The news is rife with stories of corporations and other organizations breaching contracts, both written and unwritten, with employees.

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The news is rife with stories of corporations and other organizations breaching contracts, both written and unwritten, with employees. Business leaders may behave unethically but expect absolute honesty and high performance from subordinates. Companies may limit work hours or vacation days and other benefits while increasing workloads. Despite clearly defined ethical codes, guidelines, and mission statements that promote ethical and fair treatment of employees, many organizational leaders commit ethics violations that, in turn, affect employee motivation.

In general, perceptions of fairness and justice can have a powerful impact on employee work motivation. According to Colquitt, Wesson, Porter, Conlon, and Ng (2001), employees’ subjective perceptions of justice in organizational settings are classified into the following four types:

• Distributive justice relates to the fairness of outcome distributions.
• Procedural justice relates to employee perceptions of the fairness behind the processes of distribution.
• Informational justice describes the extent to which decisions that affect employees are accurately communicated.
• Interactional justice relates to whether employees perceive that they have been given a fair voice in decision making.

To prepare:

• Using the Walden Library, the Internet, and other news sources, research and select an organization that has been cited for either an ethics or a justice violation (Wells Fargo– articles attached)

Post by Day 4 a brief description of the (Wells Fargo)organization that you selected and the ethics or justice violation associated with the organization. Then, describe two factors that might have contributed to the ethics or justice violation. Choose which of these you believe the primary factor is and explain why. Then, explain how this primary factor might have influenced employee motivation.

• CanWellsFargoGetWell.pdf
• TeachingCaseWhatGetsMeasuedGetManaged.pdf

T O T A L R E T U R N T O S H A R E H O L D E R S (2006–2016 ANNUAL R AT E )R E V E N U E S P R O F I T S E M P L O Y E E S

WELLS FARGO 2016 COMPANY PROF IL E

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It was as if the bank had been infected by a virus—a bug that had transformed its retail unit into a hard-selling boiler room. Then scandal broke, followed by a reckoning. The question now is whether the 165-year-old company can heal its culture—and still wow shareholders.

$ 9 4 . 2 B I L L I O N $ 2 1 . 9 B I L L I O N 2 6 9 , 1 0 0 7. 5 %

CAN WELLS FARGO GET WELL?

25R A N K

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P H O T O G R A P H S B Y S P E N C E R L O W E L L

Wells Fargo CEO Tim Sloan rehearses for a company town hall in May at the Pasadena

Convention Center.

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Stumpf, then Wells Fargo’s CEO, was calmly telling a House committee that the scandal was “absolutely immaterial.”

In a narrow sense, he was right. The company would go on to earn $5.3 billion in the quarter following the scandal—and an- other $5.5 billion in the most recent period, ending in March— keeping intact a prodigious earnings streak that now runs to 18 consecutive quarters of profit above $5 billion, a feat achieved only by one other company in recent history: Apple. (See our chart on page 143.) Last year, Wells Fargo was the fourth-most- profitable company overall, trailing only Apple, JPMorgan Chase, and Berkshire Hathaway.

Bank deposits are up significantly, reaching an all-time high of $1.3 trillion. And the company’s stock has blithely followed suit, climbing 20% from its fleeting dip in October. So, yes, with the exception of the exit of Stumpf himself (who abruptly retired in October), an outsider would be hard-pressed to see any signs of “material” fallout from ghost-account-gate.

As former COO Tim Sloan, who replaced his old boss as CEO, told Fortune in May: “If we were to dial the time machine back to the summer of last year and say, ‘This is what’s going to hap- pen to Wells Fargo over the next six months: Could Wells Fargo continue to generate over $5 billion of earnings [per quarter]?’ I think it would be reasonable for people to say, ‘Well, that’s not gonna happen.’ But look what’s happened.”

Indeed. And yet, as Sloan candidly attests, there was significant

fallout from the scandal. Wells Fargo faces a lingering cost that the quarterly numbers don’t reveal. “From a reputational standpoint—how our customers feel about us, our team mem- bers, how other stakeholders feel about us—there was clearly some impact,” says Sloan, a soft-spoken 57-year-old Michigan- der who, before joining the C-suite, worked on the business- banking side of the company. Data backs him up. Perenni- ally ranked by its corporate peers as one of the World’s Most Admired Companies (it was No. 25 on Fortune’s 2016 roster of all-stars), Wells Fargo didn’t make the list at all this year. Like- wise, the bank’s ranking in Harris Poll’s latest survey of corporate reputations among the general public has plunged from 70th to 99th place among the 100 “most visible” companies, above only Takata, whose defective airbags have been implicated in several deaths, according to the U.S. government. It’s “the largest drop ever measured” in the reputation poll’s 18-year history, Harris says. Some cities, moreover, have deemed Wells Fargo so toxic these days that they have said they’ll refrain from conducting new business with the bank.

As this story was closing in early June, a federal judge in San Francisco was reviewing—and looked likely to approve—Wells Fargo’s proposed $142 million settlement of a class-action lawsuit brought by consumers over the phony accounts. Ad- ditional cases, including lawsuits brought by Wells Fargo employees, shareholders, and others, remain unresolved and could prove expensive. The company’s latest estimates of “rea- sonably possible” litigation losses range as high as $2 billion. Compounding the risk, federal and state prosecutors have been asking the company for information and could still decide to

WHEN NEWS of the Wells Fargo fake- accounts scandal broke this past Septem- ber, the company’s stock responded as it had for much of the year: It rose.

A U.S. congressman would soon label the bank “a criminal enterprise,” late- night television hosts would bash it merci- lessly, and plaintiffs would file lawsuits that the company recently estimated could cost it billions of dollars. Yet on that Thursday in September—as one of the stranger and more outrageous banking scandals in memory was being revealed to the world—Wells Fargo’s share price ticked merrily upward.

Investors merely yawned at the revela- tion that its employees had created as many as 2.1 million phony deposit and credit card accounts for unwitting custom- ers—a “widespread illegal practice,” in the words of the Consumer Financial Protec- tion Bureau, that provoked that govern- ment regulator to slam the bank with its largest-ever penalty, a $100 million fine; the bank also paid $85 million to settle with the Los Angeles City Attorney and the Office of the Comptroller of the Currency. Wall Street analysts were as nonplussed as investors; none of the 30-plus sages who cover the company—No. 25 on this year’s Fortune 500—issued any urgent reas- sessments. Even three weeks later, with little break in the scalding headlines, John

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bring criminal charges. All of this continues to hang over the 165-year-old stagecoach company and could further tarnish its once-wholesome reputation.

