When culture and values fail—what next?

John Stumpf, ex CEO of Wells Fargo
John Stumpf, ex CEO of Wells Fargo

The fall of John Stumpf, long serving CEO of Wells Fargo makes good headlines.  

Some 5,000 or so employees fired for abusing the trust of the banks’ customers sounds even better.  It seems to show  a management on the war path. Is this the top team riding to the rescue of their much admired financial institution?

Unfortunately not.  The reputation destroying actions of Wells Fargo reveal a blind, deaf and insensitive management. They ignored the implications of a company culture that had turned toxic.

Why? Because the management IS the culture. You are either part of the solution or part of the problem.

Values matter and when they’re ignored the consequences reverberate for months and years. It will take at least half a decade for Wells Fargo to restore the faith of users. Right now the customers are voting with their feet. Latest reports show one in three clients are now considering moving their accounts away from Wells Fargo. 

Wells Fargo staff faced intense management pressure to sell eight new accounts to each existing customer. Yet this still only partly explains the self-inflicted disaster.

The more fundamental issue is the same as in VW, or years back in BAE, or Siemens. Those in charge did not just miss what was going on, they connived at “doing what was wrong.”

Could it happen here?

It’s the CEO nightmare of any large company: “Could a VW situation happen here?” Too often the straight answer is “yes, it could, and may be already happening.”

In the VW scandal CEO Martin Winterkorn received a memo about the emissions scam a year before it became exposed. He did nothing. Too busy? VW

Missed the significance of the message? Waited for other senior managers to pick up the baton and run with it? 

In all the above cases, managers at every level accepted or even encouraged damaging behaviour.  The culture was rotten and insensitive to what was happening to the organisation’s good name.

With all these scandals, who is accountable soon flashes in the media headlights.  Sometimes, as in Sports Direct, the owner or senior leader cannot escape the inevitable. When Mike Ashley declared his company had become “too big” for him to manage, he revealed not only accountability but a corporate culture that was both neglected and abused.

Many CEOs appear to under value culture and what it means for behaviour on a daily basis. Stumpf at Wells Fargo talked a good talk about how great the bank was. But this over paid leader had little understanding or interest in making sure the culture remained a positive one.

Instead, the company fired employees who raised concerns. As Senator Elizabeth Warren claimed in the recent Senate enquiry, Stumpf’s definition of accountability was “to push the blame to your low-level employees who don’t have the money for a fancy PR firm to defend themselves.”

In under 10 minutes, Warren destroyed the credibility of Wells Fargo’s CEO. His excuses for the wide-scale fraud occurred on his watch. She accused him of presiding over a scam, ripping off millions of customers. It also boosted the pay of senior executives like himself.

rotten applesWhen culture goes wrong it’s seldom a one-off event, or “a few rotten apples in the barrel.” The whole container goes bad and  the damage seeps into all levels.

Misconduct occurred in Wells Fargo over five to 10 years. It affected all layers of management.  


In 2008 when new CEO Peter Löscher arrived in Siemens to clean house, he replaced 80% of its top-tier executives, 70% of its second tier and 40% of its third tier. Löscher’s team set out to change the entire culture of the firm. But employees who knew the most about the company’s bribery culture and methods were the same ones who were actually involved in it. 

Changing Siemens’ way of doing business meant asking for help from those employees who had the most to lose. Which places a big question mark over Stumpf’s replacement in Wells Fargo. Senator Warren dismissed Stumpf with a devastating comment: “It was gutless leadership.” What can we make of his replacement Timothy Sloane? Will he have the guts to do what’s right for the Bank’s customers and the remaining employees? 

Sloan has worked for the bank for around three decades. Is he going to be the clean hands who sorts out the culture?Tim Sloan

Did he know nothing of the bad sales practices going on at the bank and if not why not, or what did he do about it?  From an outsiders’ perspective, this replacement CEO won’t cut it. He will not be seen by either customers or employees as guilt free. His selection by the Wells Board suggests they still don’t get it.

What the bank needs is a CEO untainted by association. A pair of clean hands whose reputation is not vulnerable from within or without. Mr Sloan may be an honest executive, but he’s just in the wrong job at the wrong time. Likewise the existing Board of the bank. 

