The Sheer Grandeur of Our Mistakes

In case you haven’t been fol­low­ing the Wells Far­go scan­dal, I am reprint­ing the tran­scrip­tion of Sen­a­tor Eliz­a­beth War­ren ques­tion­ing John Stumpf, CEO and Chair­man of the Board of Wells Far­go dur­ing recent Sen­ate hear­ings. Over a peri­od of five years, 5,300 employ­ees were fired for open­ing accounts for cus­tomers with­out their knowl­edge, result­ing in high­er cus­tomer fees. How­ev­er, no senior exec­u­tive suf­fered as a result of this prac­tice, one that came from exces­sive demands for “cross-sell­ing” placed on employ­ees. Mr. Stumpf blamed bad employ­ees for the prob­lem. Here’s the excerpt, reprint­ed from CNBC:

War­ren: Thank you, Mr. Chair­man. Mr. Stumpf, Wells Far­go’s vision and val­ues state­ment, which you fre­quent­ly cite says: “We believe in val­ues lived not phras­es mem­o­rized. If you want to find out how strong a com­pa­ny’s ethics are, don’t lis­ten to what its peo­ple say, watch what they do.” So, let’s do that. Since this mas­sive years-long scam came to light, you have said repeat­ed­ly: “I am account­able.” But what have you actu­al­ly done to hold your­self account­able? Have you resigned as CEO or chair­man of Wells Fargo?

Stumpf: The board — I serve â€“

War­ren: Have you resigned?

Stumpf: No, I have not.

Red Cone

War­ren: Alright. Have you returned one nick­el of the mil­lions of dol­lars that you were paid while this scam was going on?

Stumpf: Well, first of all, this was by 1 per­cent of our people.

War­ren: That’s not my ques­tion. This is about respon­si­bil­i­ty. Have you returned one nick­el of the mil­lions of dol­lars that you were paid while this scam was going on?

Stumpf: The board will take care of that.

War­ren: Have you returned one nick­el of the mon­ey you earned while this scam was going on?

Stumpf: And the board will do â€“

War­ren: I will take that as a no, then. Have you fired a sin­gle senior executive?
And by that, I don’t mean region­al man­ag­er or branch man­ag­er. I’m ask­ing about the peo­ple who actu­al­ly led your com­mu­ni­ty bank­ing divi­sion or your com­pli­ance division.

Stumpf: We’ve made a change in our region­al — to lead our region­al banks â€”

War­ren: I just said I’m not ask­ing region­al man­agers. I’m not ask­ing about branch man­agers. I’m ask­ing if you have fired senior man­age­ment, the peo­ple who actu­al­ly led com­mu­ni­ty bank­ing divi­sion, who over­saw this fraud or the com­pli­ance divi­sion that was in charge of mak­ing sure that the bank com­plied with the law.

Stumpf: Car­rie Tol­st­ed â€”

War­ren: Did you fire any of those people?

Stumpf: No.

War­ren: No. OK, so you haven’t resigned, you haven’t returned a sin­gle nick­el of your per­son­al earn­ings, you haven’t fired a sin­gle senior exec­u­tive. Instead evi­dent­ly your def­i­n­i­tion of “account­able” is to push the blame to your low-lev­el employ­ees who don’t have the mon­ey for a fan­cy PR firm to defend them­selves. It’s gut­less lead­er­ship. In your time as chair­man and CEO, Wells has been famous for cross-sell­ing, which is push­ing exist­ing cus­tomers to open more accounts. Cross-sell­ing is one of the main rea­sons that Wells has become the most valu­able bank in the world. Wells mea­sures cross-sell­ing by the num­ber of dif­fer­ent accounts a cus­tomer has with Wells.

Oth­er big banks aver­age few­er than three accounts per cus­tomer. But you set the tar­get at eight. Every cus­tomer of Wells should have eight accounts with the bank. And that’s not because you ran the num­bers and found that the aver­age cus­tomer need­ed eight bank­ing accounts. It is because, “Eight rhymes with great.” This was your ratio­nale right there in your 2010 annu­al report. Cross-sell­ing isn’t about help­ing cus­tomers get what they need. If it was, you would­n’t have to squeeze your employ­ees so hard to make it hap­pen. No. Cross-sell­ing is all about pump­ing up Wells’ stock price. Isn’t it?

