Wells Fargo Still Struggling to Get It

Coming up with a PR crisis management plan is not particularly difficult. The steps are well known: move promptly to accept responsibility (this might include someone losing her/his job) and be transparent about what occurred; apologize with humility; launch an internal investigation and release results; and enact a plan so that the mistake won’t happen again. When the mistake is an incorrect manufacturing process, the error is relatively easy to fix. Should the crisis stem from a faulty corporate culture, a fix can be more difficult.

That’s the case with Wells Fargo, a once mighty brand that’s devastated its reputation over the last two years. Things started in September 2016, when news broke that Wells opened in excess of one million credit card accounts, some using fake names, others bearing the names of unsuspecting bank customers. That figure has risen and stands at 3.5 million accounts today.

The bogus accounts were a banking issue, but the root cause and response were cultural. The bank’s then-CEO, John Stumpf, acknowledged the fraudulent accounts and noted some 3,500 employees had lost their jobs as a result. His conclusion: problem over, nothing to see here, move on. (PR takeaway: Too many brands believe they can weather a crisis by slogging through it.)

3,500 Fired = A Sound Culture?

Importantly, he also said that Wells’ culture was sound. Many disagreed, including regulators, House and Senate members and, of course, customers, particularly those who discovered their names were on accounts they’d never opened.

Stumpf eventually acknowledged the issue ran deeper, but by that time it was too late; he lost his job.

Timothy Sloan, CEO/President, Wells Fargo

With regard to optics, Wells Fargo needed a fresh start. One approach, perhaps a radical one, would have included replacing the board, which napped while the bogus accounts were created. Not only was the board left largely intact, but Stumpf’s successor, Tim Sloan, is a Wells insider, making it appear that the bank was on the same, old course.

Under Sloan, the bank is doing its best to avoid owning the bogus accounts mistake. An ad campaign that should have apologized only served to confuse. The ad promised Wells Fargo would make things right, but failed to mention what was wrong.

Unfortunately for Wells, a steady series of business mistakes followed the bogus credit card scandal. The bank was fined $1 billion for making auto-loan clients pay for unwanted car insurance, and for charging mortgage customers improper fees. It was also involved in a pet insurance scandal, a foreign exchange snafu and a computer error that left hundreds with foreclosed homes.

Those mistakes have done plenty to tarnish Wells’ already maligned image. Could any amount of good PR remedy this situation? You can’t say Wells isn’t trying. Not long after the accounts scandal made headlines, the bank said it would continue its philanthropy program. It deserves props for making good on this promise.

A Broken Culture 

In addition to business mistakes, several cultural mistakes have come to light. Earlier this month, chief financial officer John Shrewsbury blasted the media for over-covering the bank’s misdeeds, the Charlotte Observer reported. Reporters write negative story after story about Wells so their publications can sell more ads, he said. “A lot of these negative headlines refer to things that have been previously really well aired and vetted. But it’s a very reliable ad seller…a business model for certain outlets,” Shrewsbury told a financial conference in NY. The bank refused to comment on Shrewsbury’s remarks.

In one sense, it’s hard to put all the blame on Shrewsbury. Employees take their cues from corporate culture. When your corporate culture does its best to push scandals under the rug, employees can become resentful when mention is made of the brand’s mistakes.

There is hope. Shrewsbury also said Wells needs to ensure it strives for “operational excellence,” avoids “big mistakes” and is “super transparent.”

Fair enough. Then why communicate projected staff reductions with opaque gobbledygook? Recently Sloan, during an employee town hall, said the bank’s 265,000 staff will experience 5%-10% job cuts during the next three years. His statement is revealing. “We are continuing to transform…to deliver what customers want — including innovative, customer-friendly products and services and evolving our business model to meet those needs in a more streamlined and efficient manner,” he said. Will having fewer employees improve customer service?

The Business Case

Wells is hurting as a business from the bogus accounts scandal. It’s no longer the country’s largest bank by assets. Several cities and states have taken their business elsewhere, as have individual customers. More than that, Wells has paid record fines, and on Feb. 22, her last day in office, Federal Reserve chair Janet Yellen slapped a growth penalty on Wells, barring it from boosting assets beyond 2017 levels until it can show it’s cleaned up its act on compliance and consumer abuse. Shares are up since the initial scandal 17 months ago, but other banks are far outpacing Wells’ increase.

The penalties, including the Fed’s, and the litany of errors are the real reasons Wells will be undertaking job cuts. The sooner Sloan and his team admit this, the quicker the bank can begin improving its shattered image.

Seth Arenstein is editor of PR News.  Follow him: @skarenstein