Wells Fargo Bank Scandal is the story of a giant bank that pressured its employees and abused customers private information. As many as 2 million Wells Fargo bank accounts and credit cards opened by bank workers without customers. They had created these all accounts to meet sales goals. Workers needed to open new accounts each day to keep their jobs or get bonuses, but regulators say many workers couldn’t keep up. So, they padded their numbers by creating accounts without customers knowing. Workers forged signatures, made up email addresses, created PINs and also, they transferred customers money into accounts so they would look real. Some customers paid fees on those accounts and others say their credit scores were affected by unauthorized credit cards. Wells Fargo will pay around $185 million to regulators and reimburse the fees customers paid. But at that time bank did not admit any wrong doing. Wells Fargo’s CEO said he didn’t know this was a big problem until 2013, but in 2011, the bank fired 1000 workers over unauthorized accounts. In all, it has fired 5300 workers over the practice. Some were managers, but most were low level employees.
The unintended consequences of sales incentive programs running without controls and when that becomes part of its culture. Sales incentives or performance that live without audits to ensure rules are not bent out of temptation is a recipe for disaster (Cavico, 2017). A sales incentive are a fact of life. And we need to have them with our sales people so that they feel incentivized and rewarded to go out there and make sales for it. But if you don’t have audits, or you have a culture that permits bending the rules for the sake of sales, or so that a few of those sales people can make their bonuses, that temptation is a recipe for disaster. When that bleeds over to the culture, and if it’s a culture of the end justifies the means, in other words, the end, the sales number, making your targets, whatever it is, justifies. At that point you will eventually own that entire problem as the entrepreneur. Because that company will come down upon you, whether you are two people, or 200 people. A thousand and thousands of employees, that’s what happened to Wells Fargo. After showing up the CEO of Wells Fargo on a TV, few days later, six senators come up and they say, Wells Fargo bank, you know they had read the fine print. And it turns out, the fine print of all those visa cards and accounts that were opening said that if there is ever a dispute, you have to go to arbitration. And so these senators were pointing out, if the American consumer has to go to arbitration, that means this is kept out of the public documents and courts, so courts and reporters will never find out about this. And these customers, they would have to go to arbitration, because arguing about a visa card they didn’t open. This sounds more and more like a cultural issue.
I think this was a cultural phenomenon, not 5300 bad people. As a matter of fact, I think that they sent 5300 people on their way because they were trying to clean house and what was really the issue was the culture of Wells Fargo and sales performance. On September 26th, the plot thickens as some Wells Fargo employees gave a whole world into a glimpse. They filed a lawsuit that the news media followed and read, where they had said for 10 years, and the original find of 185 million was for those four years. They said for 10 years, we, friends and colleagues through the demoted, forced to resign or terminated for not meeting sales quotas. So, there was a quota at the bank that employee had to open this many account, otherwise employee lost their job or they got demoted or passed over for a promotion. And they were incented to do that by a corrupt system. It was a story of cultural failure. And whether it was two people, 20 or 2000, sales incentive programs are a necessary thing to run your business.