The response of Wells Fargo bank to the scandal

             In response to the scandal, Wells Fargo took the following actions and remedies. First,   the company employed the PricewaterhouseCoopers (a consulting from) to conduct the data analysis on unauthorized accounts. After review, the consulting found that unauthorized deposit accounts and credit card accounts were 1.5million and 565,000 respectively (Mims, 2017).  For this reason, the refund amount for unauthorized accounts was  $2.6 million, 5,300 employees who violated the sales policy were fired, the top management bonus was reduced by $32million, the organization minimized cross-sell metrics and maximized customer services through establishing branch-level incentives.  The responses led to significant changes in that, stocks options which costs $47 was cancelled, sales goals were cancelled and  a corporate-wide enterprise was established to ensure transparency in sales practice (Mims, 2017). In 2014, the bank ensured that ethical performance is maintained while offering incentives compensations. On compensation system, product and sales goals as well as individual product sales were completely eliminated and new system was established where product, feedback and performance were used to determine the employees’ performance. To avoid unauthorized accounts, verification procedures and training were established (Mims, 2017). 

Recommendation

 To address the problem and avoid such a scandal, Well Fargo should adhere to regulations and guidance. It is the role of Federal Regulators to ensure transparency in financial institution by monitoring compensations plans (Mims, 2017). In addition, Well Fargo should also be responsible in monitoring the compensation plans and polices by ensuring that the process adheres to Interagency Guidance and aligns with sound banking practices. Even though the bank had a ‘proposed the rule’, Federal Regulators should establish tougher rules which will control the sales practice (Mims, 2017). Well Fargo should also develop compensation strategies to avoid excessive risks. Since incentive-based compensation is contributing to risks, board of directors in Well Fargo should focus on recordkeeping and documentation. Rather than focusing on uniform rules, Well Fargo should promote board oversight (Mims, 2017).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Reference

Mims H. Justin. (2017). The Wells Fargo Scandal and Efforts to Reform Incentive-Based Compensation in

Financial Institutions. NORTH CAROLINA BANKING INSTITUTE, Volume 21 | Issue 1/21

 

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