By Alan Murray and Tom Huddleston Jr.
June 12, 2017

Good morning.

Any leader of a large organization pondering how good companies go bad needs to read Geoff Colvin’s perceptive piece untangling the scandal at Wells Fargo. The bank once ranked near the top of many “most admired” lists; a recent Harris survey finds it now one slot from the bottom—beating only Takata, the killer air bag maker.

What went wrong? Colvin documents the key mistakes—a sales-obsessed culture, an overly decentralized structure, and top leadership that badly misinterpreted clear warning signs. Colvin quotes ex-CEO John Stumpf in an email to then-COO-now-CEO Tim Sloan downplaying firings for sales abuse: “Do you know only around 1% of our people lose their jobs [for] gaming the system . . . Did some do things wrong—you bet and that is called life. This is not systemic.”

The story is in the Fortune 500 issue of our magazine, but you can read it online today here. And by the way, the kicker is that the scandal, while badly damaging the bank’s reputation, seems to have done little to undermine its profitability. Wells Fargo was the fourth most profitable company in the Fortune 500 last year, trailing only Apple, JP Morgan Chase and Berkshire Hathaway. And the streak continued in the period ending in March, which was the 18th consecutive quarter in which the bank had profits exceeding $5 billion.

I started the day in London, where page one headlines are announcing that President Trump has put his plans to visit here on ice, because of concerns about large protests. Labor Leader Jeremy Corbyn, an avowed socialist whose standing has risen after his success in the election, said Trump’s cancellation “is welcome, especially after his attack on London’s mayor and withdrawal from Paris climate deal.”

Traveling this morning to Munich, where I will moderate a panel of German and Chinese executives on “Industry 4.0,” as part of the run up to the Fortune Global Forum in Guangzhou in December.

News below.

 

Alan Murray
@alansmurray
alan.murray@fortune.com

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