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I absolutely love Senator Warren. That being said, the notion that the stock price of Wells Fargo could be significantly impacted by this scheme (which is centr

I absolutely love Senator Warren. That being said, the notion that the stock price of Wells Fargo could be significantly impacted by this scheme (which is central to Ms. Warren's argument) is not well founded. Wells Fargo makes 86 billion in revenue per year. Even if 10 million accounts were made and each made a thousand dollars -- (incredibly generous) ... over the course of 5 years this accounts for 1 billion in revenue or 200 million dollars per year. Annualized it is much less than 1% and would not inflate the stock price. These guys definitely made a mistake. It wasn't calculated fraud. It was bad incentive setting. Politicians like Warren don't intuitively understand how hard it is to actually control a group of thousands of middle-class workers and get them to do things.It is not easy to govern ... sadly politicians are the least knowledgable in what it takes and they hurt good people like Stumpf (I trust his leadership and qualities because he was appointed by Buffett). WF stock dropped a bit prior to the hearing and I bought as much as I could. Luckily most of Wall Street is smarter than such politicians and it paid off. Thanks Senator Warren. What I would like to see is politicians be held to the same accountability as these guys. That would be hilarious. I wonder how well Obamacare would do if we could actually measure results based on metrics. Our society needs people that can blend business acumen with the spirit and heart of people like Elizabeth Warren. Only Buffet or Gates come to mind.

pinewurst 10y ago
If you can call "meet the goals or get fired" incentive setting. Forcing employees to carry out some cack-headed upper management initiative on pain of losing their jobs isn't that.
wu-ikkyu 10y ago
If the CEO shouldn't be held liable for the fraud then why shouldn't the ones who signed off on all the fake accounts? Didn't they directly benefit from inflating the numbers?
tswartz 10y ago
You make a good point about how hard it is to properly incentivize a large group of people. Stumpf and leadership made a best estimate for what goals and incentives were necessary to reach performance. However, the key is that when employees began voicing concerns over what was being done they were ignored and in some cases intimidated and blacklisted from working in banking. That is why they should be held accountable. It's because of their lack of positive action when the negative outcomes from their incentive program began appearing. http://fortune.com/2016/10/09/wells-fargo-work-culture/ http://fortune.com/2016/10/09/wells-fargo-work-culture/
pmorici 10y ago
The point wasn't for these fake accounts to generate revenue. The bank executives knew that Wall Street used the number of new accounts opened as an indicator in their valuation of the stock. They explicitly reported new accounts in their quarterly results. Knowing this the executives pursued policies to boost account numbers reasoning that it would boost the stock price by boosting expectations even though it wouldn't boost revenue.
- stanfordkid 10y ago
  This is the central point I am making: there is little evidence that: 1) The stock price was inflated. This can be seen by the fact that the valuation of WF is relatively stable both prior to and after this debacle. (outside of the short term volatility due to the scandal). If what you are saying is true then we would have expected the market to dump WF shares at the "inflated" price. This did not happen 2) That the intention of the executives was to increase the stock price by leveraging the fake accounts rather than to increase real accounts whilst policing an incentive scheme that was harsh to the point that it resulted in bad behavior by low level workers. My point is that the revenue impact from the addition of fraudulent accounts is so negligible that to equate it to "fraud" is misleading. Any incentive scheme has cheaters, abusers and fraudsters. That is the norm in an organization that employees thousands of unskilled workers. This is a case of an incentive scheme that was pushed too hard despite market realities -- to the point where people felt compelled to lie to keep their jobs (which was morally wrong on their part -- regardless of "how tough it is to find work" or "needing to put bread on the table"). Those people were fired. In order to understand if this was fraud or not we need to look at whether or not these incentive schemes generated an increase in LEGITIMATE accounts being created. If this was the case then the incentive scheme worked and policing needed to be increased or modifications needed to be made to the management to prevent bad behavior. If this was not the case -- then we have to ask why the management chose to push harsh incentive schemes knowing that it only created fraudulent accounts. The type of black and white thinking that is going on in this thread (and elsewhere) is emotionally driven due to the size of Stumpf's paycheck. Most people are just not used to seeing $100mm dollars. I would be very skeptical of articles like the one linked to above. Anyone who has lead a large organization that contains people that couldn't compete or got fired and angry has heard these types of gripes... they are a dime a dozen. My point is that Stumpf paid for his sins and I don't think we need to roast him further. I think Warren's appraisal of the situation is excessive.
jernfrost 10y ago
"These guys definitely made a mistake. It wasn't calculated fraud. It was bad incentive setting. Politicians like Warren don't intuitively understand how hard it is to actually control a group of thousands of middle-class workers and get them to do things.It is not easy to govern" Oh come on, talk about sugar coating it!!! If you create crazy incentives of course it is FRAUD! If it wasn't CEOs could wash their hands of every possible fraud they might imagine by simply setting the right incentives to get the fraud done. You got an economy were people are lucky to hold onto a job and you are threatening them with getting fired if they don't meet your insane goals? That is like a tortured person answering whatever the torturer asks. We see this stuff happening again and again. This is the new way of committing fraud. Engineer it so that the poor suckers at the bottom have to take all the heat. The poor suckers who have no golden parachute to fall back on when they are kicked out. When you got 5000 employees caught doing this, the alarm bells should be ringing and you should realize you did something wrong instead of firing everybody. 5000 employees aren't all rotten apples who did something for their own gain. They gained nothing and put their reputation and job on the line for this so top management could line their pockets. Makes me sick.
- stanfordkid 10y ago
  How is it fraud? No one told them to make fake accounts. Even the most naive person knows that making a fake account is wrong. 5000 people did the wrong thing. To me it seems like people are blaming the top for widespread moral bankruptcy at the bottom.
  - user837387 10y ago
    I'm sure you've heard that ignorance of the law is no excuse right? Similar principle works here. No way the CEO did not know what was going on if 1000's of his subordinates were doing it. Saying that he couldn't have known is negligent. Personally I do not buy the story that he did not know. Come on for fucks sake, Trump just got elected on virtually pure lies and you are still being stupidly naive. This CEO knew.
    - stanfordkid 10y ago