One measure of that concern—hollow though it may seem— was the shareholder vote at the company’s annual meeting in April, where several directors barely managed reelection despite the bank’s enviable profit streak. Chairman Steve Sanger received only 56% of the vote. “When you get just over half the vote and you’re running unopposed, something is wrong,” says Charles Elson, a Wells Fargo shareholder and director of the University of Delaware’s John L. Weinberg Center for Corporate Governance. “The board needs to be refreshed. Everybody who’s been there more than five or 10 years should go.”

Sloan, to his credit, has taken on the challenge with gravity

and even some urgency. “We’re focused on remediating and fixing everything that we’ve broken, and then also building a bet- ter company over time,” he tells Fortune, emphasizing that the first task on that list is to rebuild trust with employees and cus- tomers: “It’s much more important for us to make sure we’ve got the right team mem- bers in place, motivating that team, and cre- ating that culture than it is for us to focus first on our investors,” he says. At least for now, Wells Fargo’s biggest and most famous shareholder, Warren Buffett, has declared his faith in the company, with Buffett’s

BRANCH MANAGERS WERE TOLD THEY’D END UP “WORKING FOR MCDONALD’S” IF THEY MISSED SALES QUOTAS.

Former CEO John Stumpf waits to

testify before the Senate Com- mittee on Bank-

ing, Housing, and Urban Affairs on Sept. 20, 2016.

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Fargo’s board in the wake of the scandal. For example, the bank’s branches weren’t called “branches”; they were “stores.” When employee turnover reached 41% in one 12-month period—worryingly high for a bank—managers reasoned that the number was normal for a retailer and thus no cause for concern. But high turnover meant many employees were extremely in- experienced—which became a compound- ing problem when it came to hawking additional banking services to customers.

“Cross-selling,” it’s called, and virtu- ally all banks want to do more of it. Once a customer opens a checking or savings account, maybe he or she would also like an auto loan or overdraft protection or a credit card. The more products a customer has with a bank, the more money the bank makes and the less likely the customer is to leave. That’s why all banks cross-sell. But arguably no bank has ever done it with the fevered intensity of Wells Fargo.

The obsession with cross-selling dates back to Wells Fargo’s 1998 acquisition by Minneapolis-based Norwest, whose CEO, Richard Kovacevich, adopted the more prestigious Wells Fargo name for the merged business. He urged employees to “Go for Gr-eight,” achieving an average of eight banking products per customer. This seemed an insanely ambitious goal; at most banks the average was two or three. But Kovacevich stuck with it. So did Stumpf, a Norwest banker who ran the re- tail bank before succeeding Kovacevich as

Berkshire Hathaway apparently holding on to most of its 500 million shares.

Key to fixing Wells Fargo is understand- ing how it got broken in the first place. “How could it be such a successful bank and get into such deep trouble?” asks Harvard Business School professor Bill George, a Goldman Sachs director, former Medtronic CEO, and Wells Fargo customer and shareholder. How could so many smart people have been so wrong for so long?

It’s a critically important question, and Fortune spent several months trying to shed some light on the answer. The ending for this case study has yet to be written and may not be for some time. But the story so far does offer some sobering takeaways.

One of those is a lesson for every com- pany. Harvard’s Bill George sums it up well: “No one can say this can’t happen to us.”

E VERY TALE of corporate scandal be- gins with culture—and Wells Fargo’s culture, at least in one prominent seg- ment of the company’s business, made

it the kind of place where frontline employ- ees could feel ungoverned and libertine enough to fabricate millions of customer accounts. It also created an environment where such behavior could be concealed, minimized, and willfully ignored by higher- ups. But the story is hardly that simple. The culture’s worst features were also, in their more benign forms, key to the bank’s knockout success, transforming it from America’s No. 9 bank in the late 1990s, operating mostly in California, to the coun- try’s most valuable bank for a time—and even, in 2015, the most valuable bank on earth, ahead of Industrial and Commercial Bank of China. Today it’s No. 2 globally, behind only JPMorgan Chase.

That dichotomy wasn’t everywhere at Wells Fargo—but it was central to the ethos at the company’s retail banking unit, known internally as the Community Bank, which is the company’s biggest, most prof- itable segment as well as its public face.

Leaders there didn’t think of themselves as bankers providing services but rather as retailers selling products, and they “regu- larly likened the retail bank to nonbank retailers,” says the investigation report of a special committee set up by Wells

Carrie Tolstedt, the former head of the retail bank, “did not like to be challenged or hear negative information,” concluded a Wells Fargo investigation, conducted in the wake of the scandal.

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WELLS FARGO QUARTERLY NET INCOME

AVERAGE NET INCOME FOR S&P 500 BANKS EXCL. WELLS FARGO

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$1.3 BILLION

Q4 2012 Q1 2017 SOURCE: S&P GLOBAL

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CEO. And so did Carrie Tolstedt, another Norwest banker whom Stumpf considered “the best banker in America.” She ran the retail bank from 2007 until the company announced her retirement at age 56, six weeks before the scandal became pub- lic. “Go for Gr-eight” remained the retail bank’s stated goal until last year. One result of this hard-charging sales culture was that Wells Fargo became the envy of the industry, achieving towering dominance in products per customer: an unheard-of 6.1, vs. an industry average of 2.7. Bankers everywhere wondered how they did it.

Every managerial program has a life span. Employees eventually figure out how to game the program, or the environment changes and it no longer serves a use- ful purpose, or it accomplishes all it can accomplish. All those things happened with “Go for Gr-eight.” But senior leaders seemed oblivious to these limits, and as the program intensified over many years, they did little to rein it in. Whenever a note of caution rang, the company’s Kafkaesque bureaucracy stifled effective action.

An early warning appeared in the spring of 2002, when practically all the employees

of a Colorado branch jointly gamed the program in an effort to meet sales goals, including by issuing debit cards that custom- ers didn’t ask for. The board report explains that firing everyone as required by federal law would have left the branch virtually empty, so Wells Fargo arranged a regulatory exception that allowed some lower-level workers to stay. Everyone else in the branch retired or was terminated.

Such behavior—opening accounts or issuing products that customers didn’t ask for—was and is against the rules at Wells Fargo, and when the bank found employees doing so, as it increasingly did after 2002, it would fire them. Senior leaders believed they were thus addressing the problem. But unethical employees weren’t the cause of the dysfunction; they were mostly an effect of it. The problem was targets that couldn’t possibly be met and a high-pressure sales culture that made the typical car dealership seem like a meditation retreat.

Many sales organizations report results every month or week. Wells Fargo branch managers in some regions had to report sales data every hour in calls with district managers. Branch manag- ers therefore leaned heavily on their staff to sell. Even tellers were supposed to sell products, in some cases at least 100 per quarter. Individual employees were constantly and publicly ranked against one another, as were branches, districts, and regions. At every level, from tellers up through district managers and their bosses, those who beat sales targets were celebrated, and those who didn’t were publicly humiliated, sometimes demoted, and occasionally fired.