Stumpf: No. Cross-sell­ing is short­hand for deep­en­ing rela­tion­ships. We only do well â€”

War­ren: Let me stop you right there. You say no? Here are the tran­scripts of 12 quar­ter­ly earn­ings calls that you par­tic­i­pat­ed in from 2012 to 2014, the three full years in which we know this scam was going on. I would like to sub­mit them for the record if I may, Mr. Chair. Thank you. These are calls where you per­son­al­ly made your pitch to investors and ana­lysts about why Wells Far­go is a great invest­ment. And in all 12 of these calls, you per­son­al­ly cit­ed Wells Far­go’s suc­cess at cross-sell­ing retail accounts as one of the main rea­sons to buy more stock in the com­pa­ny. Let me read you a few quotes that you had.

April 2012: “We grew our retail bank­ing cross-sell ratio to a record 5.98 prod­ucts per house­hold.” A year lat­er, April 2013: “We achieved record retail bank­ing cross-sell of 6.1 prod­ucts per house­hold. April 2014: “We achieved record retail bank­ing cross-sell of 6.17 prod­ucts per house­hold.” The ratio kept going up and up. It did­n’t mat­ter whether cus­tomers used those accounts or not. And guess what? Wall Street loved it. Here is just a sam­ple of the reports from top ana­lysts in those years. All rec­om­mend­ing that peo­ple buy Wells Far­go stock, in part, because of the strong cross-sell num­bers. I would like to sub­mit them for the record.

Chair: No objections.

War­ren: Thank you, Mr. Chair. When investors saw good cross-sell num­bers, they did, while this scam was going on. That was very good for you, per­son­al­ly, was­n’t it, Mr. Stumpf? Do you know how much mon­ey, how much val­ue your stock hold­ings in Wells Far­go gained while this scam was underway?

Stumpf: First of all, it was not a scam. And cross-sell is a way of deep­en­ing rela­tion­ships. When customers…

War­ren: We’ve been through this, Mr. Stumpf. I asked you a very sim­ple ques­tion. Do you know how much the val­ue of your stock went up while this scam was going on?

Stumpf: It’s.… all of my com­pen­sa­tion is in our pub­lic filing—

War­ren: Do you know how much it was?

Stumpf: It’s all in the pub­lic filing.

War­ren: You’re right. It is all in the pub­lic records because I looked it up. While this scam was going on, you per­son­al­ly held an aver­age of 6.75 mil­lion shares of Wells stock. The share price dur­ing this time peri­od went up by about $30, which comes out to more than $200 mil­lion in gains, all for you per­son­al­ly. And thanks, in part, to those cross sell num­bers that you talked about on every one of those calls. You know, here is what real­ly gets me about this, Mr. Stumpf. If one of your tellers took a hand­ful of $20 bills out of the cash draw­er, they prob­a­bly would be look­ing at crim­i­nal charges for theft.

They could end up in prison. But you squeezed your employ­ees to the break­ing point so they would cheat cus­tomers and you could dri­ve up the val­ue of your stock and put hun­dreds of mil­lions of dol­lars in your own pock­et. And when it all blew up, you kept your job, you kept your mul­ti­mil­lion dol­lar bonus­es and you went on tele­vi­sion to blame thou­sands of $12 an hour employ­ees who were just try­ing to meet cross-sell quo­tas that made you rich. This is about account­abil­i­ty. You should resign.

You should give back the mon­ey that you took while this scam was going on and you should be crim­i­nal­ly inves­ti­gat­ed by both the Depart­ment of Jus­tice and the Secu­ri­ties and Exchange Com­mis­sion. This just isn’t right. A cashier who steals a hand­ful of twen­ties is held account­able. But Wall Street exec­u­tives who almost nev­er hold them­selves account­able. Not now, and not in 2008 when they crushed the world­wide econ­o­my. The only way that Wall Street will change is if exec­u­tives face jail time when they pre­side over mas­sive frauds. We need tough new laws to hold cor­po­rate exec­u­tives per­son­al­ly account­able and we need tough pros­e­cu­tors who have the courage to go after peo­ple at the top. Until then, it will be busi­ness as usu­al. And at giant banks like Wells Far­go that seems to mean cheat­ing as many cus­tomers, investors and employ­ees as they pos­si­bly can. Thank you, Mr. Chair.”

