What We Learned From Wells Fargo About Checks and Balances

As the Wells Fargo scandal continues to unfold, it’s become clear that we need external checks and balances in place to hold publicly traded companies accountable.

Internal controls can only go so far if your executive team is negatively influencing workers from the top-down.

What went awry at Wells Fargo?

Let’s explore what happened in the Wells Fargo case. After watching the exchange between Senator Elizabeth Warren and Wells Fargo CEO John Stumpf, and reading recent comments from anonymous Wells Fargo HR leaders and employees, it seems obvious that Wells Fargo pushed policies designed to maximize revenue at the expense of ethics.

By setting unrealistic sales goals, Wells Fargo executives implicitly encouraged employees to cheat the system. In addition to widespread unethical behavior, executives may have fired people who reported unethical business practices.

An anonymous former HR official explained that Wells Fargo had a system to eradicate those who spoke up against unethical or illegal practices. If an employee came forward, they would find reasons to fire them that were ostensibly unrelated to whistleblowing.

“If this person was supposed to be at the branch at 8:30 a.m. and they showed up at 8:32 a.m, they would fire them,” the former HR official explained.

Where were the internal controls?

Like any other bank, Wells Fargo has a robust compliance training program and compliance team. So did the compliance training program fail? Is the compliance team at fault here? Not exactly.

Let’s assume the chief ethics officer and compliance team were pushing for business policies that would not encourage cheating. If the chief ethics officer can only make a recommendation and does not have the power to veto the CEO or the driving business policies… then what?

Well, you have the situation faced by Wells Fargo.

Checks and balances offer solutions

If executives are driving the business at the expense of ethics, then we need to create a system where the chief compliance officer can veto the CEO’s policies without having to “blow the whistle” on the company to the SEC.

Ideally, the compliance officer has the authority to check the power of the executive when necessary and that role is more than just an advisory one. Perhaps if the Wells Fargo compliance team had the power to check its executive team, Wells Fargo may have been able to avoid this current scandal.

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Janine Yancey
Emtrain Founder & CEO Employment Law Expert
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