Training in “questionable sales practices was required or you were to be fired,” a former employee tells Fortune. “We were con- stantly told we would end up working for McDonald’s” for not meeting quotas, a former branch manager told the Los Angeles Times in 2013; another former branch manager said employees “talked a homeless woman into opening six checking and savings accounts with fees totaling $39 a month.” That newspaper article sparked an investigation by the Office of the Los Angeles City Attorney, leading eventually to the actions brought by that office and the others that were settled last September.

“Managers constantly hound, berate, demean, and threaten employees to meet these unreachable quotas,” the Los Angeles suit alleged. “Managers often tell employees to do whatever it takes to reach their quotas. Employees who do not reach their quotas are often required to work hours beyond their typical work schedule without being compensated for that extra work time, and/or are threatened with termination.”

The message was clear to everyone in the retail bank: “The route to success was selling more than your peers,” the board’s in- vestigation found—not profitability or customer satisfaction, but simply selling more products to each customer. Everyone knew the goals were sheer fantasy for many branches and employees. At some branches not enough customers walked in the door, or area residents were too poor to need more than a few banking products. Bank leaders called overall quotas “50/50 plans” be- cause they figured only half the regions could meet them. Yet no excuses were tolerated. You met the quotas or paid a price.

The predictable result: fake accounts. Employees began issuing unrequested credit cards to existing customers or opening ad-

H E A L I N G I T S C O R P O R AT E C U LT U R E

MAKING BANK

Wells Fargo has posted 18 straight quarters in which net income topped $5 billion—a streak surpassed by only one company in recent history: Apple. Over the past 15 months, just one of Wells Fargo’s banking rivals—JPMor- gan Chase—has outpaced it in profit.

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who reported only to Tolstedt. The HR de- partment regarded employee bad behavior as an issue of training, incentive compen- sation, and performance management. The internal investigations and audit depart- ment looked for problems but didn’t pro- pose solutions; ditto the sales and service conduct oversight team. The law depart- ment’s employment section focused mainly on litigation risks from firing employees.

These are only a minor fraction of the individuals, offices, committees, boards, departments, groups, task forces, and teams that examined sales problems in the retail bank. Each concerned itself with its assigned slice of the issue; no one looked for the root cause or envisioned big- picture consequences. “Bureaucracies love to lie to themselves,” says University of Michigan leadership authority Noel Tichy. “The hardest thing is to get a bureaucracy to be honest.”

A T THE TOP of this bureaucracy was Stumpf, whose tepid response to information that should have trig- gered loud alarms is one of the most

striking features of the scandal. Internally reported cases of sales gam-

ing rose from 63 in 2000 to about 680 in 2004. In the second quarter of 2007, com- pany bosses received 288 allegations of em- ployee sales misconduct; that figure soared to 1,469 in the fourth quarter of 2013. Yet when Stumpf was told that the retail bank was firing 1% of its employees every year

ditional deposit accounts with fake email addresses (such as “noname@wellsfargo .com”) so the customer would never know. A slightly safer tactic was to open ghost accounts for friends and family. The board’s investigation found a branch manager who had a teenage daughter with 24 accounts, an adult daughter with 18 accounts, a husband with 21 accounts, a brother with 14 accounts, and a father with four accounts.

That was more than bad enough, but an even worse cultural problem was what happened higher up: nothing. Or at least nothing effective. As signs of trouble mounted alarmingly for years, top leaders consistently underreacted. The reasons were several, none of them unique to Wells Fargo or to banking.

Ever since the Norwest takeover, the company had maintained a strong tradition of deference to the leaders of each business unit, who were urged to “run it like you own it.” Kovacevich called himself a “CEO of CEOs.” The theory was that everything, including risk management, worked better when decisions were made closer to the customer. Tolstedt, the retail banking head, was therefore expected to take full charge of any problems in her business, and the guiding standard of deference meant she was not pushed hard on the phony- accounts problem until late in the game.

That culture proved particularly trouble- some with Tolstedt at the helm because she was “insular and defensive and did not like to be challenged or hear negative information,” the board’s investigation concluded. “Even senior leaders within the Community Bank were frequently afraid of or discouraged from airing contrary views.” (Tolstedt has not spoken publicly since leaving the bank, and she did not respond to an interview request from Fortune conveyed through her lawyer. When the board issued its findings, her lawyer said, “We strongly disagree with the report and its attempt to lay blame with Ms. Tolstedt. A full and fair examination of the facts will produce a different conclusion.”)

Compounding the problem was a dysfunctional second line of defense: a corporate bureaucracy so sprawling that all its elements could plausibly evade full responsibility for the scandal. For example, the corporate chief risk officer had no authority over the retail bank’s risk officer,

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CEO Sloan at the May 16 Town Hall in Pasadena. Recently he refocused the retail bank’s incentive plan to reward employees for higher customer satisfaction, not product sales.

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as chairman and chief executive on Oct. 12. With the board’s explicit support, Sloan has since made broad

organizational changes that are the infrastructure for culture change. Even before the scandal became public (but while the settlements were being negotiated), he had orchestrated Tolstedt’s retirement and her replacement by Mary Mack, who was running the brokerage business and who had come to Wells Fargo in its 2008 takeover of Wachovia. On Jan. 1 he instituted a new incentive compensation plan in the retail bank that pays employees on the basis of customer satisfaction and achievement of team goals, among other measures, but not product sales goals. The branches aren’t “stores” anymore; they’re branches. No one in the company gets evaluated on products per customer, and after almost 20 years, the company no longer reports that number to investors.

Repairing a critical structural error, Sloan has fully central- ized the risk and HR functions, so the leaders of those depart- ments in the business units now report to their corporate chiefs without even a dotted line to the business unit head. He consolidated much of the vast risk-control bureaucracy into a new office of ethics, oversight, and integrity, accountable to the board’s risk committee. In February the board fired four more retail bank executives for cause, and in April it clawed back an additional $47 million of Tolstedt’s pay and an additional $28 million of Stumpf ’s.

All of that needed doing before Sloan could finally start the culture-change project in earnest. He knows that culture doesn’t come from policy; it comes from leaders’ day-to-day behavior, and it cascades. What will he ask of his direct reports? Who will get promoted? How will frontline workers be evaluated, pro- moted, paid? Crucially important: What will happen when an employee calls the ethics hotline?

“With 269,000 employees, it’s inevitable that there are some who will lie, cheat, and steal,” says the University of Michigan’s Tichy. “The question is what the leaders will do to discourage it, discover it, and deal with it.” Every employee will be watching for the answers.