Now, hav­ing read the tran­script, I’d like to also direct your atten­tion to the Wells Far­go web­site where Mr. Stumpf is promi­nent­ly quot­ed:

“Integri­ty is not a com­mod­i­ty. It’s the most rare and pre­cious of per­son­al attrib­ut­es. It is the core of a per­son­’s — and a com­pa­ny’s — reputation.”

Addi­tion­al­ly, on this page there are links to the com­pa­ny’s Code of Ethics. Here again, Mr. Stumpf is quoted:

We are all respon­si­ble for main­tain­ing the high­est pos­si­ble eth­i­cal stan­dards in how we con­duct our busi­ness and serve cus­tomers. After all, our cul­ture is cen­tered on rela­tion­ships, and those rela­tion­ships are built on trust. Our cus­tomers have high expec­ta­tions of us, and we have even high­er expec­ta­tions of ourselves.”

The page also includes a link to the com­pa­ny’s Vision and Val­ues. Mr Stumpf is quot­ed here, as well:

Every­thing we do is built on trust. It does­n’t hap­pen with one trans­ac­tion, in one day on the job or in one quar­ter. It’s earned rela­tion­ship by relationship.”

The dis­con­nect between the scan­dal, as revealed by Sen­a­tor War­ren’s ques­tions and com­men­tary, and Mr. Stumpf’s state­ments on the Wells Far­go web­site could­n’t be greater. 

So how could this be, keep­ing in mind that Mr. Stumpf is not the only exec­u­tive in the soup this year? In 2016, the Volk­swa­gen scan­dal also became wide­ly known, with CEO Mar­tin Win­terko­rn quick­ly resign­ing while deny­ing any knowl­edge of an emis­sions test defeat­ing device installed on mil­lions of cars world­wide. Sim­i­lar­ly, Gov­er­nor Chris Christie of New Jer­sey, has denied any involve­ment in the “bridgegate” scan­dal in which lane clo­sures on the George Wash­ing­ton bridge were used as retal­i­a­tion against a local may­or who refused to endorse Christie. With­out rush­ing to judg­ment in any of these cas­es, it cer­tain­ly strains creduli­ty to imag­ine no inad­ver­tent or inten­tion­al col­lu­sion by top exec­u­tives in these cases. 

How­ev­er, whether that col­lu­sion was con­scious or uncon­scious isn’t the point – it’s that the col­lu­sion could only have exist­ed if the lead­ers did not see or know them­selves and their own con­di­tion­ing very well. If inad­ver­tent, then the col­lu­sion rep­re­sents a pat­tern of hid­ing from per­son­al respon­si­bil­i­ty – of look­ing the oth­er way and not want­i­ng to know. If con­scious, then the col­lu­sion rep­re­sents a pat­tern of self-decep­tion, believ­ing that it’s pos­si­ble to get away with it because, after all, “it’s me.” Either way, the leader is fun­da­men­tal­ly unaware of self and the neg­a­tive impacts on oth­ers. Some­one who is unaware defends and self-pro­tects, some­times quite clev­er­ly, such as say­ing the words, “I take responsibility,” while not actu­al­ly doing so. This is what Eliz­a­beth War­ren called out with John Stumpf. But in either case, con­scious or uncon­scious, this is not the sort of leader who actu­al­ly sees neg­a­tive pat­terns in a work­place cul­ture and inter­rupts them because that’s the right thing to do. This is not a good leader, no mat­ter what oth­er short-term “benefits” might have been pro­duced for investors or constituents. 

In the end, what should we make of this sit­u­a­tion where the exec­u­tive claims, “I did­n’t know — oth­ers did it, not me”? Sen­a­tor War­ren’s con­clu­sion is jail time. 

