Wells Fargo has made headlines recently, but for all the wrong reasons. Bank employees opened 2 million bank and credit card accounts — starting in 2011 — in customers’ names, without their knowledge. The goal was to generate fees for the company and hit aggressive sales targets for employees. As a result, regulators fined the bank $185 million.
Unfortunately, the bad news for the bank’s customers didn’t end there. New reports show customer credit may be affected from the opening of these accounts. Wells Fargo CEO John Stumpf recently announced he was forfeiting at least $41 million in pay and vowed that Wells Fargo will drop its sales incentive, which he blames for the unethical behavior of 5,300 employees that have been fired since 2011.
But is all this enough to repair the relationship between Wells Fargo and its customers? Just yesterday, the Office of the Comptroller of the Currency fined the bank $20 million for violating rules on lending to members of the military, including a rate cap on how much interest can be charged to service members on active duty.
According to Drexel’s Daniel Korschun, PhD, an associate professor in Drexel’s LeBow College of Business with expertise in marketing and corporate reputation management, Wells Fargo has a long way to go before regaining its customers’ trust. His commentary is provided in the Q&A below:
What does this mean for Wells Fargo and its relationship with customers?
All companies, but especially those in financial services, must keep their customers’ trust. Wells Fargo customers are now going to repeatedly ask themselves whether the company is holding some account in their name that they don’t yet know about. That sort of uncertainty can be devastating to a business, particularly in the personal banking segment.
What can Wells Fargo do to regain the trust of its customers?
Needless to say, it is going to take a lot of time and effort. My advice for companies going through a crisis is first, address the public swiftly, second, accept responsibility, and third, announce concrete steps to fix the situation.
Wells Fargo has responded swiftly. However, in my view, executives have not yet accepted full responsibility for the fraudulent activity. Yes, CEO John Stumpf has said that he takes responsibility, but he has been reluctant to admit that there is much of a concern beyond the incentive system that was once in place. My sense is that criticisms will linger until the company addresses the intense sales pressure that employees report being under. Only then can the company announce concrete steps to rectify.”
Is CEO John Stumpf going to lose his job?
He is in a very difficult situation. He has tried to simultaneously take responsibility but also distance his executive team from the crisis. But the fraud here involves thousands of employees. It is simply not credible to blame a few bad apples. The activities were widespread, making it unlikely that Wells Fargo can regain trust with customers, shareholders, employees and government officials without a change in leadership.
What lessons about corporate reputation management can we learn from this?
One thing I discuss with my students is that Wells Fargo is a good citizen in other areas. It gives to charity, has environmental programs, and has even weighed in on some hot-button political issues. However, rather than help generate goodwill, its responsibility in other areas has raised the bar for the whole company. As a result, the fraudulent activity will strike many people as especially bad.
When it comes to reputation, people don’t simply add up all the good one does, and then subtract a little when there is wrongdoing. Instead, most people look for consistency. And this development is clearly inconsistent with the company’s stated values — one of Wells Fargo’s stated core values is to do ‘what’s right for customers.’ It is that disconnect that breaks down trust.