In trying to change its culture, Wells Fargo holds an advan- tage over most big, old, successful companies. As an amalgam of many banks, it doesn’t have a deeply rooted, oak-strong culture like, say, General Motors had when CEO Mary Barra launched her culture-change effort after the 2014 ignition- switch scandal. With Norwesters Stumpf and Tolstedt gone, and the main elements of the Norwest model—extreme decentralization and “Go for Gr-eight”—purged, Sloan faces an opportunity to create something new: a strong, companywide, uniquely Wells Fargo culture.

It can’t happen quickly. “It takes years to behave your way out of a problem like this, to become the company you dream of becoming,” says Douglas Conant, who transformed Campbell Soup’s culture and rescued the company in the early 2000s. Wells Fargo today doesn’t need rescuing, just fixing—and it needs someone to instill the right culture. If Sloan remains CEO until he’s 65, and remembers that culture is what he’s creating with his every act every day for the next eight years, he could do it.

for sales integrity violations, he saw it as excellent news because it showed that 99% were following the rules. He reiterated the point in an email to Sloan: “Do you know only around 1% of our people lose their jobs [for] gaming the system, and about 2/3 of those are for gaming the monitoring of the system, i.e. changing phone num- bers, etc. Nothing could be further from the truth on forcing products on custom- ers. In any case, right will win and we are right. Did some do things wrong—you bet and that is called life. This is not systemic.” (Stumpf, through his lawyer, declined a request for an interview.)

Just as Stumpf and nearly everyone else focused too narrowly when looking inward (“This is not systemic”), they also focused too narrowly when looking outward. They figured, correctly but narrowly, that direct financial harm to customers from sales gaming in the form of unwarranted fees and penalties was insignificant in Wells Fargo’s overall results. But no one seems to have envisioned the reputational threat— specifically, to have imagined how news media and social media would react to the words “2 million fake accounts.”

Which brings us to Sept. 8, 2016, when Wells Fargo announced it would pay $185 million to the City of Los Angeles, the Consumer Financial Protection Bureau, and the Office of the Comptroller of the Currency. The public response quickly made clear how badly the bank’s leaders had underestimated that announcement’s effect—even if shareholders were still mostly unalarmed.

As Senate and House committees sum- moned Stumpf to testify, executives and directors switched into crisis mode. “Tim [Sloan] really stepped up and grabbed the company by the collar even before John’s fate was determined,” notes David Car- roll, who runs the company’s wealth and investment management business. Within five days the company announced that all sales goals at the retail bank would be eliminated. By September’s end, the board had clawed back $19 million worth of stock awards to Tolstedt, denied her severance pay or a 2016 bonus, and determined that she should be fired for cause. It also rescinded—reportedly at the CEO’s own request—$41 million of unvested stock for Stumpf, who stepped down from his roles

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Teaching Case

“What Gets Measured, Gets Managed” The Wells Fargo Account Opening Scandal

Paul D. Witman School of Management

California Lutheran University Thousand Oaks, CA 91360, USA

pwitman@callutheran.edu

ABSTRACT Wells Fargo & Co.’s Community Banking unit had enjoyed a strong, positive reputation for decades. Wells Fargo, as a whole, had avoided most of the problems of the 2008 financial crisis, only to stumble into its own crisis in late 2016. The Community Banking unit was accused of opening millions of unauthorized accounts, firing employees for violating policy without addressing the root causes of those violations, and failing to detect and prevent these sorts of issues before they became widespread. Impact on consumers was widely varied, from new checking accounts that sometimes caused no significant impact, to new credit accounts that generated fees and caused negative impacts on consumer credit scores. How did the bank’s approach to information management contribute to this problem? What could the bank have done differently to detect, respond to, and prevent future instances of improper account opening? What does the bank need to do going forward to prevent future problems and regain customer trust? Keywords: Corporate governance, Information for decision-making, Risk management, Audit, Cross-selling, Ethics

1. OVERVIEW

Another key gauge of how we are satisfying the needs of our customers is how many products they have with us. In fourth quarter 2013, the average Retail Bank household had 6.16 Wells Fargo products, up from 6.05 in fourth quarter 2012. (Wells Fargo, 2014, p. 7) Wells Fargo Corporation CEO John Stumpf was often

cited as using the slogan “eight is great,” encouraging employees to get the average customer “product” count for a customer to eight (Garrett, 2016). “Products” in the Wells Fargo culture referred to all types of banking and credit accounts, as well as other services. More products translated into more information about the customer, which would in turn lead to higher profitability.

Wells Fargo Corporation is a large U.S.-based banking company with operations in consumer, business, and investment banking. Their branch banking operation (the “Community Bank”) has branches in over 35 states and, through the years 2010-2015, was one of the engines of perceived growth for the company. One of the key metrics that Wells Fargo tracked and reported was “products per household,” which they used as a way of tracking the breadth of their relationship with their customers. To help drive growth of this number, for each of its branch employees, Wells Fargo tracked the number of new “products” that person

opened for their customers, including ATM cards, savings and checking accounts, credit cards, mortgages, etc. Incentives and disincentives were tied to how well these branch employees performed in relation to their new product sales goals (Independent Directors – Wells Fargo, 2017).

It’s reasonable to ask, if profitability is the fundamental goal, why were Wells Fargo employees not directly measured on customer profitability? This question will be explored later in this case study. It’s also a good practice to ensure that metrics and incentives are properly aligned with corporate goals. Kerr (1995) notes that incenting particular behaviors, while expecting different behaviors, is both common and dangerous.

Wells Fargo’s organization structure, particularly related to the Community Bank, is shown in Figure 1. Note that

Figure 1. Wells Fargo Organization Chart (Wells Fargo Reports, as of September 2016)

Journal of Information Systems Education, Vol. 29(3) Summer 2018

131

the Community Bank had its own auditing and risk management units. Those had solid line (direct) reporting relationships to the head of the Community Bank and dotted line (indirect) relationships to their respective corporate units.

The long-term impact of this scandal is not yet clear. Immediate impacts included lower traffic in the bank’s branches and fewer new accounts and deposits from consumers. And, at least in the short term, large organizations have pulled their business from Wells Fargo’s corporate banking division. These include the states of California and Illinois, who froze their business dealings with the bank (Glazer, 2016). Some cities have also reduced or eliminated their business ties to Wells Fargo, in part because of the new account scandal, but also due to other concerns such as funding for socially unfavorable projects (Chappell, 2017).