How do we know a CEO is in fact an ethical leader? There are many ways of finding out, but here’s a basic checklist which can help:

Test your ethical leadership




Watson, Siemens and the battle against bribery and corruption, Guardian, 18 September 2013

Neate, VW CEO was told about emissions crisis a year before admitting to cheat scandal Guardian, 2nd March 2016

Olen, Elizabeth Warren to Wells Fargo’s CEO: “You Should Give Back the Money That You Took”, Money Box, 20th September 2016

Mike Ashley admits Sports Direct has outgrown him -as it happened, Guardian 20th September 2016

Tim Sloan: The CEO Replacing Wells Fargo’s John Stumpf, Walls Street Journal, Oct 13 2016

Volkov, After Circling the Wagons: Wells Fargo’s CEO Finally Falls, Oct 17th 2016

Wells Fargo ex-CEO John Stumpf Resigns From Chevron and Target Boards, Oct 19 2016





  1. From Wikipedia:-


    Higher costs charged to African-American and Latino borrowers

    Illinois Attorney General Lisa Madigan filed suit against Wells Fargo on July 31, 2009, alleging that the bank steers African Americans and Latinos into high-cost subprime loans. A Wells Fargo spokesman responded that “The policies, systems, and controls we have in place – including in Illinois – ensure race is not a factor…”[61] According to Beth Jacobson, a loan officer at Wells Fargo interviewed for a report in The New York Times, “We just went right after them. Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans.” The report goes on to present data from the city of Baltimore, where “more than half the properties subject to foreclosure on a Wells Fargo loan from 2005 to 2008 now stand vacant. And 71 percent of those are in predominantly black neighborhoods.”[62]
    Failure to monitor suspected money laundering

    In a March 2010 agreement with federal prosecutors, Wells Fargo acknowledged that between 2004 and 2007 Wachovia had failed to monitor and report suspected money laundering by narcotics traffickers, including the cash used to buy four planes that shipped a total of 22 tons of cocaine into Mexico.[63]
    Overdraft fees

    In August 2010, Wells Fargo was fined by U.S. District Judge William Alsup for overdraft practices designed to “gouge” consumers and “profiteer” at their expense, and for misleading consumers about how the bank processed transactions and assessed overdraft fees.[64][65][66]
    Settlement and fines regarding mortgage servicing practices

    On February 9, 2012, it was announced that the five largest mortgage servicers (Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo) agreed to a settlement with the federal government and 49 states.[67] The settlement, known as the National Mortgage Settlement (NMS), required the servicers to provide about $26 billion in relief to distressed homeowners and in direct payments to the states and federal government. This settlement amount makes the NMS the second largest civil settlement in U.S. history, only trailing the Tobacco Master Settlement Agreement.[68] The five banks were also required to comply with 305 new mortgage servicing standards. Oklahoma held out and agreed to settle with the banks separately.

    On April 5, 2012, a federal judge ordered Wells Fargo to pay $3.1 million in punitive damages over a single loan, one of the largest fines for a bank ever for mortgaging service misconduct.[69] Elizabeth Magner, a federal bankruptcy judge in the Eastern District of Louisiana, cited the bank’s behavior as “highly reprehensible”,[70] stating that Wells Fargo has taken advantage of borrowers who rely on the bank’s accurate calculations. She went on to add, “perhaps more disturbing is Wells Fargo’s refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods.”[71]
    Alleged racial discrimination during foreclosures

    In 2011, the Department of Housing and Urban Development (HUD) launched an investigation of Wells Fargo into racial discrimination practices, the second federal probe in 2012 of alleged violations of misconduct with regard to race. The other, began in 2011 by the National Fair Housing Alliance has found “overwhelming” and “troubling” evidence that six of the nation’s major banks handle foreclosures in neighborhoods populated primarily by minorities differently than in white communities.[72]

    On July 13, 2012, Wells Fargo entered a settlement agreement with the U.S. Department of Justice for allegedly discriminating against African-American and Hispanic borrowers from 2004 to 2009. Wells Fargo agreed to pay $125 million to subprime borrowers and $50 million in direct down payment assistance in certain areas, for a total of $175 million.[73][74] Wells Fargo spokespersons denied all claims and are settling only to avoid contested litigation.[74][75]
    SEC fine due to inadequate risk disclosures

    On August 14, 2012, Wells Fargo agreed to pay around $6.5 million to settle SEC charges that in 2007 it sold risky mortgage-backed securities without fully realizing their dangers.[76][77]
    Lawsuit by FHA over loan underwriting

