Thursday, September 15, 2016

Something to Know - 15 September (late)


Gary Varvel

As long as we are talking about DEPLORABLE, here is a prefect example of what is deplorable and who the deplorables are.   The person at Wells Fargo Bank who created the latest scandal is home free.  She ran the scam, but she leaves with stock and a vault full of money and no prosecution.   Those who followed her directions all, every one in the division, all got fired.   The Consumer Financial Protection Bureau (Lizzie Warren's idea) works for us and tries to make sure we do not get screwed over by the banks and shady money people.  What is also DEPLORABLE are all of the Republican law makers who attempt to defund and abolish the CFPB - that is really deplorable.  Which of the two major political parties seek to clean up this deplorable mess?:

http://www.nytimes.com/2016/09/15/opinion/in-wells-fargo-scandal-the-buck-stopped-well-short.html?emc=eta1&_r=0

The Opinion Pages | OP-ED CONTRIBUTOR

In Wells Fargo Scandal, the Buck Stopped Well Short
By SUSAN M. OCHSSEPT. 15, 2016

Wells Fargo is trying to clean up the mess created by its high-pressure sales culture, which drove employees to open millions of unauthorized accounts in the names of customers. Pledging accountability, the bank is paying restitution to customers who were charged for these sham accounts, reviewing its process controls, and — as it announced Tuesday — eliminating sales goals for its retail bank products.

In connection with the "widespread illegal practices," Wells Fargo has also fired 5,300 employees and managers, with one notable exception: the executive in charge.

Instead of bearing any responsibility for this scandal, Carrie Tolstedt, the divisional senior vice president for community banking who supervised the 6,000 retail branches where the wrongdoing took place, is retiring, taking with her millions in stock and options.

Wells Fargo was aware of the problems in the division when Ms. Tolstedt announced her retirement on July 12. The bank's sales practices have been under regulatory scrutiny since at least November. Further, the bank itself has been working to identify the affected customers and complicit employees.

Despite knowing about the widespread misconduct on her watch, Wells Fargo gave Ms. Tolstedt a glowing farewell. John Stumpf, the chief executive, called her a "role model for responsible leadership" and "a standard-bearer of our culture." Her compensation — more than $27 million over the last three years — has never been dinged as a result of these problems.

Further, Ms. Tolstedt continues to be employed at the bank through the end of the year. She stepped down only from her division role — getting out of the hot seat just weeks before the regulatory settlement was announced.

So, as in most banking scandals, lower- and midlevel employees face repercussions, but senior executives are whisked out of harm's way, with their reputations and full stock awards intact. For Ms. Tolstedt, that could be as much as $125 million.

Is it fair to blame the supervisor of 94,000 people for the actions of a small portion of them? Yes. First, illicit behavior involving thousands of people and two million fraudulent accounts cannot be dismissed as the work of a few bad apples. Systemic problems like this are exactly what top executives are supposed to address.

Second, the problems here stemmed from "cross-selling" — soliciting customers to buy multiple products — which Wells Fargo has promoted as the cornerstone of its retail business model. Ms. Tolstedt was charged with running that retail business during the five years these fraudulent practices took place, and has heard about them since 2013. A Wells Fargo spokeswoman said internal controls detected the behavior, and the response of the bank's managers was to significantly strengthen "training, monitoring, oversight and compensation structure."

How Ms. Tolstedt oversaw any reform efforts and why the behavior persisted for five years have not been explained.

Eight years after the financial crash, we are still not proficient at holding business leaders to account. From a legal standpoint, regulators are often playing a weak hand against executives, as it can be hard to prove direct culpability for a subordinate's actions. The authorities rarely name individuals in cases, choosing to focus on organizations instead. This can help change systems, but hurts the cause of accountability.

Banks have more latitude to enforce responsibility. After the 2008 crisis, improved "clawback" provisions allowed banks the option to recoup bonuses earned from fraud or excessive risk.

These penalties are not just about punishing one individual. Accountability at the top is essential to a healthy company culture. If leaders aren't held responsible for what happens in their divisions, principled employees lose faith that they will be treated fairly.

Mr. Stumpf did not address the likelihood that executives, including Ms. Tolstedt, might have their compensation clawed back, telling CNBC that there is a "board process" if that becomes a consideration. After whitewashing Ms. Tolstedt's departure, taking this corrective action — or explaining why it is unwarranted — would help restore the board's credibility. Expect the Senate Banking Committee to look into the issue at its hearing next week into the bank's misdeeds.

Wells Fargo has already started to address criticisms of its sales quotas and risk controls, but this is more than a process problem — this is a corporate culture problem.


Culture can feel amorphous, and it is always tempting to blame the systems; they are more tangible and easier to deconstruct. But the impact of corporate culture cannot be overstated. For example, sales targets exist in many industries — the key is how they are met. Intimidation, public shaming and micromanagement — as alleged by Wells Fargo employees — will create a culture of fear in which people think they must deliver at any cost.

Simply eliminating sales quotas will not magically turn fear into inspiration. It requires credible, vested leadership to foster the right culture. Banks have continued to grapple with culture issues since 2008. Wells Fargo once saw itself as the exception. Clearly, it isn't. To succeed, its repair efforts must lead with candor and accountability in the executive suite.

Those efforts may also get a boost from external forces, as calls grow louder for prosecutors to focus more on executives. Of course, that would require culture change in a different set of institutions, and must also be driven by accountability at the top.

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Juan
 

Donald Trump and the National Rifle Association  aid and abet violence.

- An American Story

A half-dead Clinton is always better than the brain-dead Trump



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