Wells Fargo fake accounts crisis still hurting because no one owned up early
Wells Fargo Bank, the nation’s second-largest by deposits, continues to absorb massive hits six months after admitting it opened two million fake bank and credit card accounts to artificially drive sales revenue.
The bank fired 5,100 people. Belatedly, the board let CEO John Stumpf “retire,” and then, but only after pressure from Congress, clawed back much of his $41 million golden parachute. Regulators fined the bank $185 million. In March, it agreed to pay $110 million in a settlement with defrauded customers.
But the bleeding won’t stop and now its choking existing business. The City of Philadelphia took its $2 billion payroll account away from Wells Fargo this week and gave it to a local bank. And, as CNN reported in March, more than 12 investigations are ongoing into the fraud.
“Gradualism” is a normal human reaction to dealing with bad news, but when there’s a crisis, it’s a deadly strategy. And that’s how Wells Fargo chose to play this mess. It…never…works.
“Time and time again their [Wells Fargo’s] actions have revealed them to be the antithesis of corporate social responsibility,” [Philadelphia] Councilwoman Cindy Bass said in a statement. “I want to thank my colleagues on the committee for doing the right thing and sending a message that we will not do business with companies that engage in unethical business practices.”
Clearly a consumer fraud on this scale inevitably would result in corporate fines and costly legal settlements. Quick response to a crisis will not “fix” the original crisis event or make it go away. It will determine how you are regarded going forward. To wit:
“In a statement to CNNMoney, a Wells Fargo spokesman said the bank is ‘committed to restoring trust with customers and all of its key stakeholders.’ He pointed to major changes, including scrapping the sales goals, hiring Tim Sloan as its new CEO and stripping top execs of their 2016 bonuses.”
Not enough. Not enough because the bank faltered when its future hinged on decisive, swift, dramatic action — at the beginning. The bank chose gradualism. United Airlines tried the same thing last month and quickly saw its error. Wells Fargo revealed only as much as officials thought they could get away with. As a result, the hits just keep coming.
What should Wells have done? Taken responsibility immediately. Fired Stumpf the first day. Started a third-party investigation and transparently reported the results, within a month. Apologized, also the first day. Expressed outrage at the betrayal of the bank’s customers and mission. Chart a public path forward toward redemption.
You can’t nibble at a crisis or it will eat you.
Learn more about EMA at mowerpr.com/crisisready.
Originally published at https://www.linkedin.com on May 5, 2017.