Wells Fargo’s Implication Of Unethical Behavior Drives Share Prices Down
May 25th, 2018 10:23 am | By admin | Posted In Business News
Wells Fargo seems to be facing a difficult time in terms of their public image. It was recently exposed that some employees altered customer documents during 2017 and early 2018 to comply with anti-money laundering laws. This information forced share prices down 1.4% during the May 17th session. According to CNBC, Wells Fargo’s executives ensured that “This matter involves documents used for internal purposes. No customers were negatively impacted, no data left the company, and no products or services were sold as a result”.
The problem, according to previous news sources, is that this is not the first episode of irregular behavior within the bank. In 2013, the press published that Wells Fargo employees created more than a million fake accounts as a way to achieve sales targets. Those accounts belonged to customers that were not informed or asked about that. In July 2017, the company acknowledged that more than half million customers were charged with auto insurance they did not need and a few months later a new issue emerged, this time with brokerage accounts, as company workers drove clients to make investments that had a high chance to turn into losses for them.
If you are not very familiar with Wells Fargo’s name, let’s clarify what this company means for the global financial system. Its beginnings date back to the 19th century when Henry Wells and William Fargo founded Wells, Fargo & Co. to serve the Western region of the United States with banking services. Today Wells Fargo is one of the four largest banks in the United States together along with Bank of America, JP Morgan Chase, and Citigroup. It has worldwide operations and is now placed among the top 10 largest banks in the world and the company provides full-time jobs to more than 200,000 employees.
Managing such a large institution sounds like a lot of work, right? Here’s Warren Buffet take on the matter, who is one of Wells Fargo’s top investors. “All the big banks have had troubles of one sort or another”, he said during the Berkshire Hathaway’s annual shareholder meeting. Buffett does not plan to dump his position in the company as a consequence of the latest news. He thinks the corporation will solve these issues and continue to be a strong piece of the global financial puzzle. However, he recognized that Wells Fargo’s subsequent problems have proved that processes and controls were not properly fixed once the first misbehaviors were noticed.
Buffett and other analysts alleged that the main cause of the undesired misconducts were poorly-designed incentives. Employees were prized in line with short-term sales and that is why some of them chose unethical ways. However, many people think that problems are deeper than that. Good values seem to be absent in those decisions. Although Wells Fargo’s corporate values include “to place customers at the center of everything” and behave under “the highest standards of integrity, transparency, and principled performance”, several times its employees have demonstrated just the opposite. Writing down nice statements is not enough. Making most of your people accountable is not easy but absolutely needed for long-term success.
In the meantime, the company launched an ad campaign that reinforces its commitment to clients as a strategy to win back trust. It is still too early to know if the most recent chapter in Wells Fargo’s novel will finally lead to real changes. Surely Wells Fargo investors and employees are expecting this to happen!
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