The post-scandal scrutiny of Wells Fargo’s culture has so far focused on the high-pressure sales environment that drove employees to create as many as two million fake accounts. Former employees have alleged a “soul-crushing” culture of fear and daily intimidation by managers, where they were pressured to reach extreme sales goals, some by breaking the law. The bank has since fired 5,300 employees for the illegal behavior and eliminated retail bank sales goals entirely.
As a result of this fraud, the bank is now being investigated by Federal prosecutors and Congressional overseers. The states of California and Illinois and the city of Chicago have also suspended parts of their business relationships with the bank.
But the fallout is far from over. Hearings last month before the Senate’s banking committee and the House’s Financial Services Committee point to further dangerous cultural dynamics inside Wells Fargo. The grueling testimonies from CEO John Stumpf, coupled with insights from my industry-wide research into the culture and mindsets of bankers, suggest there is a blind spot among senior leaders at Wells Fargo, as well as deterrents to speaking up among the rank and file. Along with fixing the sales culture, the bank will have to address these critical management issues to prevent the next scandal.
A blind spot among senior leaders
Despite five years of explicit and repeated warnings, the executive team and the board of directors were remarkably slow to see the breadth and gravity of this fraud, and to address it effectively.
According to Stumpf’s testimony, a board committee became aware of the fraud “at a high level” back in 2011. They had a fuller discussion in 2013–2014 — around the time when media reports of the illicit behavior first surfaced. Although roughly 1,000 employees had been fired each year since 2011 for these practices, the board only became “very active” on the issue in 2015.
Stumpf testified that he personally became aware in 2013 when, after two years of ineffective solutions within the business unit, the volume of fake accounts was still increasing. It was yet another two years before Stumpf brought in consultants in 2015 to investigate the full scope of impact on consumers.
In examining what took them so long to react, Stumpf’s comments portray a leadership team that refused to believe the sales fraud could be systemic in a culture such as theirs. Founded in 1852, Wells Fargo and its trademark red stagecoach aim to evoke the values of plainspoken pioneers and a simpler time. The bank proudly held itself apart from its New York–based peers after the financial crisis and regularly touted its “culture of caring.” The public believed it, rating the brand far more trustworthy than any of its peers of a similar size.
Executive team members, most who have spent decades at the company, concluded this fraud had to be minor isolated incidents. During both Congressional hearings, Stumpf kept repeating that the firings totaled only 1% of headcount per year, and that only 1.9% of deposit accounts could be fraudulent. He also said, “I’ve always known…that not everybody will do it right every day,” trying to rationalize this as the work of rogue bad actors and a predictable part of doing business, as opposed to a systemic failure.
Wells Fargo leaders also seem to be blind to the significance of this crisis — both for consumers and for its own culture. Stumpf noted that initially, the bank didn’t realize customers could be charged fees for these fake accounts, but said, “when we finally connected the dots on customer harm in 2015, the board was very active on this.”
This statement implies that the only impact on consumers is monetary: wrongful fees. When the bank thought thousands of employees were simply violating consumer trust — stealing identities, forging signatures, secretly moving money — that wasn’t enough harm to provoke the board’s active involvement. This misjudgment (perhaps initially due to management downplaying the incidents) could explain why the board got engaged so late in the process, and why they did not impose penalties on executives until after the first scathing Congressional hearing and weeks of public outcry. Senior leaders were so focused on financial impact that they couldn’t see the ethical damage.
Even now, Stumpf adamantly refuses to hear criticism of the bank’s culture. Instead, he called this an operations and compliance issue, perhaps not realizing that both of those functions influence corporate culture. When “operational issues” like extreme sales goals help create a certain mindset — in this case, the belief that successful managers must push employees aggressively — that mindset will endure, even after the bank removes those sales goals.
It’s not unusual for a CEO to view the organization’s culture more favorably than average employees do. But Stumpf’s high opinion of the Wells Fargo culture seems to be unwavering despite consistent evidence to the contrary. Pushing back against members of Congress last week, he asserted, “the culture of the company is strong” and is “based on ethics and doing what’s right.” By the end of the hearings, Members were calling him “tone-deaf” and “in denial.”
Deterrents to speaking up
This leadership blind spot is the result of misguided reverence for their culture and its ability to inoculate the bank from systemic problems. It represents a governance breakdown of the highest order for executives and board members. But it appears that some red flags never even reached them: Investigations revealed the bank has ignored, discouraged, and even fired employees who tried to voice concerns about the intimidating culture and unethical practices.
In the worst cases, whistleblowers claim they were fired after reporting violations to the bank’s ethics hotline or trying to alert supervisors to illegal behavior. Concerns raised by other employees were reportedly ignored, including an alleged email sent to Stumpf directly, and a petition, signed by 5,000 colleagues, that sought to lower sales quotas and combat unethical conduct. Stumpf called the firings “regrettable” and assured Congress that the bank has a policy of non-retaliation against whistleblowers.
But the damage goes beyond the employees who were terminated — it sends a signal to everyone else that they should keep quiet. At best, problem-raisers will be ignored; at worst, they will lose their jobs. Why risk it? If the bank doesn’t care, why should they?
This is one of the most dangerous dynamics to afflict a financial institution. Following the 2008 crisis, regulators have prioritized a healthy banking culture, anchored by “effective challenge,” meaning when people question ideas or escalate problems, they are heard and welcomed, without fear of reprisal. In a large organization, successful risk management requires all hands on deck. Employees should feel not only comfortable but also accountable for speaking up.
Wells Fargo is creating the opposite environment — where employees are discouraged from caring or challenging anything.
In addition, a more implicit deterrent to speaking up may be permeating the organization. During his testimony, Stumpf interrupted a detailed exchange saying, “I care about outcomes, not process.” If this mentality pervades the bank, it could exacerbate an existing industry bias.
For many in finance, projecting an aura of self-reliance is part of what garners respect. In my research, the mindset, “My boss would judge me poorly if I had to ask for help instead of solving an issue on my own,” is especially prevalent among midlevel and high-level bankers. It is also correlated with a tolerance for rule-breaking, which perhaps is the extreme last-recourse solution for the lone wolf.
Given this predisposition, when subordinates hear the CEO cares about end results, not the details of getting there, they may be even more reluctant to come forward with problems or seek advice on process points along the way. This could have contributed to the years of delay in rooting out the Wells Fargo sales fraud.
For the bank, any obstacles to speaking up — whether deliberate or inadvertent – must be eradicated. That starts with listening to and protecting the employees who raise concerns. And managers at all levels must take explicit steps to encourage questions and collaborative problem-solving. It’s important to care about how things are done, not just the end results.
The problems from blind spots at the top and stifled voices within the ranks will not disappear when sales goals do. Without doubt, there are many great people working at Wells Fargo, and they deserve better. Senior leaders need to see the truth about the bank’s culture and engage all employees in the effort to repair it.