Scandals don’t often appear overnight. John Stumpf’s predecessor created the phrase “eight is great,” doubling the number of products per customer that the bank hoped to sell (McLean, 1998). The “Jump into January” sales campaign, which particularly ramped up pressure in the first month of each year, started in 2003. Significant volumes of “bad behavior” didn’t start surfacing until 2011, and the scandal itself became fully public in 2016 (Independent Directors – Wells Fargo, 2017).

In addition to published reports, this case study includes comments from three former Wells Fargo employees (names changed):

• Lawrence, a teller with the Community Bank for five

months in 2015 • Bernie, who started as a teller and became a branch

manager for over five years starting in 2009 • Sam, an information technology executive with two

different banking units over an eight year period All three shared their perspectives based on the published

reports and their own experiences. All had left Wells Fargo before the story became public, and each separately expressed surprise that it had taken so long for the scandal to become public.

2. TECHNICAL AND BUSINESS BACKGROUND 2.1 Key Terms Key terms relevant to the case include banking, cross-selling, profitability, culture, ethics, incentives, risk, and metrics. Understanding these terms is important to grasping the impact of information and of decisions made by the various participants in these situations.

Banking: The banking industry is responsible for a variety of financial management functions, most fundamentally including taking deposits from customers for safe-keeping and earning interest and making loans to customers to support those customers’ financial needs (Investopedia.com, N.D.).

Cross-selling: The process of leveraging an existing relationship with a customer to attempt to provide that customer with additional goods and services. In banking, that often means opening additional accounts or providing additional services, like ATM cards, online banking, or financial planning (Investopedia.com, N.D.).

Profitability: At a corporate level, this refers to the overall balance between income and expenses. At the individual customer and business unit levels, profitability attempts to capture the same principle, but reflects the necessity in some cases to estimate the actual income and expense that are attributable to a specific customer or business unit (Investopedia.com, N.D.).

Metrics: These are measurable values pertaining to business operations that can be counted and reported on a monthly, weekly, daily, and even continuous basis. The objective of capturing and reporting metrics is usually to help the organization focus on accomplishing goals that its management has deemed to be important to achieve, including high-level goals of revenue and profitability, as well as finer- grained goals related to things like customer service, sales results, etc. (Investopedia.com, N.D.)

Culture: Corporate culture refers to the beliefs, values, and behaviors that govern how employees of a company interact with each other and with outsiders, including customers and suppliers. Sometimes this is explicitly documented; more often at least some aspects of a corporate culture are tacitly defined, but not explicitly documented (Tayan, 2016).

Ethics: A system of moral and social principles that in business are used to guide interactions among employees and between employees and other stakeholders, such as customers (Investopedia.com, N.D.).

Incentives: In managing employee behavior, incentives are often used to encourage or discourage particular behaviors or results. Done well, incentives support positive aspects of corporate culture and encourage behaviors that lead to positive business outcomes (Kerr, 1995).

Risk and risk management: Risk refers to the uncertainty of various events happening – both good and bad. Most commonly, risk management focuses on “downside” risk – the risk that unfavorable events or results will take place. In banking, this takes a number of forms – risk of fraud, risk of borrowers not paying back a loan, etc. Risk management includes the tasks of identifying risks, estimating probabilities of occurrence, and determining likely impacts. It also includes the function of identifying and assessing steps that might mitigate either the risk of occurrence or of the impact (Investopedia.com, N.D.). 2.2 Rationale for Product Sales Goals Sam, the IT executive, said that Wells Fargo had an intense corporate focus on sales and especially cross-selling, referring to that as Wells Fargo’s “sacred cow.” He pointed out that even the IT organizations were part of the process, as the IT systems were required to capture and report sales-related metrics.

The Community Bank had a somewhat arbitrary goal of eight products per customer. (For the purposes of this case study, products and accounts are used somewhat interchangeably, with products being a more general term that includes ATM cards, online banking, and other services.) The rationale for this target is shown in Figures 2 and 3, below.

Figure 2 indicates that the propensity of customers to add new products goes up the more products they have. So more products are a self-sustaining path – if customers join the bank and can be persuaded to add more products, that increases the chances that they’ll add even more products in the future (Tayan, 2016).

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Figure 2. Products per Customer vs. Future Purchases

(Tayan, 2016, p. 8)

But in the larger picture, why are more products a good thing? It appears that customers with more products are more profitable to the bank, as shown in Figure 3. The base level of profitability, a customer with three products, is profitable to a certain extent. A customer with five products, though, is believed to be three times more profitable than the three- product customer.

There are many reasons for this effect. For example, customers with more accounts tend to be “stickier” and stay with the bank longer, so the bank doesn’t need to spend marketing dollars to replace them. In addition, customers with more products tend to give the bank a higher “share of wallet” so that the bank can earn additional revenue on those deposits or loans (Witman and Roust, 2008). Finally, the additional information provided by the products gives the bank better information with which to make decisions on how to interact with the customer.

Figure 3. Retail Banking Profit per Customer

(Tayan, 2016, p. 8) 3. TIMELINE OF EVENTS

3.1 The Scandal Becomes Public In September of 2016, it was revealed that Wells Fargo employees had been systematically opening new accounts that customers had not authorized. In many cases, the accounts were opened and then closed a few days later, but often the accounts stayed open for weeks or months, and often without the customer’s knowledge. Wells Fargo announced a

settlement with two federal financial regulatory agencies and the City of Los Angeles and agreed to a penalty of US$185 million.

This practice of creating accounts to meet key metrics conflicted with systems that the bank itself had put in place to prevent this type of issue:

• Customers were to be notified when new accounts

were opened for them. o In many cases, employees would modify the

notification address and phone information so that the customer would not be alerted.

• New deposit accounts needed to have funds deposited into them for the accounts to stay active. o Employees would often move funds to those

accounts temporarily, then move the money back. Many customers didn’t notice the opening of the accounts or the funds movement on their statements. This was a practice known as “simulated funding.”

• Auditors reviewed new accounts periodically. o However, access to records by corporate-level

auditors was limited by the Community Bank management.

The bank also had systems in place to measure results,

often in terms of new accounts opened, at the staff member, branch, and regional levels. And while simply measuring and reporting results can affect behavior, Wells Fargo also had strong management motivations in place aimed at reinforcing the task of meeting or exceeding the metrics. The metrics were deliberately tough to meet, referred to as “50-50” goals, with senior managers expecting that only 50% of branches would be able to meet the goals.

Bernie, the former branch manager, said that his branch goals were clearly tough to meet – the goals had been set based on prior year results, which included a one-time increase in branch activity. In addition, each of his two personal bankers (a rank above teller) had a goal of 8 product sales per day, but the branch’s goal was for 25 sales per day – 9 more than his two personal bankers were expected to produce. When he asked, he was told to “figure it out” – meet the numbers “without regard” to other considerations.

