Wells Fargo Case Prompts Questions Of Corporate Ethics Reform
SCOTT SIMON, HOST:
This week, Senator Elizabeth Warren had some suggestions for John Stumpf, the CEO of Wells Fargo.
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ELIZABETH WARREN: You should resign. You should give back the money that you took while this scam was going on. And you should be criminally investigated.
SIMON: Mr. Stumpf was testifying at a Senate Banking Committee hearing. Wells Fargo's been fined $185 million to settle allegations that over 5,000 bank employees created unauthorized accounts for customers to meet sales goals and inflate profits. Wells Fargo's fired 5,300 employees. John Stumpf has not resigned.
By the way, he earns at least $22 million a year plus stock and says he's committed to, quote, "strengthening our culture." What does that mean? Dov Seidman is CEO of the business ethics consulting firm LRN. And he joins us now from New York. Mr. Seidman, thanks so much for being with us.
DOV SEIDMAN: Scott, it's good to speak with you.
SIMON: Let me ask a question that I think might be on the minds of a lot of people. Senator Warren pointed out that John Stumpf made over $200 million during the years of the scandal. Would it demonstrate his sincerity to stockholders and employees and the bank's customers and make a point for others if he resigned?
SEIDMAN: You know, we live in a time where, as we see in our political climate - I think there's a lot of protest. And there's a lot of outrage. And we tend to go right from outrage to fire that person. He must resign. Where's my apology?
And I think when we deal with such a crisis, such a betrayal of trust - at least, that's how it seems, and that's how it's being experienced - I would begin with a deep apology. But when we tell a child, just say you're sorry, we're teaching the child to say the words and put the problem behind them.
I think apologies that really matter are the ones that are followed with a commitment to making amends and architecting and inspiring the kind of systems of culture, of leadership that allow the institution to not just heal but find new ways to thrive.
SIMON: What does that translate to in this case? Can a Wells Fargo customer be forgiven for not trusting their bank statement when they get it now?
SEIDMAN: I think trust in authority, trust in institutions is at an all-time low. And the way forward is to recognize that we have such a rupture in trust that we need to do those things that build trust. And if you can architect a way of doing that that is profitable in today's world, then all the power to you. And I think that's the path ahead for that company.
It's no different than a pharmaceutical giant whose people are more interested in selling pills, as opposed to truly making patients healthy. I think we're going to see this in company after company - that their business models aren't exactly tracking to a world where it's all personal.
SIMON: But I get back to this point. Wouldn't it demonstrate that the company is really sincere if top executives resigned?
SEIDMAN: Listen. I believe in accountability. I would hope that the board and others are going to, in a transparent way, say, listen. Give us two weeks. Give us a month. We are going to deeply look into this. We're going to trust people with the truth.
And we are going to share our commitments for a better future - if they're sincerely committed to having one. There should be accountability, yes. What form it takes - is it a resignation? Is it a firing? Is it a financial one? Let's see. This is a venerated institution.
This is a main-street bank, if you will. And I think what you're seeing is the outrage from main street that - isn't this just another example - indeed a scam - of how the system is rigged?
SIMON: Do you really need to create or strengthen a culture or just tell your employees, don't cheat the customer?
SEIDMAN: You can tell the employees, don't cheat the customer. But if you're paying them for selling more and more or cross-selling - you know, there's an adage in business. You've got to measure things. So what you measure is what you get.
And most metrics in business, especially the large ones, are - how many products did you sell this week? You could tell somebody, be ethical. Do the right thing. But then you pay them for how much. And until we start to measure the how - how deep is your relationship with your customer? How loyal is it? How collaborative are you with your colleagues? We're not going to get there.
So this is a massive systems problem where we are measuring the wrong things. And I think the path ahead for a large bank or any large institution is going to be really reworking and architecting the system.
SIMON: Dov Seidman, who's the CEO of LRN, thanks so much for being with us.
SEIDMAN: Scott, it's a real pleasure. Thank you for having me.
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