Regulator Criticizes Wells Fargo's HR in Wake of Phony Accounts

​Wells Fargo's HR department needs to address thousands of complaints from those who say they were wrongfully fired as part of its fake-account problem, according to the federal Office of the Comptroller of the Currency, reports The Wall Street Journal. In 2016, the company fired 5,300 employees who scrambled to meet impossibly aggressive sales quotas by setting up phony accounts for existing customers.

The banking regulator wants Wells Fargo's HR department to address these complaints from approximately 3,000 people. The regulator also has asked Wells Fargo's HR to do something about a reportedly inadequate policy for recovering compensation from executives suspected of wrongdoing and controls around pay that, the regulator maintains, don't do enough to discourage wrongdoing. The regulator reached a $1 billion settlement with the bank last year and is continuing to monitor the bank.

We've gathered articles from SHRM Online and other respected media outlets on the fallout from the fake-account problem.

Bank Defends Its Actions

"We do not comment on specific regulatory matters, however, Wells Fargo is making progress on our regulatory obligations but more work needs to be done," said Arati Randolph, a bank spokeswoman in Charlotte, N.C. New Chief Executive Charles Scharf is "already making significant changes," including hiring a new chief operating officer "to focus on regulatory priorities and improve our control and operations functions," Randolph said.

(The Wall Street Journal)

Code of Conduct Didn't Prevent Alleged Dodd-Frank Violations

A code of conduct alone isn't enough to stop bad behavior. A code of conduct must be enforced and supported by company culture. And if a company's upper management isn't enforcing the code, then it is HR's job to do so. Failure to do so can prove costly. Wells Fargo agreed to pay $190 million in settlements after complaints that thousands of its employees created unauthorized accounts using existing customers' credentials.

(SHRM Online)

[SHRM members-only sample policy: Code of Ethics and Business Conduct]

Senators Grilled Former CEO on Fake Accounts, Pressuring Employees

In September 2016, Republican and Democrat senators on the Committee on Banking, Housing and Urban Affairs uniformly criticized former Wells Fargo CEO John Stumpf about the 2 million unauthorized accounts that the employees created over at least five years. Wells Fargo employees had been pushed to cross-sell accounts to existing customers so that the clients would have at least eight accounts each. Stumpf apologized to the committee and promised the bank would make things right, noting that Wells Fargo was doing away with product sales goals as of Jan. 1, 2017.

(SHRM Online)

How Employee Incentives Can Go Awry

Wells Fargo's incentive may have seemed ordinary when the company first issued it. But it led to some extraordinarily negative consequences. What went wrong? One crucial factor was an unrealistic goal, according to Marc Hodak of Farient Advisors, headquartered in New York City. While cross-selling is common in the banking industry, eight accounts per customer, even as an aspirational scale, was not realistically achievable on a widespread scale. Compounding the problem, high-level managers were offered lucrative financial rewards if their staff hit the targets and managers' bonuses depended on the degree to which sales goals were achieved. Some managers checked progress toward the sales goals twice a day.

(SHRM Online and Security Management Magazine)

Wells Fargo Announced Claw Back of $75 Million in Incentive Pay Scandal

In the largest forced return of pay and stock grants in banking history, Wells Fargo announced it would claw back $75 million from Stumpf and its former head of community banking, Carrie L. Tolstedt, who took the brunt of the blame for the scandal over fraudulent accounts. HR also was faulted for not connecting high turnover—up to 42 percent a year—to relentless goals that went unmet.

(SHRM Online)