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Wells Fargo
Banking Scandal

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Wells Fargo was the
darling of the banking
industry, with some of the
highest returns on equity
in the sector and a
soaring stock price. Top
management touted the
company’s lead in “cross-
selling”: the sale of
additional products to
existing customers.
“Eight is great,” as in
eight Wells Fargo
products for every
customer, was CEO John
Stumpf’s mantra.

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In September 2016, Wells Fargo announced that

it was paying $185 million in fines for the
creation of over 2 million unauthorized customer
accounts.  It soon came to light that the pressure
on employees to hit sales quotas was immense:
hourly tracking, pressure from supervisors to
engage in unethical behavior, and a
compensation system based heavily on
bonuses.
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Wells Fargo also confirmed that it had fired over 5,300 employees over the
past few years related to shady sales practices. CEO John Stumpf claimed
that the scandal was the result of a few bad apples who did not honor the
company’s values and that there were no incentives to commit unethical
behavior. The board initially stood behind the CEO but soon after received
his resignation and “clawed back” millions of dollars in his compensation.

Further reporting found more troubling information. Many employees had

quit under the immense pressure to engage in unethical sales practices,
and some were even fired for reporting misconduct through the company’s
ethics hotline. Senior leadership was aware of these aggressive sales
practices as far back as 2004, with incidents as far back as 2002 identified.
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The Board of Directors commissioned an independent

investigation that identified cultural, structural, and leadership
issues as root causes of the improper sales practices. The report
cites: the wayward sales culture and performance management
system; the decentralized corporate structure that gave too
much autonomy to the division’s leaders; and the unwillingness
of leadership to evaluate the sales model, given its longtime
success for the company.

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Problem of the Case
John Stumpf has been the Chairman and Chief Executive Officer until his
resignation in 2016. Because of this, he got a wider power and control over the
board’s decision authority.
During his time, a fraud has been discovered, wherein the bank has to pay $185
million as fines for the creation of over 2 million unauthorized customer
accounts.
Moreover, there was an unethical and improper treatment to the employees
imposing extremely aggressive sales quota, hourly trafficking, firing over
5,300 employees, engaging in an unethical behavior and compensation system.

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Objectives
• To identify the major causes of this scandal
• To provide recommendations for improving
the corporate governance practices of Wells
Fargo in order to resolve the identified
problems.

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Workable title style
Alternatives Courses of
Action (WACA)
•With the problems that being discussed, the possible solution to avoid unethical
and improper treatment to the employees is having a Balanced Scorecard. It is
a strategic planning and management system wherein it measures and monitors
progress towards the projects, products, and services towards strategic targets. 

The balanced scorecard incorporates monetary measures that tell the results of
activities already taken. And it complements the financial measures with
operational measures on client satisfaction, internal processes, and the
organization’s innovation and improvement activities- operational measures that
are the drivers of future financial performance.
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Workable
Click Alternatives
to edit Master title style Courses of
Action (WACA)
• The employer must be flexible in any
way where he/she is capable of
managing and evaluating the sales of
the company. Flexibility helps to
maintain work/life balance as well as
help the employers to improve
productivity and efficiency of the
business.
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Evaluation of WACA
WACA 1 WACA 2 WACA n
Decision Criteria Weight

Rate Score Rate Score Rate Score

The WACA must

encourage ethical conduct
and behavior by modelling
character and values
The WACA must be able
to avert cultural meltdown

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Recommendation
• We recommend Wells Fargo to empower its
Board of Directors to centralize the key decision-
making process, align divergent interests of
employees and shareholders to mitigate the
agency problem, and hire different executives for
the positions of Chairman and CEO. A better
organizational culture needs to create and a set
of independent directors need to be hired who
can share an unbiased view about different
strategies and techniques adopted by the
organization. 1212
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Thank You 

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