I’m just guess­ing, but I don’t imag­ine even jail time would shift the sto­ry the exec­u­tive would tell, say at 3:00 AM, star­ing at the ceil­ing of that low secu­ri­ty cell. This is a sto­ry of lack of self-knowl­edge and self-respon­si­bil­i­ty, basi­cal­ly one about very smart peo­ple who don’t real­ly have a clue who they are. It’s a sto­ry about lived blind spots, self-assigned priv­i­lege and supe­ri­or­i­ty oper­at­ing in a closed world. In the end its about con­di­tion­ing and the parts of the self that are still unknown and how much work we put in to keep­ing them unknown. 

The moment we own just how con­di­tioned we are as indi­vid­u­als, the more we are able to grow. We all have a safe side, a robot­ic side, an auto­mat­ic side, a self­ish and self-pro­tec­tive side. Acknowl­edg­ing and accept­ing this side, tak­ing respon­si­bil­i­ty for it and its con­se­quences, pay­ing the price, may in the moment make us vul­ner­a­ble but it also begins to set us free. My hope would be that deep­er down, John Stumpf, exam­ines exact­ly what hap­pened here and he spends con­sid­er­able time on the mar­gins of his enclosed world reflect­ing on exact­ly how out of touch he is with the leader he might be. Jail may not do it, but maybe one day he’ll run into one of those fired employ­ees who was unnec­es­sar­i­ly blamed, maybe some­one who acts with more integri­ty and kind­ness and aware­ness toward him than he imag­ined in all those pro­found­ly emp­ty state­ments of his. Maybe one day some­one will save his life but not take a pen­ny for hav­ing done so. Not because his life isn’t worth any­thing — just the reverse — because his real life, like all of ours, is worth so very much.

Dahlia w- Motion Blur

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  • Excel­lent post Dan. This was the first chance I had to read the tran­script on the Wells Far­go fias­co, for lack of a bet­ter word. 

    I feel like I’m preach­ing to the choir at this point, how­ev­er, this is yet anoth­er gross reminder that we need to pay far less atten­tion to what peo­ple say and more on what they do. (‘we’ is includ­ed and implied here) 

    I can’t tell you how many times I hear peo­ple in all walks of life and pro­fes­sions preach about val­ues such as hon­esty and integri­ty, yet in prac­tice, dis­hon­esty is the val­ues lived. 

    Or there is the expec­ta­tion that ‘every­one else’ needs to be hon­est, yet peo­ple will turn right around in the same breath and jus­ti­fy why they per­son­al­ly can’t be hon­est with some­one or in their par­tic­u­lar situation.

    You don’t under­stand! I HAVE to hide x,y,z from this per­son! Or all hell will break lose! I need more time and then I will tell the truth. Or it’s just a lit­tle white lie…no one will get hurt by it.’

    Our imag­i­na­tions and ideals are great. We are high and lofty when we speak of them and write about them. (myself includ­ed) Yet none of it mat­ters much if we can’t prac­tice those same ideals in our day to day life. 

    What will it take for us to stop let­ting oth­ers and our­selves off the hook? How much enabling will we all con­tin­ue to engage in? How much do we con­fuse enabling with lov­ing? And lov­ing as hid­ing the truth from peo­ple because it hurts? 

    I don’t have the answers to those ques­tions. I also don’t imag­ine that we will ever be com­plete­ly void of these issues from here to eternity. 

    And yet, we each need to do what we can when these things hap­pen to hold peo­ple account­able. Includ­ing ourselves. 

    Thanks for shar­ing on this top­ic Dan.

  • Well said, Saman­tha! It is so much eas­i­er to see gar­den vari­ety duplic­i­ty in oth­ers than in ourselves! 

    We appear to be liv­ing in a world where it is not psy­cho­log­i­cal­ly safe to com­mu­ni­cate hon­est­ly, yet we deeply under­mine that safe­ty for our­selves and oth­ers when we fail to observe and act on the plain gap between our stat­ed and lived values.

    A firm “NO!” to this self-wrought BS is in order.

    Best to you and thank you so much for tak­ing a moment to add your wisdom!


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