Page 33 - Wells Fargo Bank (C) Teaching Note

For John Stumpf the question really boils down to:

“You fired 5,300 people,” he said at the hearing.
“You took 5,300 good Americans and turned them

into felons.” It is time, he concluded, to break up the

big banks.” (See Case Study ref. 7)

So, what went wrong at Wells Fargo to wreck a business

model that had been so successful for so long?

The answer may simply be the hubris of management.

Partly, growth by acquisition, where bigger is better and

success is measured by size. But for Wells Fargo,

responsibility and accountability were disconnected. A

simple question is, should the roles of CEO and Chairman

be held by a single person? The Chairman runs the board

and the CEO is responsible for strategy. Where are the

checks and balances?

Allied to this is the question of setting overly aggressive

sales targets by senior management with little or no

knowledge or control of the processes designed to
achieve management’s objectives.

However, Wells Fargo is unlikely to grow significantly until

the asset cap and risk controls placed on it in 2018 by

regulators are lifted. Indeed, Wells Fargo's poor Q2 in July

2018, demonstrated how the asset cap and risk

management procedures ordered by regulators were

significantly restricting Wells Fargo's growth

opportunities.