Wells Fargo Case Summary

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EXAM I MGMT 512: CORPORATE GOVERNANCE SPRING 2017 | MMBA PROGRAM AHMET BOZ – 0055103 AHMET BOZ 0055103 MGMT 512 FINAL EXAM I 2 CHOSEN CASE: WELLS FARGO ACCOUNT FRAUD SCANDAL 1. Brief Introduction of the Company Wells Fargo is an international bank headquartered in San Francisco, California. Wells Fargo is the world's second largest bank by market capitalization and the third largest bank in the U.S. by assets. In 2016, Wells Fargo ranked 7th on the Forbes Magazine Global 2000 list of largest public companies in the world and ranked 27th on the Fortune 500 list of largest companies in the United States. In 2015, the company was ranked the 22nd most admired company in the world, and the 7th most…show more content…
Also, several members of the senior management retired after the fraud scandal. 3. Corporate Governance Failures – What is missed? There are several corporate governance issues that brought about the scandal. The first one is about sales culture. Sales culture should have been prioritized customer benefits with respect to commercial concerns. Wells Fargo targeted to distinguish itself in the industry as a market leader in cross-selling banking products and services to its existing customers, and therefore, set sales goals and implemented sales incentives. Employees were motivated to earn bonuses in the form of commissions for increasing the number of accounts opened by existing customers. The second one is about audit process. Both of internal and external audit processes failed to expose the improper transactions. The improper cross selling activities had continued almost 4 years. This is a long period to dismiss this kind of fraud. There had been some considerable cues of the fraud. For example, some employees were creating phony email addresses not belonging to consumers to enroll them…show more content…
My POV About the Case I think that this scandal was directly related with the management and sales culture of Wells Fargo. Pressuring sales goals, high and uncontrolled incentives, only commercial-focused management perspective made all employees to ignore customer rights and satisfaction. Because the lack of a customer oriented management culture, Wells Fargo BoD didn’t pay attention to build the proper audit and control organization. Moreover, BoD didn’t encourage the employees, who felt uncomfortable about the system, to talk and expose the fraud. In the direction of cultural-based root causes of the scandal, Wells Fargo should define the company’s values, mission and vision statements afresh. And the company should be sure about that each word of these statements are adopted by every single employees. Moreover company should re-build its organizational structure and procedures according to new statements. Also, company should work intensively to gain the trust of customers again. 6. References 1) http://lumsdenfinancialservices.com/wp-content/uploads/2016/10/Wells-Fargo-Scandal.pdf 2) https://fas.org/sgp/crs/misc/IN10587.pdf 3)

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