Wells Fargo Culture… (Finally) Acknowledged

Gustavo
Grodnitzky
April 20, 2021
2017-04-20

I have written several blogs on Wells Fargo culture since the termination of 5300 employees late last year for opening more than 2 million accounts without the permission of bank customers.  The CEO of Wells Fargo at the time, John Stumpf, first stated publicly that the behavior was due to bad hiring practices.  (Five thousand three hundred bad hires, John?)  He was forced to resign 3 weeks laters.

This past week a review by the Board of Directors (Stephen Sanger, Elizabeth Duke, Enrique Hernandez, and Donald James) was published with finding pointing to… what else?  The culture at Wells Fargo.  As a result, the Board has decided to claw back an additional $28 million from Stumpf.  This is after he agreed to forego $41 million after his resignation in October 2016.  The report indicates that Stumpf was aware of the systemic sales practice culture in 2012, but he was aware of this culture issue as early as 2002.  Nonetheless, he did not initiate any investigation or inquiry until 2015.  

The review identifies Carrie Tolstedt, the former Wells Fargo Head of Community Banking, as resisting changes to the high-pressure sales culture she had created, even though it was clearly creating undesirable behaviors.  Instead, she doubled down and reinforced the sales culture that drove employees to open accounts fraudulently or be fired.  The report indicates that by 2015, there were several board members who did not believe she was reporting the problems accurately to the board.  Instead, she was understating the problem which she was responsible for creating.  

As a result, Tolstedt is being terminated retroactively for cause and giving up an additional $47.3 million of stock options awards, in addition to the $90 million that was clawed back in September 2016.  

This is a great example of how a CEO is responsible for the creation and maintenance of a subculture by on of his/her executives. A CEO must always ensure any and all subcultures that exist in an organization are aligned with the overarching culture of the organization.  Subcultures are a naturally occurring phenomena.  They occur as an organization grows, and/or gets structured into departments, and/or different geographic areas.  Subcultures are not, in and of themselves, problematic.  Until and unless they end up outside your overarching culture.  A CEO is responsible for the culture of an organization and all of its subcultures.  This simply means ensuring that all executives understand and align any subcultures with the overarching culture set by the CEO.

How many subcultures are in your organization?  Are they all aligned with your overarching culture?

Let’s cultivate our culture – together!

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