    On October 9, 2012, the U.S. federal government sued the bank under the False Claims Act at the federal court in Manhattan, New York. The suit alleges that Wells Fargo defrauded the Federal Housing Administration (FHA) over the past ten years, underwriting over 100,000 FHA backed loans when over half did not qualify for the program. This suit is the third allegation levied against Wells Fargo in 2012.[78]

    In October 2012, Wells Fargo was sued by U.S. federal attorney Preet Bharara over questionable mortgage deals.[79]
    Lawsuit due to premium inflation on forced place insurance

    In April 2013, Wells Fargo settled a suit with 24,000 Florida homeowners alongside insurer QBE, in which Wells Fargo was accused of inflating premiums on forced-place insurance.[80]
    Lawsuit regarding excessive overdraft fees

    In May 2013, Wells Fargo paid $203 million to settle class-action litigation accusing the bank of imposing excessive overdraft fees on checking-account customers. Also in May, the New York attorney-general, Eric Schneiderman, announced a lawsuit against Wells Fargo over alleged violations of the national mortgage settlement, a $25 billion deal struck between 49 state attorneys and the five-largest mortgage servicers in the US. Schneidermann claimed Wells Fargo had violated rules over giving fair and timely serving.[20]
    Violation of New York credit card laws

    In February 2015, Wells Fargo agreed to pay $4 million for violations where an affiliate took interest in the homes of borrowers in exchange for opening credit card accounts for the homeowners. This is illegal according to New York credit card laws. There was a $2 million penalty with the other $2 million going towards restitution to customers.[81]
    Executive compensation

    With CEO John Stumpf being paid 473 times more than the median employee, Wells Fargo ranks number 33 among the S&P 500 companies for CEO–employee pay inequality. In October 2014, a Wells Fargo employee earning $15 per hour emailed the CEO – copying 200,000 other employees – asking that all employees be given a $10,000 per year raise taken from a portion of annual corporate profits to address wage stagnation and income inequality. After being contacted by the media, Wells Fargo responded that all employees receive “market competitive” pay and benefits significantly above federal minimums.[82][83]
    Tax avoidance and lobbying

    In December 2011, the non-partisan organization Public Campaign criticized Wells Fargo for spending $11 million on lobbying and not paying any taxes during 2008–10, instead getting $681 million in tax rebates, despite making a profit of $49 billion, laying off 6,385 workers since 2008, and increasing executive pay by 180% to $49.8 million in 2010 for its top five executives.[84] As of 2014 however, at an effective tax rate of 31.2% of its income, Wells Fargo is the fourth-largest payer of corporation tax in the US.[85]
    Prison industry investment
    Main article: Prison–industrial complex

    The GEO Group, Inc., a multi-national provider of for-profit private prisons, received investments made by Wells Fargo mutual funds on behalf of clients, not investments made by Wells Fargo and Company, according to company statements.[86] By March 2012, its stake had grown to more than 4.4 million shares worth $86.7 million.[87] As of November, 2012, the latest SEC filings reveal that Wells Fargo has divested 33% of its dispositive holdings of GEO’s stock, which reduces Wells Fargo’s holdings to 4.98% of Geo Group’s common stock. By reducing its holdings to less than 5%, Wells Fargo will no longer be required to disclose some financial dealings with GEO.[88]

    While a coalition of organizations, National People’s Action Campaign, have seen some success in pressuring Wells Fargo to divest from private prison companies like GEO Group, the company continues to make such investments.[89]
    Consumer Financial Protection Bureau fines
    In September 2016, Wells Fargo was issued a combined total of $185 million in fines for creating over 1.5 million checking and savings accounts and 500,000 credit cards that its customers never authorized. The Consumer Financial Protection Bureau issued $100 million in fines, the largest in the agency’s five-year history, along with $50 million in fines from the City and County of Los Angeles, and $35 million in fines from the Office of Comptroller of the Currency.[90] The scandal was caused by an incentive-compensation program for employees to create new accounts. It led to the firing of nearly 5,300 employees and $5 million being set aside for customer refunds on fees for accounts the customers never wanted.[91] Carrie Tolstedt, who headed the department, retired in July 2016 and received $124.6 million in stock, options, and restricted Wells Fargo shares as a retirement package.[92][93] On October 12, 2016, John Stumpf, the then Chairman and CEO, announced that he would be retiring amidst the controversies involving his company. It was announced by Wells Fargo that President and Chief Operating Officer Timothy J. Sloan would succeed, effective immediately.

    Why anyone would want to bank with them is completely beyond me!