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Values, Values on the wall, Who Practices Who Recalls? The Wells Fargo Bank Fiasco Scam

Values, Values on the wall, Who Practices Who Recalls? The Wells Fargo Bank Fiasco Scam

How can values make of break a company? And how can HR professionals align culture and values with employees?

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by Avi Liran

Following Guest article co-authored by Avi Z Liran & Dr. Simon Dolan

On the 8th of September, Richard Cordray, director of the Consumer Financial Protection Bureau announced that Wells Fargo would pay $185 million in fines for illegally creating unauthorized deposit and credit card accounts across the USA.

The saddest thing about Wells Fargo’s fraud is that no one is surprised. The leading Israeli humourist and gestalt master, Lenny Ravich said, “99% of bankers give a bad name to this profession. ”   I would go as far as to say, many bankers nowadays are ashamed to introduce themselves as “bankers” in public presentations.

Wells Fargo’s stock price dove, shaving 24 billion dollars from its’ investors. 5,300 employees were fired, but surprisingly very few senior executives. Not one senior executive has taken action that shows personal accountability yet. To date, there have been no senior-level resignations nor returned personal windfalls generated from the fraudulant activities. On the contrary, Carrie Tolstedt, the former head of the consumer banking division, the executive directly responsible for overseeing the retail banking sector of the company where the fake accounts were created, was rewarded for her act. Instead of being fired and denied from a bonus, in July, Tolstedt was allowed to retire holding roughly $96.6 million in various stock awards.

“Leaders are accountable. They share the credit and shoulder the blame. They give others the responsibility and opportunity for success.” ~ (statement from Wells Fargo Vision and Values document)

At the Banking Committee Hearing, Senator Elizabeth Warren questions Wells Fargo’s CEO and Chairman of the Board, John G. Stumpf about accountability. He refused to share any opinion on any matters regarding personnel, senior leadership resignations or claw back.

This is not the first time in the history of business that greed overpowered values. A few years ago BP compromised on their stated first core value of safety, causing the largest, most harmful and costly oil spill in history bringing BP almost existential risk. The cost of not delivering on organizational values is massive. Today many organizations are teaching their values only from the wall rather than through their actions in a very inefficient manner.

John G. Stumpf’s vision and values for Wells Fargo as included in their website states: “We believe in values lived, not phrases memorized. If we had to choose, we’d rather have a team member who lives by our values than one who just memorizes them.”

Most of the company’s vision and values were breached in this fiasco. It was not a few rotten apples but rather 5,300 employees who broke the code of ethics. These employees didn’t do it for a day or two.  They did it daily over a period of a few years.

These employees deserve to be fired because they committed criminal offences. They cheated. Regardless of core values all societies see stealing as a criminal act. However, when you are a low-wage employee whose livelihood depends on reaching an unrealistic sales target; your colleagues are all involved in a scam that clearly is making your bosses happy; you are being taken advantage of by your superiors in the organization.  It seems that not only the leadership did not provide for efficient training and compliance, it is also avoiding taking responsibility.

On September 24th 2016, Former and present Wells Fargo employees filed $2.6 billion class action against the bank in Los Angeles County Superior Court.  "The biggest victims of this scheme are a class of people that nobody else has talked about. The biggest victims of Wells Fargo's scam is the class of victims that were fired because they did not meet these cross-sell quotas by engaging in the fraudulent scam that would line the CEO's pockets," the class says in its 26 pages lawsuit.

Senior executives at Wells Fargo might ask themselves, “What are we doing wrong in the hiring and on-boarding process?  What training and compensation models encourage so many of our employees or colleagues to cheat on our behalf?

Wells Fargo did practice the value of doing what’s right for the customer by faking their authorizations and charging them unknowingly. Did the leadership provide sufficient training for the values and code of ethics or supervisory effective compliance? How could they expect employees to follow the values while concurrently applying relentless pressure to acheive unrealistic sales targets?

From a leadership perspective, cross-selling and providing one-stop-shop services for the financial needs of your customers is a legitimate goal.  Yet, there must be a balance between “greed goals” that feed the stock value and practicing the value of what’s right for the customer?

If you were a CEO, would fire two best-performing sales persons who contribute 60% of  your company’s profits? Is it true that it is “kosher” to do anything for short term share value growth?

