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…
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.
