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How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

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Re: How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

#21

Post by pmorici »

stanfordkid wrote: post #7

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 re…

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.

Re: How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

#22

Post by bas »

CalChris wrote: post #13
tswartz wrote: post #9

I appreciate that Warren didn't let Stumpf talk his way out of taking any responsibility for the actions of his employees and made a clear argument as to why he should be held accountable. Unfortunately, it seems the primary reason he resigned was because the public outrage was loud enough. It seems that until CEOs are personally held accountable via fines or prison (as Warren suggests) we won't see a very big change…

Carrie Tolstedt is also retiring at the end of the year with $125M.

Oh man, she must be so bummed about that. The struggle is real.

Re: How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

#23

Post by rconti »

forgetsusername wrote: post #19
tswartz wrote: post #9

I appreciate that Warren didn't let Stumpf talk his way out of taking any responsibility for the actions of his employees and made a clear argument as to why he should be held accountable. Unfortunately, it seems the primary reason he resigned was because the public outrage was loud enough. It seems that until CEOs are personally held accountable via fines or prison (as Warren suggests) we won't see a very big change…

Anyone who has worked in a company of any size knows it'd be down near impossible to know the inner working at all levels of the organization. So, yes, the guy is accountable and needs to lose his job. But the idea that he should go to prison for something like this is ludicrous.

Prison may be a bit harsh.

And in a vacuum, you're right. It would be somewhat unfair to drop the hammer, out of nowhere, on some unsuspecting CEO who just did "business as usual".

But that's no excuse; it just means we need to create a culture where this kind of thing becomes increasingly unacceptable, so that in the future executives will know what's expecting of them, and what the consequences can be.

The "unintended" consequences of unrealistic goal-setting should be patently obvious to anyone who's made it that far in business, and if it isn't, we should make it clear that it's something these people need to start thinking about.

In the case of Wells Fargo, this went on for a LONG time, was well-known, frequently reported on, and had a number of whistleblowers.

The CEO can't know what every last person in the organization is doing, but they should be incented to make it their business to a culture in place that doesn't permit this, nor the blacklisting of whistleblowers.

Re: How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

#24

Post by dangerlibrary »

forgetsusername wrote: post #19
tswartz wrote: post #9

I appreciate that Warren didn't let Stumpf talk his way out of taking any responsibility for the actions of his employees and made a clear argument as to why he should be held accountable. Unfortunately, it seems the primary reason he resigned was because the public outrage was loud enough. It seems that until CEOs are personally held accountable via fines or prison (as Warren suggests) we won't see a very big change…

Anyone who has worked in a company of any size knows it'd be down near impossible to know the inner working at all levels of the organization. So, yes, the guy is accountable and needs to lose his job. But the idea that he should go to prison for something like this is ludicrous.

Given the enormous scale of the fraud, someone should definitely be going to prison. "But my criminal organization is very large and not everything we did was illegal" is not an excuse.

Re: How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

#25

Post by samstave »

wheelerwj wrote: post #2

Look I love Elizabeth Warren but this whole article is really over the top. > leaders of financial institutions are painfully aware that there are consequences They were fined lousy 280m and the CEO was allowed to resign a full 3 years after it was first reported. Really, REEAAALLLY painful stuff there.

The pain is only in the risk to their pocketbook. Not any other actual risk...

Re: How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

#26

Post by bsder »

forgetsusername wrote: post #19
tswartz wrote: post #9

I appreciate that Warren didn't let Stumpf talk his way out of taking any responsibility for the actions of his employees and made a clear argument as to why he should be held accountable. Unfortunately, it seems the primary reason he resigned was because the public outrage was loud enough. It seems that until CEOs are personally held accountable via fines or prison (as Warren suggests) we won't see a very big change…

Anyone who has worked in a company of any size knows it'd be down near impossible to know the inner working at all levels of the organization. So, yes, the guy is accountable and needs to lose his job. But the idea that he should go to prison for something like this is ludicrous.

> But the idea that he should go to prison for something like this is ludicrous.

Fine. Then the company should get the "death penalty" and be liquidated.

Especially for something like the banking sector where the federal government could replace a bank almost instantaneously, the "death penalty" should get dropped on companies that engage in malfeasance.

