Pervasive Misconduct at Wells Fargo: What Can Be Done?
Wells Fargo, known as the world’s fourth-largest bank has been accused of many things, and one of them was opening over 1.5 millions of unauthorised bank accounts in the name of customers. Eight years since the discovery of Wells Fargo’s scandal, one could ask what preventative measures have been taken to avoid the recurrence of these illicit practices?
In 2016, 5,300 ‘mid-level’ and ‘low-level’ employees were fired for their complicity. However, there was one notable anomaly, the top executives – former chairman and CEO of Wells Fargo, John G. Stumpf and former head of retail bank division, Carrie Tolstedt who orchestrated the fraud were granted retirement, which allowed them to walk away with a compensation scheme of $130 million and $125 million respectively.
Many said that perhaps the most effective way to battle corporate crime is by proving direct culpability of the individuals who perpetrated the crime. But it turns out, we are still not capable of holding corporate leaders accountable. In the case of Wells Fargo, the two top executives have been forced to resign after not been given their high-valued retirement scheme. Even though the system managed to claw back $67 million and $69 million from the two former executives, the gap in the law still left them exceptionally wealthy. Moreover, it is unlikely that anyone from Wells Fargo will serve time in prison after all; as proven by recent history.
Although corporate culture is an intangible feature of a company, its heavy influence on corporate behaviour can not be emphasized enough. When a small group of people behave wrongfully, we can possibly regard that as rogue contingent, and not a result of the erroneous pattern of behaviour cultivated under the wrong leadership. However, it is hard to argue the opposite – when 5,300 employees have gone rogue, it is clearly fostered and influenced by the companies’ incentives, culture and toxic leadership.
It is rather difficult to locate the “mind” of the organisation, and this is partly why prosecutors rarely point the finger to individuals thus making even harder to find the persons in charge of compliance. This helps to reconfigure the legal system but it harms the source of accountability. But sometimes it’s not just about punishing the individual, it’s about holding the “controlling mind and will” of the company – namely – the executives – accountable. By prosecuting the individuals, we can help put an end to toxic company culture, and help foster and rectify a new culture under the right leadership.
President Trump has long been an advocate for dismantling bank rules, arguing that the law restricts a bank’s growth by adding too many costs for businesses. The Consumer Financial Protection Bureau CFPB, an organisation set out to protect consumer’s interests have shifted agendas and weakened their regulations as Trump viewed it as “a thorn in the financial industry”. This is a major setback for the regulation of banks as many view it as a dismantling foundation of consumer protection. We might not be able to eradicate white-collar crime in an instance, but the system and the government should be doing more to protect consumers’ interest by implementing and strengthening policies, not the other way round.