From 2011 until 2016, the employees of the Community Bank, Wells Fargo’s Consumer retail banking arm, opened 2 million unauthorized customer accounts and credit cards and sold products and services to customers under false pretenses in an effort to increase sales and drive up profits.
As you have observed while reading the case, there were many different problems at Wells Fargo: their sales practices, their internal control systems; their employee incentives, their risk management and control systems and their board structure. Underlying all of these is a flawed Structure, the key contingency factor that led to the widespread misconduct and later prevented it from being detected and eliminated.
As you consider the many concepts you have studied in Chapter 3, which are pertinent in this case? What do you believe caused these problems? What were the failures of control systems, at all levels, What allowed the dysfunctional behaviors to go unchecked? What was the roles of the Board? Why did they not intervene? What should be done to repair the damage and prevent such a crisis from ever happening again?
Remember, these questions are just to spur your thinking. Your Case Notes should:
-Highlight a limited number of key points from the case
-Describe the major issue and offer solutions; and
-Apply course concepts form the Structure chapter to support your analysis.
If you wish, feel free to offer more current information on Wells Fargo. Here is a very brief, and very low-key overview of the Wells Fargo crisis from the Financial Times:
Wells Fargo scandal explained
2- Answer this question in one paragraph :
After a several years and several mistakes, in 2019, the Board of Directors of Wells Fargo finally found a new CEO, Charles Scharf, who had a long and successful career in the banking and credit card industry. Shortly after assuming his position, a headline in the February 12, 2020 Wall Street Journal announced “Wells Fargo Shuffles its Business Units.” According to the article’s author. Scharf overhauled the banks reporting lines in his first move “to stamp out the corporate structure implicated in its fake-account scandal.” (Eisen, WSJ 2/12/2020)
If Scharf had consulted with you prior to this overhaul, what structural changes would you have recommended and why?
