First Enron; Now Wells Fargo

Wells Fargo and its CEO John Stumpf have no doubt had better weeks than last week.Forbes image on Wells Fargo - First Enron; Now Wells Fargo

The Consumer Financial Protection Bureau fined Wells $185 million for opening deposit accounts and transferring funds without customers’ approval. This came five years after Wells paid $85 million in fines for selling higher interest rate mortgages to customers who should have qualified for lower rates and falsifying applications in the process.

Warren calling out Stumpf - First Enron; Now Wells FargoAnd if that wasn’t enough Sen. Elizabeth Warren tore him a new you-know-what by calling him a gutless leader and said he should resign and face criminal investigation.

Perhaps she’s right. We’ll see.

If Stumpf leaves he’s likely going to take $200 million with him which is only a little more than the woman who headed the scam will take with her. She’s estimated to get $124 million on top of a $7.3 million bonus she got last year?

Stumpf eight is great 300x195 - First Enron; Now Wells FargoIn the meantime Stumpf seems to blame much of what’s happening to him on the company’s culture, which he thinks needs to be strengthened, and the 5,300 employees who were found to be connected to the scandal.

What Stumpf doesn’t understand is that he already has an enormously strong culture. It’s just the wrong one. It’s a culture that’s driving people to do the wrong things. It’s a systemic issue that appears to have spread itself throughout the organization.

In a rambling and almost cutesy brochure on the company’s website is a discussion of the company’s vision and values, presumably crafted by Stumpf. He says: “If there is one job that I as CEO must do for our team members, customers, communities, and shareholders, it is to be the keeper of our company’s culture. Corporate America is littered with the debris of companies that crafted lofty values on paper but, when put to the test, failed to live by them. We believe in values lived, not phrases memorized.”

“Leaders,” he said, “are accountable. They share the credit and shoulder the blame.”

There’s also a nod to customers. “We value what’s right for our customers in everything we do. Our customers are our friends. We treat them as our guests. We want them to be successful. Our focus on customers is unwavering.” He doesn’t mention signing them up for accounts they didn’t want.

Reading Wells’ vision and values beside the allegations against the company conjured up what Yankee catcher Yogi Berra once described as “déjà vu all over again”.

Don’t I recall an energy company espousing the same drivel when it was going down the tubes in 2001? And didn’t that same company say one thing in its vision and values and do quite the other in practice.

Of course: Enron. Ken Lay, Jeff Skilling and the gang the book Conspiracy of Fools documented.

Under the heading of “Respect,” Enron’s web page reads, “We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness, and arrogance don’t belong here.” I suspect there must have been at least a touch of these characteristics for it to have been included.

Under “Integrity” it assured the public, “We work with customers and prospects openly, honestly, and sincerely. When we say we will do something, we will do it; when we say we cannot or will not do something, then we won’t do it.”

The last entry on the page was headed “Excellence” and stated, “We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be.”

In 2001, the Enron Corporation of Houston collapsed after a series of events that included a lawsuit filed by investors and an investigation by the U.S. Securities and Exchange Commission that led to bankruptcy.

Stumpf is right about one thing: the CEO must lead the effort to ensure that the desired values are in fact the values that are lived and acted on every day. Perhaps he’s learned that he was right about that part.

There are many ways that CEOs and their leadership teams can test whether that’s occurring. This sounds oh so simple but it’s both hard to do and it’s easy to do.

Get out of that humongous office that reinforces your ego–especially in banks–and get in touch with your people. What are they saying–really saying–not what you want them to be saying. Get into the core of the organization every day. Get onto the floor–the factory floor, the sales floor, the bank floor, the truck floor.

Stay in touch with your organization no matter how big it is. Work closely with your human resources leaders to identify what the reward system is really rewarding. Listen to the people on the front line. IBM’s Lou Gerstner did. GE’s Jeff Immelt does. “A.G” Lafley, former P&G CEO, did it.

Let’s assume Stumpf is out of touch. That’s bad.  Let’s assume he isn’t. That’s worse.

Key Takeaway: No matter how big or small you are, leaders need to work hard to stay in touch with their organizations, test regularly and make sure you’re really living the values, not just pretending you are.

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  1. Thank you for a very worthwhile read.

    I once worked at JCPenney corporate, (catalog division). At the time they still practiced the corporate motto, The Golden Rule. If you didn’t treat all people with respect and dignity all the time, you were called and counseled on it. If that didn’t work, you’d get fired. The culture worked very well, it wasn’t perfect, but for the most part, one felt valued and cared-for.

    1. Garrett, thank you for your comment. I grew up not very many miles from where James Cash Penney grew up in Missouri. I think in many ways what I know about the way he treated people was exactly what you described–the golden rule. Pretty simple.Having the right values and accountability must go hand in hand.

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