Individual personal bankers were assessed by their managers, usually several times per day, on how many accounts they had opened that day, that week, and that month. Lawrence said that tellers were measured on their compliance with scripted talking points and metrics for referrals for product sales. Their results were compared to their individual goals and their contribution to the branch’s goals. Meeting or exceeding goals might be rewarded with cash incentives of $250-800. But failing to meet goals was often met with threatened and actual penalties – demotion and termination among them, primarily for personal bankers (the lowest-level staff), but also for branch managers and others up the management chain.

Measurement and incentive programs continued up the organization chart to include the branch and regional management teams. They would have weekly, sometimes daily, conference calls to check on results, and it was important to the managers to have good numbers to report. Further up the organizational chain, though, at the senior

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management levels, incentives were tied less to the immediate achievements and more toward longer-term results. 3.1.1 Ethics rules: The bank had ethics rules in place that could and should have prevented the actions in this scandal (Tayan, 2016). Indeed, the first statements from the CEO, John Stumpf, just days after the scandal broke in September 2016, indicated that the problem was employees who didn’t live up to the bank’s culture and ethical standards: “if they’re not going to do the thing that we ask them to do – put customers first, honor our vision and values – I don’t want them here” (Glazer and Rexnode, 2016).

In addition to the bank’s ethical standards (their Code of Ethics and Business Conduct), the bank provided a hotline for employees to call to report ethical concerns. The company’s 2015 annual report notes that “We require all team members to adhere to the highest standards of ethics and business conduct” (Wells Fargo, 2015), and employees are encouraged to call the EthicsLine anonymous tip line to report suspected ethical violations (Independent Directors – Wells Fargo, 2017). Bernie’s experience flew in the face of this statement; he said that his experiences with Human Resources led him to believe that HR leaned more toward meeting the goals than doing it ethically. 3.1.2 Egregious abuses: Between 2011 and 2016, Wells Fargo terminated many people for failing to meet goals (amounting to 1% of its workforce every year). Wells Fargo terminated an additional 5,300 of its 110,000+ employees for abusing the account opening process. In addition, in some cases it is alleged to have terminated (often on fake charges) and “blacklisted” employees from the financial industry if the employee had complained about the sales goals or made allegations of improper conduct (Associated Press, 2017). Yet it did not change the fundamental measurements that seem likely to have triggered the misbehavior by those employees. 3.1.3 Business value: Wells Fargo, as part of its annual reports, told its shareholders that having many accounts with each household would ensure that it would be the “primary” bank for that household, and thus have a strong and long- lasting relationship. In many cases, though, because so many of these accounts and products (a total of at least 3.5 million new accounts over 6 years (Stempel, 2017)) were never used, and often charged no fees, the bank found itself spending staff time to open the account, to cover up the opening, to fund the account, and perhaps later to close the account. And if a customer noticed an issue and complained, bank staff would spend time to resolve the issue and perhaps compensate the customer by reimbursing any fees paid.

Bernie recounted a conversation with a state-level executive who touted the sales of over 1 million products during a particular reporting period, and that about 250,000 were still open at the end of that period. This indicates that around 75% of the products sold had not been kept by the customers.

The net effect of these fraudulently opened products was generally not a financial gain for the bank, but merely a win for staff metrics and shareholder reporting. The reported total fees claimed by the bank related to these fraudulent accounts was only $2.6 million. Even the credit card accounts, which often had fees associated with them, were worth relatively

little revenue to the bank if the consumer did not actively use the card. As a result, the bank’s incentive system seems to have provoked behavior that was not beneficial to any of its stakeholders – customers, employees, management, or shareholders. 3.2 Elements of the Scandal 3.2.1 Sales pressure: Branch staff, both tellers and personal bankers, many of whom earned near the minimum wage, were often under significant pressure to “sell” products – to open new accounts or provide new services. This pressure came not just in the form of the potential for earning incentives, but also in pressure from managers to produce or risk losing their jobs.

All branch staff, and particularly personal bankers, were viewed to a great extent by the bank as sales people, responsible for “selling” a certain volume of new products in a particular time period. Branch, district, and regional managers would often hold conference calls on a daily or more-frequent basis to check on the progress against that day’s goals, increasing pressure on the line employees.

As an example, one Wells Fargo customer had two accounts opened, one for each of his two great-grandchildren. Some years later, the account owner discovered a total of twelve accounts, rather than the original two, with ten of the accounts empty and dormant.

Not surprisingly, competition even without explicit incentives can be a strong motivator. Shelley Freeman was the Lead Regional President for Florida from 2009-2013. She went a step further to add pressure, routinely exhorting her staff to do better by calling out her region’s performance relative to the other regions, and encouraging them to do what it takes to be ranked first among the Wells Fargo regions.

• Why would something as simple as a conference call be perceived as raising pressure on staff, particularly to do things that are disallowed by the corporate ethics policies?

• How could senior managers better balance the importance of meeting sales goals with the importance of doing quality work and meeting ethical standards?

3.2.2 Employee turnover rates: One common indication of an organization’s health is the rate of staff turnover – how many employees are leaving an organization in a given period of time. Employee departures can be for a number of reasons: resignations, firings for failure to meet quotas, firings for failure to comply with ethics rules, geographic moves, staffing level adjustment, and others. Most critical in this case is the number of staff departures due to resignations and due to failure to meet quotas or to comply with ethics rules.

Bernie commented on the high turnover rate as a common phenomenon at Wells Fargo. He also noted that turnover allowed his rapid ascent in the organization – from teller to service manager in just 18 months.

When the scandal became public in 2016, Wells Fargo reported that over 5,300 employees had been terminated for failure to comply with corporate ethics rules (specifically, customer consent requirements). Only nine of these terminations were for management staff above the branch manager level. The rates of these types of terminations varied by region, with California, Arizona, and Florida ranking highest in terms of numbers of allegations of violations and in

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terms of numbers of resignations or terminations due to those violations. Wells Fargo recorded information about the stated reason for each departure so that it had a way to count how many departures were related to ethics issues or to failure to perform up to standards.

• When do employee departures represent a problem for a company? What criteria could have enabled Wells Fargo to detect this symptom of the problem and see the bigger issue it represented?

• If you were in charge of Human Resources at Wells Fargo, what type of data would you want to be reported so that you could detect this or similar problems?

3.2.3 “Jump into January” and 1Q sales goals: In 2003, Wells Fargo’s Community Bank created its “Jump into January” sales campaign to help start sales off strong in the first month of the year. Daily sales targets were set higher in January, and management emphasized these higher goals and rewarded staff who were able to meet them. Staffers reported that they were asked by managers to identify friends and family for whom they might open accounts in January. They also reported that they frequently “sandbagged” – holding back accounts they could have opened in December, so that they had more new sales to start with in January (Independent Directors – Wells Fargo, 2017, p. 21).

