Déjà vu

by | Mar 12, 2020 | Ethics

In the last few days, the newly hired CEO of Wells Fargo, Charles Scharf, was grilled by the U.S. Congress.

Sound familiar?

The same grilling occurred in 2016 when the former CEO, John Strumpf, appeared before Congress and, again in 2019, when Strumpf’s successor CEO, Tim Sloan, was grilled.

All hearings have centered on Wells Fargo’s “practices of opening phony accounts in customers’ names” and “forcing unnecessary fees and products on customers.”

Since the massive fraud was discovered, thousands of employees have been terminated for cause, the bank has paid billions in fines, executives have been fired and new ones hired. The company’s structure has been changed, incentive plans have been redesigned, and the audit and compliance leadership and function mission has been reshaped. Regulatory direction has been provided, with limitations placed on company operations.

Problems solved, right?

 

Wrong. Because each of the CEO’s spoke of the same need…

…the transformation of Wells Fargo’s culture from an unethical one to an ethical one.

Yep. After 4 years, discouragingly, the new CEO described, again this week, a broken company in need of major change.

See what I mean by, Déjà vu?

 

So, what’s wrong and what really needs to be fixed?

I think there was a glimpse of the bigger problem when two former Wells Fargo Board Members spoke before Congress. Both were members of the Board before and during the fraud. And both clearly subscribed to the “shareholder model” of corporate organization… where the shareholders elect the Board, the Board selects the CEO, and the CEO runs the company with a shareholder first mentality.

Well guess what that “tone at the top” has led to?

Ironically, the“shareholder model” has been to the detriment of the shareholders.

John Bogle, the late founder of The Vanguard Group, wrote a book in 2005 called The Battle for the Soul of Capitalism. In the book, Bogle points out that there has been a “major displacement of the direct ownership by the shareholders (that’s you and me)… in favor of a new system of agency ownership.” And as a result, Bogle describes a system that has evolved away from true “ownership” power to “managed” power.

I see exactly what Bogle wrote about in action at Wells Fargo… and this managed power is what has led to the detriment of their shareholders (owners).

The Board Members proved that in their answers to Congress.

The past CEO’s, Strumpf and Sloan (remains to be seen about Scharf), proved that in their lack of COMPLETE (not a lot of talk and partial) action in response to the issues. I’m afraid they are just the “managers” Bogle was talking about.

So, how do they fix it?

It’s time for “managers” to start acting like “owners.”

Since I was once surrounded by corporate “managers” in my life (and perhaps fell into the trap myself), I knew immediately what needed to be changed when I opened the doors of my firm. And I started to document the true mentality it takes to be an “owner” as Bogle described….

  • Look out for your family (real family or work family) by striving to do things that make them proud.
  • Provide valuable services to customers, continually going “above and beyond” to meet or exceed their needs.
  • Solve problems for customers; don’t become one of their problems.
  • Build good relationships based on easy to understand interactions and by being kind to people.
  • Understand people buy things and engage services from people they trust… and that people are trusted because they have a record of honesty, integrity, character, and fair play.
  • Be professional and take seriously the standards of their profession, at all cost.
  • When there is a conflict, place the interests of customers above their own.
  • Select associates carefully, honoring them, but making sure their values are in sync. Because you are who you associate with.
  • Be fiscally responsible and honor all commitments.
  • Support the community and serve ALL stakeholders.
  • And always, always pay it forward.

 

Wells Fargo leaders would be well served by adopting this “owner” model of behavior. And, to not just say they will, they tried, or they did…  to actually do it, and to prove they do it in their actions, every day.

“Ethical leadership is not repeating past promises. Ethical leadership is fulfilling promises before asked.”

 

Like this “ownership” topic? There are many more thoughts on our “ownership” choices in my book, Our Choices on the Road of Life. Check it out here!