Being Wells-Fargoed Should Keep Top Executives and Boards of Directors Up at Night

The news broke this morning that Wells Fargo’s board has decided to revoke compensation valued at $41 million from the company’s CEO, John Stumpf, in relation to the sham customer accounts created by employees to fluff sales numbers. Additionally, Wells Fargo’s former head of the community banking division that is the source of the scandal, Carrie Tolstedt, has also been financially penalized. I was surprised to hear that these two were being reprimanded for the scandal by Wells Fargo – but then, it occurred to me just how similar this was to the Volkswagen scandal. As I’ve written about before in Directors & Boards Magazine, both companies initially found that a swath of employees were to blame, before moving up the chain to management-level employees who were turned out only after it became increasingly clear to the public just who was to blame for their respective breaches with the public trust. In short, Wells Fargo is scrambling, just the way VW did when the emissions scandal broke.

I’ve said it before, and I’ll say it again – CEOs need to be aware of what is going on in their businesses. Transparency is the name of the game here – not just with handling scandals in the public eye, but in managing employees in every sector of business. Firing scapegoated lower-level employees and revoking the huge payouts to executives is fundamentally a band-aid approach to fixing the problems that lead to scandals. Firstly, Tolstedt should not have been allowed to retire peacefully with a few penalties imposed on her severance package – Wells Fargo should have made a point of firing her. Additionally, if it is revealed that Stumpf was fully aware of the sham accounts and covered up for them, he should also be dismissed publically. However, before either of those two steps could be taken, the most important course of action for Wells Fargo (and any similarly scandalized corporation) is to conduce a full, comprehensive and objective investigation into the root causes of the wrongdoing that occurred. Having a complete picture is essential to actually curing the problems present in any organization – and it makes a more convincing argument to the public whose trust those organizations are trying to regain.

At the end of the day, Wells Fargo’s behavior is yet another stain on the already-tainted US banking industry. The pervasive nature of short-term goal oriented cultures will almost always result in similar scandals that further erode the public’s trust in those institutions they have no choice but to invest in. It’ll be a long time before those 5,300 employees let go for their “rogue” behavior will be able to get a job again, just like it will be a long time before the employees let go for whistleblowing will feel comfortable standing up for their principles again. Depending on how far this particular scandal goes, perhaps the entire board will need to be replaced before anyone is willing to give Wells Fargo their money again. 

Image: Stumpf on Capitol Hill last week. Image Credit: Gabriella Demczuk for NYT

Ignored to the Point of Quitting

This article is a real eye-opener. In France, many workers have permanent contracts, or CDIs, that make it very hard for employers to fire them. Because of this, many employees fear what they call “the closet” – a strange situation where employers strip away an employee’s department budget, teams, and even basic duties. The goal is to “Try to make someone so miserable, he’ll quit.” This tactic, while brutal, is not unique to France. Many employers use the same methodology to get rid of workers. However, in France, the job market structure makes this systematic problem even more difficult to escape. You can read more about this at The New York Times.

Photo: Protesters in Paris against France's new labor law policies. Yoan Valat/European Pressphoto Agency via NYT

Supporting the Workers of Fort McMurray

The fires at Fort McMurray have been a tragedy. Usually, in circumstances like these, where an environmental catastrophe happens, we’re used to hearing about the fallout at work – people not only lose their homes, but their jobs, income and way of life. However, in the case of Fort McMurray, there seems to be a different response for working people. As one spokesperson for Syncrude Canada Ltd. put it, “Our employees have looked after us so we’ll look after them.” Several of the oil sands corporations with employees in Fort McMurray have been offering interest-free loans, salary continuation, lump sum payments, and other forms of financial aid to employees displaced by the fire. We’re so used to wrongdoing by big companies in situations like this that the way oil sands producers are currently working for their employees is worth commending. It’s nice to see corporations do the right thing, especially in the face of such a monumental environmental disaster. Read more about it at The Globe and Mail.

Photo: An evacuee camp for the people who fled the Fort McMurray wildfires in Wandering River, Alberta, Canada, Monday May 9, 2016; Mark Blinch/THE CANADIAN PRESS

We Still Need to Talk about Volkswagen

As seen in this article, the continual neglect by Volkswagen executives to consider their emissions cheating scandal a “real problem” in the months leading to the sudden announcement shows a fundamentally toxic corporate culture. It’s one thing to have cheating be a habitual aspect of your business, but it’s quite another to see cheating as so normal that it’s only worth setting 10 minutes aside in a meeting to discuss its possible financial and reputation-based ramifications. While some of the leadership of VW responsible for the scandal have left the company, VW still has a lot to prove in terms of repairing its image – both to customers and to current employees who may have been compelled to cooperate with the emissions cheating for fear of losing their job. Read more about their conduct at The New York Times.

Photo Credit: Justin Lane for European Pressphoto Agency, via NYT

Are Fortune's "Most Admired Companies" Really Worth Admiring?

Image via Fortune: http://for.tn/1ID66n0 

After reading this list of the world’s “Most Admired” companies from Fortune Magazine, I have to wonder – who is doing the admiring here? In the short description of its methodology in picking these companies, Fortune states that companies are ranked by their peers’ perspectives on nine unidentified criteria (the only two criteria mentioned were “investment value” and “social responsibility”). One essential way that companies should and must be judged is by their workplace culture – and the people who should be making those assessments can’t just be those at the highest tiers of the system. According to this list, Amazon is the third most admired company on the face of the Earth right now – the same Amazon where, according to The New York Times, it’s commonplace to see employees crying at their desks. Companies can’t continue to be judged solely on their profitability or business practices – they should be judged on human factors as well.