Gender Rectitude – the Board of Wells Fargo

Conventional Wisdom #1: Leadership at Wells Fargo has been bad. In one of the biggest rebukes ever to the head of any financial institution, CEO John Stumpf has now been required to forfeit some $41 million, as punishment for doing wrong. For presiding over a bank that misled and even defrauded countless customers.

Conventional Wisdom # 2: Having women as members of boards is good – good for business and good for society more generally. Gender balanced boards, we are told, result in “better productivity and organizational effectiveness.” Moreover, women board members “are more likely [than men] to consider social, ethical, and environmental effects of business.”*

Well… guess what. To every rule there really are exceptions. Take the case of Wells Fargo. Its board was a source of pride particularly because of its gender diversity. Women make up 40% of Wells Fargo’s board, twice that of the typical S & P 500 company. Additionally, at least two of these women had extensive experience in consumer banking. One was a member of the Federal Reserve Board from 2008 to 2013. The other was director of banking and finance for the State of Nebraska from 1987 to 1991.

We are likely never fully to know how it happened that Wells Fargo went badly astray. What we do know though is this. That while women are now widely reputed to “change how boards work,” that while women are now widely reputed to provide boards with procedural virtues such as “enhanced dialogue,” “better decision making,” and “higher quality monitoring” of management, it ain’t necessarily so.**

At the least, the famous, now infamous case of Wells Fargo should give us pause. Should remind us that having a high percentage of women on any given board is no guarantee whatsoever of good company behavior.

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*Quotes from Ivana Vasic Chambers, “Evidence Back the Benefits of Equality,” Financial Times, September 29, 2016.

** Quotes from Laura Liswood, “Women Directors Change How Boards Work,” Harvard Business Review, February 17, 2015.

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