Wells Fargo CEO, Tim Sloan, announced this week that he is abruptly resigning his post at the nation's fourth largest bank, effective immediately. Why does it matter? Why are we (still) making a big deal out of Wells Fargo?
First, let's recap.
The Wells Fargo Controversy
Wells Fargo has been marred in controversy stemming back to 2016 when it was discovered that the company had created more than 3.5 million potentially fake bank and credit card accounts, according to a company press release. Also, as reported by the New York Times, Wells Fargo came under further scrutiny for its auto insurance program for "engaging in unfair and deceptive practices and failing to manage risks," serious charges that were simply overshadowed by the bigger issue.
Amidst all of these controversies, there was also the relatively less-discussed issue of the bank's toxic company culture, which as reported by NPR Planet Money, involved a highly aggressive and abrasive practice of forcing employees to make unrealistic sales quotas. These practices included unfair and unethical retaliatory actions carried out by management when employees could not make these lofty sales goals or quit.
In 2016, the then-CEO, Gerald Stumpf, testified before congress and indicated that he was not aware of the practice of creating fake accounts apparently being carried out at the branch levels. It was revealed by Planet Money, however, that these same sales quotas were supported by him on earnings calls.
Stumpf also did not step down as CEO immediately, even after repeated calls for him to do so. Instead, he entered into early retirement and, according to CNBC, after forfeiting $41 million and his annual salary and bonus still walked away with $131 million.
Tim Sloan, the then-COO for the company, stepped in and served as CEO until this week, when he announced his abrupt resignation.
The Wells Fargo controversy has been well covered and debated for three years. The issue, for the most part, is resolved. Wells Fargo did bad things, they paid fines and were publicly shamed, and they are moving on.
I am not going to pretend to be an insider or know anything about the decision making process of the bank, and this is not a campaign to smear Wells Fargo and its leadership. Instead, what I can say for certain is that I have eyes and a nose, and what I see and smell looks and smells really bad.
From a brand management standpoint, and in politics, this is called optics -- how something is perceived by the public, regardless of the reality of the situation. The reason we should care is because while Wells Fargo may be on the right track, they certainly are not giving that impression to the public.
Allowing their former CEO to retire without an official apology and absent culpability looks bad. The recent resignation of Tim Sloan just reopens that wound and raises the question -- why was he put into this position in the first place? Sloan was the company's COO during the time the fake accounts were created and hence was responsible for the operations of the bank during that time.
Whether he was or was not involved in the creation of the fake accounts, it just looks bad.
Responsibility and Courage
Again, I am not hear to beguile Sloan or Stumpf, both of whom I am sure are respectable men. Both have had long careers in the banking industry and, from background checks and citation research from Wikipedia, have had overall positive impacts on their organizations.
The point is that anyone stepping into a position of leadership has to understand that these types of controversies require a higher level of self-awareness, empathy and in the end, responsibility and courage to step away from the organization and allow it to heal.
I think many young business leaders do not understand this level of commitment and leadership. Whether you are the manager of a small team, a department, a region or an entire company, in the end, actions of your subordinates, and to a larger degree stakeholders, are your responsibility.
That is not to say that every offense should result in a resignation. Indeed, if a manager quickly identifies the problem and promptly remedies it, then is transparent and takes responsibility, there are strong arguments for why keeping that manager and that particular set of skills is good for the organization.
If the actions are endemic, however, and allowed to fester over time, and if they affect so many stakeholders as to significantly impact the company, culture and brand, the only way to repair that trust and respect is a change in leadership.
Because this higher understanding is enough to scare away even the grittiest managers, I remind them that this course of action requires a great deal courage and responsibility, which are exactly the leadership attributes that all companies look for in managers, especially those that have rebounded from controversy.
What do you think? Do you agree or disagree with the actions Wells Fargo has taken to repair its reputation? Please share your thoughts with me on Twitter.