In 2002 an internal investigation in Ali Baba, found that these two sales persons were violating the values and paying off, Jack Ma, the funder and legandary CEO he had a painful decision to make. Not now when his company worth more than Wells Fargo bank, but at a time when this money was essential for Ali Baba’s survival.

Jack Ma said: “If we fire them immediately, the company will not have profit. If we do not kick these two employees out, then what does this signify about us? It would imply that our words are empty. "So we finally decided to let these two employees go."

Later on in an interview he said “We focus on the employees and the culture. Everybody is helping each other instead of just making money”

Would Jack Ma had opted to pressure employees to meet cross sales quotas? Once he dismissed a sales trainer for teaching mal practices. He said: “The training instructor was speaking about how to sell hair combs to monks. After five minutes, I got extremely angry and expelled the instructor. I thought the instructor was a cheat. Monks do not need combs in the first place.”

In our work on Coach and Managing by Value across the globe with many of the best global organizations we continually see a crisis of “values in action.” There is a growing discrepancy between the stated values on the wall and values in action. The most common current employee training methods largely reinforce values using a push strategy which relies far to heavily on memorization and retention. Very few organizations actually practice what we and other like-minded value-driven consultants have been suggesting for the past 20 years (See: Dolan et al (2006) Managing by Values: A corporate guide to living, being alive and making a living in the 21st century (Palgrave MacMillan); or Dolan (2011): Coaching by Values. iUniverse).

There are many organizations fixated on the values their founders established years ago. Perhaps these need to be updated.

A common “old” value that we see in many companies is Team Work.  Is that a value or a result? IDEO which is one of the most famous and successful design companies in the world chose to express Team Work instead as “We Collaborate.” These words have power. It is not a passive result but a dynamic action that inspires behavior that drives results.

Organizations spend billions of dollars on engagement surveys, profiling tools and tests, yet they seldom inquire about the personal values of their team members. As new generations grow into the workforce there is a need to help them connect with the core values of the organizations they serve and take ownership of them.

Millennials are looking not only for values; they want to have greater sense of purpose and meaning. Learning what their personal values are helps them to connect, to scan for similarities and to develop respect for diversity.

This check-list may help you align your culture and values with those of your employees:

  1. Do you practice “hire and fire” for values. Do you put an emphasis on attitude and suitability for your culture and values?
  2. Do you tolerate deviation from your culture and values giving concessions and closing one eye when a top performer is needed for your short term results?
  3. Are your policies and processes aligned with your values? Do you create paradoxes by setting unrealistic targets?
  4. When was the last time that you conducted a value audit to identify the current gap between the values on your wall and values in practice?
  5. With new generations and disruptive technologies and business models, are your values still relevant? Do you need to refresh and update them?
  6. Are you at liberty to review and update your existing values? Are you willing to explore a change and solicit wide based feedback to uplift them or are you forced to live with the words on the wall?
  7. Do you provide tools to help teams in your organization understand the values of their team members?
  8. How do you teach your values? Do you emphasize only verbal memory retention or do you have procedures in place to ensure that values are actually living and values in action? Do you expect role modelling and sense of ownership?
  9. Do you involve many of your employees in your strategic sessions or do you work traditionally top down?
  10. Are the words on the wall are empowering, vigorous and calls to action?

Parting words about board of directors and audit conflict:

Nothing much will change unless we have a radical shift in mindset. We can’t expect the cat to guard over the milk. There is an inherit conflict of interest in the current business model where public companies appoint their boards and appoint their auditors. These individuals then get paid by the company and they have a personal interest not to lose their position by going against the management of the company when sometimes they should.

In public companies the role of the auditor is to protect the true owners of the company – the shareholders. Perhaps every stock exchange nominates the auditors. If the audit firms will be rotated every two years, the auditors will know that they will be audited too by a new firm, thus much more prudent. The public companies will pay a fixed fee to the stock exchange for auditing cost accordingly. The stock exchange will be able to get better price for volume using RFP system. When the auditors are working for the exchange to represent the public interest they will be more impartial, their duty and loyalty will be to their client and the audited companies will be transparent.

This article had been published in the Singapore Business Times.