Wells Fargo & Co. has become a punchline. And that’s not where any big corporation wants to be.
The problems of the giant bank now go beyond revelations that it created more than 2 million fake accounts without customer knowledge and issued more than half a million credit cards to unsuspecting customers – all so their employees could pump up their bonuses.
That’s because during a pummeling Tuesday by senators, CEO John Stumpf managed to make matters worse. He blamed low-level employees, he seemed to suggest his hands were tied on compensation to senior managers who benefited from the bad behavior and he couldn’t answer questions about harm to consumers.
“This is somebody who for (almost) three weeks has felt or appeared unprepared for the issues,” said Scott Davis, chief growth officer for Prophet, a San Francisco-based global branding and marketing consultancy.
Translation: Houston, we’ve got a branding problem.
“This is about as big a brand crisis as we’ve seen since Volkswagen last year,” Davis said, referring to last year’s news that the German automaker deliberately cheated in evaluations of harmful emissions from its diesel engines, subjecting it to worldwide derision. That company is just starting to recover after management changes and a $15 billion U.S. settlement.
Companies must do three things, he said, when facing crisis: Own it, be transparent and explain the plan to fix it. Stumpf spelled out new actions Tuesday but to some branding experts, he stumbled – a lot.
“They’ve missed all of my steps. There is a crisis of confidence within the culture of Wells Fargo, which leads to a crisis of confidence with consumers,” said Davis, a nationally recognized speaker on branding. “You need a very swift change of leadership.”
When rental car company Hertz was faced with a similar crisis in 2015, based on inflated accounting and excessive pressure from the top to reach sales targets – issues similar to Wells Fargo’s crisis – the entire executive team was replaced.
There’s no evidence that will happen at Wells, the nation’s third-largest bank by U.S. assets. To the contrary, Stumpf testified that he had no plans to step down, even as the company’s shares have lost more than 10 percent this month.
“They need some good corporate therapy,” said Chuck Kent, director of brand content for Avenue, a Chicago-based global marketing strategy firm that works with companies ranging from midsized firms to those on the Fortune 100 list. “You really need to start with a good honest look at yourself.”
Coming out of the financial crisis of 2008, the company dodged the negative publicity that haunted many Wall Street banks. That view began changing in 2012, when Wells Fargo settled with the Justice Department, agreeing to pay $125 million to Hispanic and African-American borrowers whom the government said were given higher p-riced loans.
Under attack Tuesday by Sen. Elizabeth Warren, D-Mass., and others, Stumpf maintained that the 5,300 people fired between 2011 and 2015 in connection with the fake accounts and credit cards were outliers who didn’t reflect the company’s values.
“If you can’t speak the truth, then shut up. You’re only going to dig your hole deeper. You’re only going to make Elizabeth Warren’s case for her,” said Kent, who said the bank CEO’s testimony surely had dampened his company’s morale. “They’ve got this huge internal branding problem. It’s going to impact who is going to be willing to work there, who is going to be willing to stay there. They are going to have to make fundamental changes.”
The bank’s board of directors also must consider the internal impact, suggested Charles Elson, a University of Delaware professor and leading expert on corporate governance.
“The board is going to have to figure out, ultimately, who is responsible for this. Was it a specific order? Was it lower-level and poor tone?” he asked.
The bank is living the adage that it takes a lifetime to build a reputation, minutes to lose it.
“Wells Fargo had a fabulous brand. . . . This really does sully it,” said Elson, himself a shareholder. “The conduct is just bad conduct. Five thousand people are a lot of bad actors. Obviously this is coming from somewhere.”
Kent preaches to companies the crisis-management motto “be, do, say”: “What it means is you have to back up and really decide what you want to be and what you are. Wells Fargo, to re-earn trust, must actually decide what that looks like internally – their culture. And they need to do the things that externalize that, and once that’s all in place they can say something.”
The restaurant chain Chipotle Mexican Grill, said Davis, is an example of a company that did a good job handling a crisis in late 2015 stemming from a nine-state outbreak of E. coli. The company didn’t shrink from it, and it quickly announced that it would adopt food-safety standards far beyond what was required.
“The amount of measures they took to make sure it would never happen again, it was all about restoring trust in the employee base and consumers,” he said.
It’s why Davis thinks the Wells Fargo CEO should go, for the sake of the brand.
“Right now you need a change in leadership, somebody who is going to bring confidence,” he said, noting that the bond of trust with employees and consumers has been broken. “If they don’t have trust, and they don’t believe, and they don’t have the answer, how can a consumer ever get confident that it’s not going to happen to them six months from now?”