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The Wells Fargo Cross-Selling Scandal

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Document pages: 16 pages

Abstract: In this updated Closer Look, we examine the tensions between corporate culture, financial incentives, and employee conduct as illustrated by the Wells Fargo cross-selling scandal. In 2016, Wells Fargo admitted that employees had opened as many as 2 million accounts without customer authorization over a five-year period. We discuss the factors that contributed to the scandal, the repercussions for the bank, and its response. We ask:•How did the company’s incentive system contribute to the scandal?•Would the system have worked better if coupled with additional metrics or controls?•What systems should have been put in place to identify and escalate potential problems earlier?•What steps should senior management have taken to better contain the fallout?•Is an inside or outside CEO successor better positioned to help the bank recover?•How do you maximize the positive contribution that incentives make to culture while minimizing potentially negative outcomes?The Stanford Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance and executive leadership. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books “Corporate Governance Matters” and “A Real Look at Real World Corporate Governance.”This updates the original Closer Look with more recent information.

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