overtaking rival J.P. Morgan. No wonder the leadership wants to keep things this way. Heaven forbid the staff should undermine a successful business model.
Not many of the 260,000 employees seem bound to complain. The majority will understand the ethical position of the bank. They know Well Fargo to be one of the most admired companies around (Fortune 2011). It is also amongst the 50 best National Green companies.
The Bank’s Rules
The diligent ethics guardians exist to promote the right atmosphere.
in which ethical behavior is well recognized as a priority and practiced.
The elaborate code of business conduct runs to some two dozen detailed pages. There are explicit guides for its many managers.
To exemplify the highest standards of ethical behaviour and to ensure that team members understand that business results are never more important than ethical conduct
Equally vital the code steers them to create a culture in which people: “feel comfortable asking questions and raising ethical concerns without fear of retaliation.”
How successful is the leadership at keeping the bank pointing in the right direction? Like its rivals, the codes, compliance staff and systems failed to stop Fargo stumbling into a series of scandals.
Amongst these are accusations of reckless lending practices and customer deception; alleged foreclosure abuses; and reimbursement for investment advice of around $2 million in losses to 239 customers.
While scoring high on workplace diversity activists accuse Wells of mistreating poorer clients. Many are people of colour. The bank is also a long running target for predatory financial behaviour by the community-organizing network ACORN.
ACORN accuses Wells with a slew of abusive activities. These include charging higher interest rates than a borrower’s credit warrants, and excessive fees for creating mortgages. Rainforest Action Network (RAN) brands the bank as financing environmentally destructive in developing countries.
No one says running a responsible business is easy. Wells Fargo is actually rather better than most at keeping its nose clean. The latest ban on crowd sourcing will hardly be transformative, but at least might remind people the ethics message matters.