Senior managers at the bank observed the risk that the Jump program created in adding more sales pressure to the first month of the year. However, Division President Carrie Tolstedt was reluctant to end the program because she was “scared to death” that such a change would impact sales throughout the year (Independent Directors – Wells Fargo, 2017, p. 25). Instead, in 2013, she replaced Jump into January with a new program called “Accelerate,” which ostensibly focused more on customer experience and spread the measurement out beyond January to the first three months of the year. However, some employees viewed “Accelerate” as more of a name change and a longer time span, but no real change in direction or methods from “Jump.”

• Is sandbagging a problem in and of itself? Does the act of moving a legitimate sale from one month to another constitute a problem? Why or why not?

• Are there advantages to starting off a measurement period with strong numbers? How could the advantage of a strong start help to manage performance throughout the entire time period? Are there disadvantages as well?

• What could the bank have done instead to start the year off strong without creating undue sales pressure?

3.2.4 Selling to family members and staff: Many Wells Fargo staff members, in the push to meet daily quotas, would often open accounts in the name of friends or family members. As noted previously, idle accounts often had little direct and immediate impact on the account holder, as long as there were no fees. As one example, cited by the board’s investigative report, “a branch manager had a teenage daughter with 24 accounts, an adult daughter with 18 accounts, a husband with 21 accounts, a brother with 14 accounts, and a father with 4 accounts” (Independent Directors – Wells Fargo, 2017, p. 36).

This highlights the pressure not just on line employees, but on managers as well.

Both Bernie and Lawrence reported accounts being opened for them without their consent. Lawrence had four unauthorized accounts, including a credit card, before he left the bank after five months. The credit card was intercepted or sent to an incorrect address, as he never received it. Bernie had five products, including credit protection services with a monthly fee. He noticed that each month a personal banker would manually credit the monthly fee back to his account.

The relatively higher targets of the “Jump into January” campaign seemed to provoke some of this behavior, with employees stating that they were asked to identify friends and family for whom they could open accounts as soon as January began. In addition, friends and family were a relatively easy sales target for many employees throughout the year. It was also alleged that at least one district-level manager taught employees how to hide the family relationship in the online systems that the bank used to try to detect such activity.

• Was this behavior really “wrong”? What if the family members agreed to these new accounts? Does it violate reasonable ethical standards?

• What additional controls could Wells Fargo have used to detect and respond to family-based account openings?

• What characteristics of the new product sales metric provoked selling to family and friends?

3.2.5 Selling to vulnerable populations: Part of the role of a regulatory system is to protect vulnerable members of society from abuses by powerful entities, like corporations. In incenting its staff to open accounts to protect their own jobs (and management’s), Wells Fargo arguably triggered behaviors that were particularly egregious. Wells Fargo staff reportedly went beyond opening accounts for family members. In many cases, they “sold” an account as requiring a different type of account to go with it, or added additional accounts to a new customer’s records after the customer had left the bank office. Often, this behavior took place with customers who were not native English speakers or who were elderly. Some of these new accounts were “harmless” – no fees or direct impact to customers. But multiple accounts, particularly unused credit lines, can have a negative impact on a credit report and can be an avenue for fraud and other risks (MyFICO.com, N.D.).

At some branches, Wells Fargo employees reported that they would routinely go out to locations frequented by day laborers and pay each of them a small sum to come back to the bank branch and open accounts (Payne, 2017). The laborers often spoke little English and did not understand what they were signing up for. In many cases, this exposed the laborers to monthly or annual fees and other obligations to the bank. If the laborers were undocumented, this could also have increased their immigration enforcement risk.

• What information could Wells Fargo have captured (or would you expect it already had) that could have helped it to detect this issue?

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3.2.6 Funding rates: Numbers of new accounts were one target metric, but Wells Fargo seemed to have recognized that an empty or unused account was likely not a particularly profitable one. The bank had controls and metrics in place that periodically measured what they called the “funding rate” – the percentage of new accounts that showed some evidence of being used by their owners. Most commonly, for deposit accounts, this was measured by the percentage of accounts that had money moved or deposited into them and for that money to remain there for a period of time (Independent Directors – Wells Fargo, 2017, p. 21).

There are certainly reasons why a customer might open an account and then not fund or otherwise use it. The bank might have offered an incentive of some sort to open the account or the account might have been created for a future need. However, the bank used this metric, across the bank and by region, to assess the “quality” of its sales. Lower funding rates generally indicated lower quality of sales.

The bank noticed that its funding rate was significantly lower in some parts of the country than in others, and that the funding rates had declined over time, even as far back as 2012. Bank staff were also reported to have “simulated” funding of an account by moving funds from another of the customer’s accounts for a short period of time, and then moving the money back.

• What metrics might be applied to other “products” to ensure that they were being used? Consider products like ATM cards, debit cards, and credit cards?

• How could the bank have detected these “simulated funding” incidents?

• How could the bank have responded to the reduced funding rate?

3.2.7 Metrics tracking and changes: Based on its fundamental target of eight products per customer, Wells Fargo relied on the relatively simple target metric of counting the total number of products sold to each customer, averaged over the customer base. This metric was advanced by encouraging new sales of products to existing customers on the assumption that additional products would bring the bank more information about each customer as well as a larger “share of wallet” (proportion of the customer’s total banking business).

While these metrics worked for several years (at least 1998 to the mid-2000s), the evidence that they began to break down started to appear in 2005. More serious issues became visible in specific regions with particularly strong pushing of the sales goals. Ultimately, the scandal emerged with the revelation of millions of unauthorized accounts and thousands of employees fired for improper activity, with many more fired for failing to meet sales goals or, allegedly, for raising ethical concerns.

Wells Fargo measured not just product sales, but also tried to incorporate some assessment of product profitability. For example, Bernie noted that a home equity line of credit (HELOC) counted for a much higher score than a standard checking account. He also noted that he had observed personal bankers selling HELOC accounts to people who had very recently bought homes. The home would likely have little accumulated equity, and the account would likely be closed soon after, but the banker got “credit” for the HELOC sale.

In January of 2017, Wells Fargo announced their new metrics and incentives program which eliminated specific sales quotas. The incentives also focused on customer satisfaction, was more team-based (at least for entry-level staff), and carried more of an oversight function to ensure proper behavior. Wells Fargo hoped that this new incentive program would encourage the correct behaviors while discouraging the bad behaviors that precipitated the scandal.

Figure 4. Wells Fargo Incentive Metrics Compared

(Wells Fargo, 2017)

• What was wrong with just measuring sales and also holding employees to a high ethical standard?

