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 –

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 –

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 —

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 —

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 —

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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