James B. Stewart’s column in today’s New York Times about the Wells Fargo case is so solid, there’s no need for me to reiterate his argument. (Link below.) I will however extract from his piece eight salient points, all of which pertain to bad leadership.
- Wrongdoing at the highest levels of Wells Fargo seems so clear, it has the virtue of providing the Justice Department with an unusual opportunity to put its money where its mouth is. To hold one or more corporate leaders accountable for their misconduct.
- Accountability for misconduct – in this case defrauding customers on a depressingly large scale – will be semi-achieved only if individuals are held responsible. It will never be achieved if only institutions are held responsible.
- To dismiss 5,000 people at lower levels of the organizational hierarchy for wrongdoing endemic to the corporate culture, is more reprehensible than doing nothing at all. It’s scapegoating – the powerful deflecting blame onto the powerless.
- Fraud is frequently difficult to ferret out. Not in this case it isn’t. One of the virtues of this case is that the charges of criminal wrongdoing are easy to understand.
- Corporate misconduct is easier to prosecute when political and public outrage are visible, palpable, formidable.
- Corporate misconduct is easier to prosecute when a single individual takes the lead. In this case a highly visible senator, Elizabeth Warren, an expert in financial services and also consumer protection, is the perfect attack dog. Her assault on Wells Fargo CEO John Stumpf during Tuesday’s congressional hearing was lacerating, devastating.
- Warren’s attack on Stumpf had virtue of containing specific recommendations. She demanded he be criminally investigated, by both the Department of Justice and the Securities and Exchange Commission, And she called for his resignation. (In the wake of Tuesday’s hearing, Stumpf did in fact resign, albeit only from his role as adviser to the Federal Reserve.)
- As usual, to follow the money is to have our anger stoked even further. Between 2011 and 2015 – right while the “epidemic of bogus account openings was in full swing” – Stumpf earned over $100 million.
Those of us who are card-carrying members of the Leadership Industry would do well to study what happened at Wells Fargo. Not only is it edifying, it is sobering. A sobering reminder of how little we know about bad leadership, and of how ill-equipped we are to stop or even slow it. If Stumpf and the now “retired” former head of retail banking at Wells Fargo, Carrie Tolstedt, end up paying a price for what took place on their watch, we’ll have cold consolation – which is, however, better than no consolation.