There was a burst of righteous populist anger anger last week, when it emerged that Wells Fargo had engaged in pervasive, "massive" fraud since at least 2011, including opening credit cards secretly without a customer’s consent, creating fake email accounts to sign up customers for online banking services, and forcing customers to accumulate late fees on accounts they never even knew they had. For this criminal conduct, Wells was fined $185 million (including a $100 million penalty from the CFPB, the largest penalty the agency has ever issued). In all, Wells opened 1.5 million bank accounts and "applied" for 565,000 credit cards that were not authorized by their customers.
As "punishment" Wells Fargo told CNN that it had fired 5,300 employees related to the shady behavior over the last few years. The firings represent about 1% of its workforce and took place over several years. The fired workers went to far as to create phony PIN numbers and fake email addresses to enroll customers in online banking services, the CFPB said.
What Wells did not disclose publicly to anyone is that the head of the group responsible for Wells' biggest consumer fraud scandal in years, is quietly leaving the bank with a $125 million bonus.
Carrie Tolstedt ran the community banking division of the bank, which included its retail banking and credit card divisions, during the entire period in which the customer abuse was alleged, which goes back to 2011. The CFPB said about three quarters of the unauthorized accounts opened by employees of Wells Fargo were bank deposit accounts. Another 565,000 were unauthorized credit card applications. Tolstedt took over the division in 2008, after Wells Fargo merged with Wachovia during the financial crisis..There are multiple layers to Wells Fargo's management crime. The first is incentives distort behavior. Add management imposed hard targets that prioritize bank profits over customer needs and bad behavior goes exponential. Management learned long ago that 30% of executives cheated by backdating stock options. They didn't need to lie, cheat or steal to keep their job like many Wells Fargo employees.
Bad management is perpetually surprised when their simplistic methods of motivation, bribing people or firing them, backfire on a widespread basis as people respond to the poor system management created.
Like the co-worker with body odor bad management never recognizes their offense.
Wells Fargo’s CEO John Stumpf said Tolstedt had been one of the bank’s most important leaders and “a standard-bearer of our culture” and “a champion for our customers.”She is a standard-bearer for greed and driving in fear. She is a champion for executives who blame the little people for trying to survive in a situation where the employee is damned no matter what. She is a champion for sticking her executive head in the sand for years while her division assaulted customers financially. Her retirement pay reflects the bizarre lack of balance and absence of accountability executives get from each other and their corporate board of directors.
Management in our world today is absurd, i.e wildly unreasonable, illogical, or inappropriate. Carrie Tolsedt is the latest poster child in that regard. Unfortunately, the system is chock full of absurd corporate executives. It's the water in which they swim.
Update 9-22-16: Management was complicit in covering up the predictable bad outcomes from P4P and hard targets. CNN reports they went as far as firing whistleblowers who "tried to put a stop to the bank's illegal tactics only to be met with harsh, prompt and severe retaliation by the bank. Almost half a dozen workers who spoke with us say they paid dearly for trying to do the right thing: they were fired." Greed and vanity (image management at all costs) are the basis for today's management practices.
Update 10-20-16: Distorting pay for performance causes widespread unethical behavior and sends the wrong message to workers that lying, cheating and stealing is OK as long as management's abusive goals are met.