• Do you think the immediacy of the prior incentive system (immediate credit for each sale) contributed to the problems? What value does it add to delay the recognition of a sale? What risks does that delay add?

• What do you think about Wells Fargo’s new metrics? What are the pros and cons of these new metrics relative to the corporate goals of high ethical standards AND high profitability?

3.2.8 Bypassing customer controls: Most banks have controls in place to help prevent fraud of all types, both internally- and externally-generated. Often, this includes automatic notification to customers of changes in their accounts or other services. But here again, Wells Fargo staff appear to have found ways around these controls. In some cases, they were reported to have used the e-mail address “noname@wellsfargo.com” to sign a customer up for online banking services (Egan, 2017). Many banks also notify customers of changes via e-mail and/or via paper mail to their home addresses.

• What data could Wells Fargo have examined to identify potentially false or misleading e-mail addresses or other notifications?

• Thinking unethically for a moment, if your employer did notify customers of changes in their accounts, how could you prevent the customer from being aware of the change?

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3.2.9 Audits and information access: Like all banks, Wells Fargo has a number of internal audit and risk management functions. In most cases, those departments report to executives in the corporate management structure, as well as to their respective committees on the Board of Directors. As shown in Figure 1, the Community Banking division had both an Audit and a Risk Management function. Each reported directly to the President of the Community Bank, and indirectly to their respective units in the corporate office. The corporate risk and audit leaders then reported to the board, giving the Community Bank stronger control of the raw data that eventually was seen by the board. This was an organizational decision that Wells Fargo made, and it carried both pros and cons with it.

The Chief Operational Risk Officer for the corporation, Caryl Athanasiu, did not view compensation issues or sales practices as her responsibility. She took a somewhat narrower view of risk, focusing on creating risk management programs and supporting individual business units only in the event of serious breakdowns. This obviously did not include the unforeseen reputational risk that the scandal ultimately produced (Independent Directors – Wells Fargo, 2017, p. 61).

In some cases, the Community Bank units leveraged that stronger control to remove information from reports to the Board. For example, in 2013, Claudia Russ Anderson, Community Banking Risk Officer, was able to convince Chief Risk Officer Michael Loughlin to exclude information about sales practices from a board report. Russ Anderson claimed that the report as written made the problem seem “so much worse than it is” (Independent Directors – Wells Fargo, 2017).

• Why is control of information flow fundamental to the problems that Wells Fargo experienced?

4. CLOSING QUESTIONS

The following questions are provided to spark additional thought and research into the information flows and management inside Wells Fargo. We hope to also invite consideration into how to use information more effectively to manage organizations, incentivize the right behavior, and detect inappropriate behavior in a timely manner.

• Why would the bank choose to measure its employees’ performance based on products per customer rather than measuring performance more directly on customer balances and profitability?

• How would you propose measuring the profitability of a particular customer? What data would you need to track? Think broadly! Could you measure the profitability impact of staff interactions with the customer? How?

• What information could Wells Fargo have used to resolve this issue before it was subject to a $185 million penalty?

• If you were running the Wells Fargo Community Bank, what results would you measure to ensure against such problems while still pushing for profitability?

• What ethical dilemmas did Wells Fargo create in their staff through their original measurement and incentive plan?

• What were some of the business (e.g., financial, management, marketing) failings of this measurement and incentive plan?

• If you view the raw measurements of “new accounts” or “new products” as pieces of data, what must be done to turn that data into actionable information, on which Wells Fargo can make informed decisions?

The following questions may require additional research:

• Did the employees have to undergo periodic ethical training?

• When employees called the EthicsLine to report ethical violations, what happened?

• When employees were fired for opening too few accounts, was there a fair process for this? Did employees sometimes complain that perhaps there were other issues involved? Were there any long-term impacts on those employees?

• Is it possible that firing some employees for failing to meet goals was done deliberately to create even more sales pressure? Or was the additional pressure an unexpected side effect of those firings?

5. CONCLUSIONS

This case study provides a detailed look at the information gathered and used in a real-world business setting. The behaviors of bank employees and managers can be examined in ways that help to understand how corporate culture can change over time, and how information management can contribute to that. It can also help to understand how the right metrics (data to gather), coupled with reporting and monitoring those metrics over time (turning that data into information), are critical to achieving and sustaining business results.

We encourage you to analyze each of the components of this case, to understand what could have gone wrong, and to identify ways to improve the likely outcome. No one is immune from making imperfect decisions, so it is important to understand how we are asking employees to make decisions, and whether we are getting the correct results.

6. ACKNOWLEDGEMENTS The author thanks the three Wells Fargo alumni who provided personal insights; his reviewers, including the anonymous reviewers; Barbara Witman and Robert Deuson; and the student reviewers for their helpful feedback.

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Egan, M. (2017, January 13). Wells Fargo Dumps Toxic ‘Cross-Selling’ Metric. CNN Money. Retrieved from http://money.cnn.com/2017/01/13/investing/wells-fargo- cross-selling-fake-accounts/index.html.

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Payne, P. (2017, May 15). Lawsuit: Petaluma Wells Fargo Employees ‘Corralled’ Day Laborers. The Press Democrat. Retrieved from http://www.pressdemocrat.com/news/6979097181/lawsuitp etalumawellsfargoemployees.

Stempel, J. (2017, May 12). Wells Fargo Bogus Accounts Balloon to 3.5 Million: Lawyers. Reuters. Retrieved from http://www.reuters.com/article/uswellsfargoaccountsidUSK BN1882UV.

Tayan, B. (2016, December 2). The Wells Fargo Cross-Selling Scandal. Closer Look Series, 15. Retrieved from https://www.gsb.stanford.edu/sites/gsb/files/publication- pdf/cgri-closer-look-62-wells-fargo-cross-selling- scandal.pdf.

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Wells Fargo. (2015). Annual Report. Retrieved from https://www08.wellsfargomedia.com/assets/pdf/about/inves tor-relations/annual-reports/2015-annual-report.pdf.

Wells Fargo. (2017). 2017 Performance Management & Rewards. Retrieved from https://www08.wellsfargomedia.com/assets/pdf/commitmen t/performance.pdf.

Witman, P. D. & Roust, T. (2008). Balances and Accounts of Online Banking Users: A Study of Two US Financial Institutions. International Journal of Electronic Finance, 2(2), 197-210.

AUTHOR BIOGRAPHY

Paul D. Witman is a Professor in Information Technology

Management at California Lutheran University and Director of the School’s Undergraduate programs in Business, Accounting, and Economics. His research interests include teaching cases, social networking for non-profits, information security, and electronic banking.

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