In 2016, the Los Angeles Times exposed a colossal scandal at Wells Fargo that shook the Wild West institution’s reputation to its core and landed the bank with a $3.7 billion fine.
Through top-down, high-pressure sales goals, Wells Fargo had pushed sales agents across the bank’s multiple business lines to fraudulently open accounts for millions of customers without their consent, pocketing a couple of million dollars for itself in related fees but also substantially inflating the size of its business.
The fallout from the scandal was huge. The scale of the fraud prompted the Federal Reserve to take the unprecedented step of capping the bank’s assets; more than 5,000 bankers were fired for misconduct; and the board clawed back $69 million in compensation from then-CEO John Stumpf after he resigned in the wake of the scandal.
But the drama continued. Stumpf’s replacement, Timothy Sloan, resigned in March 2019, as pressure on the bank to make amends continued. Sloan’s replacement, current CEO Charles Scharf, set about revamping the bank’s leadership, axing old executives and bringing in new blood, such as vice chairman of public affairs Bill Daley.
This week I spoke with Daley about Wells Fargo’s response to the crisis and how the fabled bank is still on the journey of rehabilitating its image and earning back stakeholder trust.
This conversation has been edited and condensed for clarity.
You were hired in November 2019, about three years after the scandal initially broke. What shortcomings in Wells Fargo’s response did you identify up to that point?
When [new leadership] came in, it was obvious that no meaningful action had been taken to change the dynamic [that had led to the scandal]. They weren’t transparent about what the real problems were. They weren’t transparent about the time it was going to take [to resolve]. So when we got here, very little had been done at all to correct the trust and reputation of the bank, so it was like starting at square one.
Wells Fargo ran two big marketing campaigns after the scandal, once in 2018 and again in early 2019. The 2018 campaign, Re-Established, admitted the bank’s wrongdoing and focused on how the bank was rebuilding trust. The 2019 campaign was similar. But to hear you talk about it, Wells Fargo hadn’t really done anything tangible to rebuild trust at that point.
Well, I would say the proof was in the pudding, in a sense. That those campaigns were done, to my mind, confirms that you can’t tell a story that isn’t true. And you better not tell your story until you’re pretty confident that you can back up what you’re saying because investors, shareholders, employees—they all see through BS. So if you’re going to say what you’ve done, or what you plan to do, you better be doing it, otherwise they will call you out.
When a company suffers a crisis of trust, do you think a change of leadership is always necessary?
I think it’s pretty hard for any organization that goes through such a traumatic challenge of who they are, what they do, and how they treat people to keep the same people in place. You can’t build credibility with that.
And so the actions [Scharf] began were the basic actions of creating a new team. The leadership changes that he’s made from the top have been rather substantial: 80% of the senior executives are new, either hired from outside or moved within into new positions; 70% of the operating committee is new too.
And in our situation, it wasn’t just the sales practice piece of it. That may have been the most public piece of the challenges we’ve had. But if you look at the journey we’re on, we’re making progress on all those other things [such as the bank’s lax risk and compliance frameworks] that are as important to the strength and credibility and ability of a major bank to compete.
It sounds like a constant process. Will there ever be a time when the job of rebuilding trust is done?
No, there is no “mission accomplished.” With every business today, you’re earning the trust of your customers, your investors, your communities, every day and with every transaction. So it’s not something that you will someday wake up and say, “Oh, my God, it’s great.” It may be improved, which is the goal, but there’s no end.
Every day is another challenge, as with any company today, but especially when you’re as visible as we are. You have so many touchpoints for trust or reputation challenges every single day. Every single time somebody walks into a branch, you have the potential [to lose credibility]. So it’s not an easy thing, but I think we’re moving forward quite well, and I feel good about where we’re at in this long-term journey.
Eamon Barrett
[email protected]
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