Re: How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

#27

Post by 45h34jh53k4j »

forgetsusername wrote: post #19
tswartz wrote: post #9

I appreciate that Warren didn't let Stumpf talk his way out of taking any responsibility for the actions of his employees and made a clear argument as to why he should be held accountable. Unfortunately, it seems the primary reason he resigned was because the public outrage was loud enough. It seems that until CEOs are personally held accountable via fines or prison (as Warren suggests) we won't see a very big change…

Anyone who has worked in a company of any size knows it'd be down near impossible to know the inner working at all levels of the organization. So, yes, the guy is accountable and needs to lose his job. But the idea that he should go to prison for something like this is ludicrous.

Prison. RICO act for running a large criminal enterprise that defrauded millions. Any other industry fraud at this scale would see the dismantling of the enterprise!

Re: How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

#28

Post by qq66 »

forgetsusername wrote: post #19
tswartz wrote: post #9

I appreciate that Warren didn't let Stumpf talk his way out of taking any responsibility for the actions of his employees and made a clear argument as to why he should be held accountable. Unfortunately, it seems the primary reason he resigned was because the public outrage was loud enough. It seems that until CEOs are personally held accountable via fines or prison (as Warren suggests) we won't see a very big change…

Anyone who has worked in a company of any size knows it'd be down near impossible to know the inner working at all levels of the organization. So, yes, the guy is accountable and needs to lose his job. But the idea that he should go to prison for something like this is ludicrous.

If the maximum penalty is losing one's job, the incentives are aligned towards maximum risk as losses are capped at zero. If prison is off the table, the fines need to be large enough so that the perpetrator loses all of his assets, savings, houses, cars, etc. and has to start again with a used Corolla and a studio apartment, since his Rolodex alone is worth millions.

Re: How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

#29

Post by henrikschroder »

rconti wrote: post #23
forgetsusername wrote: post #19

Earlier quoted context omitted.

Anyone who has worked in a company of any size knows it'd be down near impossible to know the inner working at all levels of the organization. So, yes, the guy is accountable and needs to lose his job. But the idea that he should go to prison for something like this is ludicrous.

Prison may be a bit harsh. And in a vacuum, you're right. It would be somewhat unfair to drop the hammer, out of nowhere, on some unsuspecting CEO who just did "business as usual". But that's no excuse; it just means we need to create a culture where this kind of thing becomes increasingly unacceptable, so that in the future executives will know what's expecting of them, and what the consequences can be. The "uninten…

> The CEO can't know what every last person in the organization is doing, but they should be incented to make it their business to a culture in place that doesn't permit this

Where I'm from, there's a group af crimes such that if an employee at a company does them, the CEO will absolutely go to jail, even if they knew about it or not. For example, if your company produces toxic sludge as a byproduct, and someone at the company dumps it in nature instead of properly taking care of it, it's jailtime.

Unsurprisingly, compliance with some environmental protection laws are A+ at all companies. Personal liability works fantastically as a motivator for companies.

Re: How Elizabeth Warren Took Down the CEO of Wells Fargo, and Why It Matters

#30

Post by amalcon »

forgetsusername wrote: post #19
tswartz wrote: post #9

I appreciate that Warren didn't let Stumpf talk his way out of taking any responsibility for the actions of his employees and made a clear argument as to why he should be held accountable. Unfortunately, it seems the primary reason he resigned was because the public outrage was loud enough. It seems that until CEOs are personally held accountable via fines or prison (as Warren suggests) we won't see a very big change…

Anyone who has worked in a company of any size knows it'd be down near impossible to know the inner working at all levels of the organization. So, yes, the guy is accountable and needs to lose his job. But the idea that he should go to prison for something like this is ludicrous.

The theory that someone is valuable enough to be worth the compensation packages given to leaders of this type of company, but not effective enough to prevent this sort of thing if they give it an honest effort, strains credibility.

The theory that the incentive structure discourages that sort of honest effort is much more plausible. The correct response, if that's what's going on, is to change the incentive structure. Prison being what it is, I'd far prefer a way to do that without sending anyone there, but there does need to be some kind of consequence.

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