Wells Fargo has become the new poster child for corporate greed, though mismanagement might be a better criticism, and it’s not hard to see how the company achieved the honor.
When you fire 5,300 employees over several years for opening some millions of fake accounts to achieve quotas for bonuses and are fined $185 million by various government agencies, eventually even Congress will notice.
If you then refuse to take any action against the executives who promoted, then obfuscated, this activity, there will be hell to pay before congressional committees, no matter how much you have contributed to members’ campaigns.
CEO John Stumpf, once a banking superstar, may well be gone by the time you read this. If not, he will be soon. There will also be a housecleaning of Wells Fargo executives, though no more than necessary to placate regulators and Elizabeth Warren.
While testifying before Congress, Stumpf danced around the question of whether executive-in-charge Carrie Tolstedt, who was allowed to resign before the storm broke, would be forced to return at least a portion of the jaw-dropping bonus she received on departing. The same will be asked of him and anyone else even peripherally involved.
This is all great political theater, and fodder, for Warren and her senatorial cohorts of both parties, as it should be. It is unconscionable, and, according to Warren, criminal, behavior. It is also a perfect example of the lack of corporate conscience and extreme executive compensation that political candidates of all stripes are presently fulminating about, even as they take campaign contributions, as well as big speaking fees and donations to their foundations, from the same folks they rail against. Corrupt? Well, yeah.
The irony here is that Wells Fargo may well have lost money on this program. After processing paperwork to open the fake accounts, paying bonuses to employees who opened them, paying bigger bonuses to executives who were supposedly supervising those employees, then processing more paperwork to close the accounts after customers complained, there couldn’t have been much left for the bottom line.
When something like Wells Fargo pops up, it is way too juicy to be ignored, and there will be people fired, probably with at least silver parachutes, and fines levied and much regulatory back-slapping for a job well done. Until the next time.
Is it possible to change behavior, to at least reduce these incidents? It’s not just us. Remember Volkswagen’s diesel fiasco? Where there is money to be made, people will stretch or violate rules, and it seems certain that many of them are never discovered.
Of course it is a function of greed; that is human nature and to be expected, but it is also a function of opportunity. If you are part of a giant bureaucracy, corporate or government, that is too extended to manage itself properly, and if you have no skin in the game but a paycheck, and possibly tempting bonuses, how do you weigh the odds of gain versus exposure?
Politicians will have a field day with all this until the election, after which it will drift into limbo, except for the attention of Ms. Warren, who has built her entire career on attacking big banks. This is not to say they don’t sometimes deserve attack, only that, once the dust settles and Mr. Stumpf has retired to Palm Beach or wherever, there will be plenty of new headlines to attract attention, and we can all wait for the next scandal to erupt.
It won’t take long.