Wells Fargo Essay

FIN 9858, Term Paper – Wells Fargo

1.What was the financial performance of Wells Fargo during John Stumpf’s tenure as Chief Executive Officer (2007-2016)?

The financial performance of Wells Fargo during John Stumpf’s tenure as CEO can be described as exemplary: assets grew by 46% and net income grew by 85% and the bank’s efficiency ratio at 58.7% was lower than at all of Wells Fargo’s major competitors. The bank before the scandal become the most valuable in the world, with a market capitalization of $300 billion dollars. The bank’s stock price grew at a CAGR of 12.4% in the period outpacing all major competitors. In sum the bank’s performance during John Stumpf’s tenure at the bank prior to the scandal was exemplary, with first class performance

Upon John Stumpf’s resignation all of this began to crumble as the stock declined 10% already between September 8th, 2016, and September 20th, 2016, as the pressure from customer and employee lawsuits and congressional investigations began to weigh on the stock. 2.What were the effects of the cross-sell strategy on Wells Fargo’s stakeholders?

Wells Fargo’s cross-sell strategy was a cornerstone of the firm’s business strategy and it had important, differing effects on different stakeholders. On shareholders the effect before the scandal was very positive, as Wells Fargo was known as the “King of Cross-Selling”. The bank had the highest cross-sell ratio among large banks, 5.95, which allowed the firm to produce exceptional profits in its Community Banking Division (59% of net income in

In the case of Wells Fargo, the firm had all of these things “on paper”, but in practice the firm was not run in an ethical manner. For example, the firm had a “Recommended Process for Resolving an Ethical Dilemma” and a “Non-Retaliation Policy” for Whistleblowers. However, in reality Whistleblowers were fired using false pretenses such as “tardiness” and flagging managers or human resources for unethical behavior was either routinely ignored or led to an employee being fired. Management routinely touted “integrity” as a core corporate value but incentivized employees to ‘push’ financial products by tying compensation to sales quotas and by creating a culture where employees who missed their quotas were harassed, by being forced to attend calls on Saturday for example. In sum, the firm pretended to maintain an ethical corporate culture, but its culture in practice was the exact