pinewurst 10y ago

If you can call "meet the goals or get fired" incentive setting. Forcing employees to carry out some cack-headed upper management initiative on pain of losing their jobs isn't that.

wu-ikkyu 10y ago

If the CEO shouldn't be held liable for the fraud then why shouldn't the ones who signed off on all the fake accounts? Didn't they directly benefit from inflating the numbers?

tswartz 10y ago

You make a good point about how hard it is to properly incentivize a large group of people. Stumpf and leadership made a best estimate for what goals and incentives were necessary to reach performance. However, the key is that when employees began voicing concerns over what was being done they were ignored and in some cases intimidated and blacklisted from working in banking. That is why they should be held accountable. It's because of their lack of positive action when the negative outcomes from their incentive program began appearing. http://fortune.com/2016/10/09/wells-fargo-work-culture/ http://fortune.com/2016/10/09/wells-fargo-work-culture/

pmorici 10y ago

The point wasn't for these fake accounts to generate revenue. The bank executives knew that Wall Street used the number of new accounts opened as an indicator in their valuation of the stock. They explicitly reported new accounts in their quarterly results. Knowing this the executives pursued policies to boost account numbers reasoning that it would boost the stock price by boosting expectations even though it wouldn't boost revenue.

stanfordkid 10y ago
This is the central point I am making: there is little evidence that: 1) The stock price was inflated. This can be seen by the fact that the valuation of WF is relatively stable both prior to and after this debacle. (outside of the short term volatility due to the scandal). If what you are saying is true then we would have expected the market to dump WF shares at the "inflated" price. This did not happen 2) That the intention of the executives was to increase the stock price by leveraging the fake accounts rather than to increase real accounts whilst policing an incentive scheme that was harsh to the point that it resulted in bad behavior by low level workers. My point is that the revenue impact from the addition of fraudulent accounts is so negligible that to equate it to "fraud" is misleading. Any incentive scheme has cheaters, abusers and fraudsters. That is the norm in an organization that employees thousands of unskilled workers. This is a case of an incentive scheme that was pushed too hard despite market realities -- to the point where people felt compelled to lie to keep their jobs (which was morally wrong on their part -- regardless of "how tough it is to find work" or "needing to put bread on the table"). Those people were fired. In order to understand if this was fraud or not we need to look at whether or not these incentive schemes generated an increase in LEGITIMATE accounts being created. If this was the case then the incentive scheme worked and policing needed to be increased or modifications needed to be made to the management to prevent bad behavior. If this was not the case -- then we have to ask why the management chose to push harsh incentive schemes knowing that it only created fraudulent accounts. The type of black and white thinking that is going on in this thread (and elsewhere) is emotionally driven due to the size of Stumpf's paycheck. Most people are just not used to seeing $100mm dollars. I would be very skeptical of articles like the one linked to above. Anyone who has lead a large organization that contains people that couldn't compete or got fired and angry has heard these types of gripes... they are a dime a dozen. My point is that Stumpf paid for his sins and I don't think we need to roast him further. I think Warren's appraisal of the situation is excessive.

jernfrost 10y ago

"These guys definitely made a mistake. It wasn't calculated fraud. It was bad incentive setting. Politicians like Warren don't intuitively understand how hard it is to actually control a group of thousands of middle-class workers and get them to do things.It is not easy to govern" Oh come on, talk about sugar coating it!!! If you create crazy incentives of course it is FRAUD! If it wasn't CEOs could wash their hands of every possible fraud they might imagine by simply setting the right incentives to get the fraud done. You got an economy were people are lucky to hold onto a job and you are threatening them with getting fired if they don't meet your insane goals? That is like a tortured person answering whatever the torturer asks. We see this stuff happening again and again. This is the new way of committing fraud. Engineer it so that the poor suckers at the bottom have to take all the heat. The poor suckers who have no golden parachute to fall back on when they are kicked out. When you got 5000 employees caught doing this, the alarm bells should be ringing and you should realize you did something wrong instead of firing everybody. 5000 employees aren't all rotten apples who did something for their own gain. They gained nothing and put their reputation and job on the line for this so top management could line their pockets. Makes me sick.

stanfordkid 10y ago
How is it fraud? No one told them to make fake accounts. Even the most naive person knows that making a fake account is wrong. 5000 people did the wrong thing. To me it seems like people are blaming the top for widespread moral bankruptcy at the bottom.
- user837387 10y ago
  I'm sure you've heard that ignorance of the law is no excuse right? Similar principle works here. No way the CEO did not know what was going on if 1000's of his subordinates were doing it. Saying that he couldn't have known is negligent. Personally I do not buy the story that he did not know. Come on for fucks sake, Trump just got elected on virtually pure lies and you are still being stupidly naive. This CEO knew.
  - stanfordkid 10y ago