In 2007, John Stumpf became the CEO of Wells Fargo Bank, one of the most respected and reputable financial institutions in the country. To increase market share and corporate profits, Mr. Stumpf embarked on a product sales strategy in 2010 involving the cross-selling of financial products to bank customers with the mantra, “Eight is Great.” This implied that Wells Fargo sales employees would be required to sell eight financial products (i.e. deposit accounts, credit cards, etc.) per customer to meet the quota.
According to the bank’s 2010 annual report, Stumpf is quoted: “I’m often asked why we set a cross-sell goal of eight. The answer is, it rhymed with ‘great.’ Perhaps our new cheer should be: ‘Let’s go again, for 10.”
What transpired became one of the biggest consumer fraud scandals in banking history.
In order to meet onerous sales targets, prosecutors say employees often opened accounts without customers’ knowledge or consent — forging signatures, moving money from existing accounts and altering customers’ contact information to avoid detection.
The Wells Fargo account fraud came to light in September of 2016. Approximately 3.5 unauthorized accounts were created by employees using customer information without their consent. Consequently, 5,300 low-level employees were later fired.
Despite the bank’s ethical code of conduct, this fraud was perpetuated by the CEO, John Stumpf, and supported by top management to increase profits based on unethical sales practices and unrealistic sales quotas. The combination of poor corporate governance, aggressive sales tactics, lack of an ethical culture, and any management oversight contributed to the scandal.
Since then, Wells Fargo has paid hefty government fines and been embroiled in many lawsuits. Its once respected reputation has been tarnished and CEO John Stumpf was forced to resign. Additionally, Wells Fargo has undergone corporate restructuring to rectify the organizational issues that led to the scandal.
Video Assignment Preparation
Review the question prompts below, in the Prepare Your Video Response section and then complete the reading assignments.
Grading Rubric: View the Video Assignment Rubric Under “Rubrics” for a guideline of grading expectations.
Resources:
Reread Chapter 10 in your textbook
Read Wells Fargo Ex-CEO Banned, to Pay $17 Million in Fake-Account Scandal (WSJ, January 24, 2020) ATTACTCHED IN ADDITIONAL MATERIALS
Watch Wells Fargo to Pay $3 Billion in Settlement for Fake Accounts Scandal (NBC News, February 21, 2020): https://www.nbcnews.com/nightly-news/video/wells-fargo-to-pay-3-billion-in-settlement-for-fake-accounts-scandal-79178821599
Read Wells Fargo – A Timeline (CSR, February 27, 2020): ATTACTCHED IN ADDITIONAL MATERIALS
Podcast:
Wells Fargo Podcast/Transcript (18 min.)(NPR): https://www.npr.org/sections/money/2016/10/07/497084491/episode-728-the-wells-fargo-hustle
Prepare Your Video Response
You can use a webcam and record directly in the Video Assignment tool or use a phone, tablet, or your computer to record a video you will then upload to the assignment.
Your video should include the following:
PSA PLEASE DONT ACTUALLY MAKE A VIDEO, I JUST NEED A SCRIPT TO MAKE MY OWN VIDEO! THANK YOU SO MUCH:)
1. Introduce yourself. (I CAN DO THIS PART THANKS)
2. For this discussion, there are multiple ethical issues and stakeholders to consider. Identify the relevant corporate governance issues, practices, and problems at Wells Fargo.
3. Identify all of the stakeholders involved in the outcome of John Stumpf’s decision to pursue aggressive sales goals like “Eight is Great” (refer back to Chapter 3.3 Ethical Decision-making and Prioritizing Stakeholders). Despite reports of ethical complaints within Wells Fargo, the bank and John Stumpf continued to promote cross-selling to existing customers and require unrealistic sales quotas. What should he have done to make “Eight is Great” a legitimate sales marketing strategy? Alternatively, should he have eliminated the quota and pursued a different goal or strategy?
Construct a 2-3 minute video (275 WORD SCRIPT PLEASE) that includes.
What is the best decision?
Explain your decision.