I thought it would be a long time before a corporate scandal got bigger and worse than the Volkswagen emissions-cheating mess. I still think that, but almost every day the Wells Fargo situation makes me wonder if it might soon surpass even VW in overall awfulness. The latest news certainly shortens the odds. Before we examine the dismal state of affairs, let’s jump straight to the bottom line: Even if this scandal does not widen further, it reflects a massively broken corporate culture, not just the acts of a few bad men and women. It has trashed the reputation of former CEO John Stumpf and at least casts doubt, fairly or not, on the reputation of his predecessor, Richard Kovacevich; both were among America’s most admired CEOs. The No. 1 job of CEO Tim Sloan is culture change, and the big lesson from others’ experience is not to talk about culture but to model and enforce the right behavior – and to be patient.
Recent developments go way beyond the original revelation, that the bank opened as many as 2.1 million accounts without customers’ permission or knowledge. Lots of people had to know of such widespread wrongdoing, but…
-New evidence shows that employees who called the company’s ethics hotline were sometimes fired or otherwise punished. That’s illegal under federal law. The bank has hired an outside investigator to learn more.
-Branch managers were warned 24 hours before internal auditors showed up to conduct inspections. Employees were sometimes ordered to work into the night or all night to shred documents and forge signatures so the branch would pass inspection, the Wall Street Journal reports.
-The bank allegedly caused customers to miss deadlines for extending a promised interest rate, then charged those customers late fees. The process typically cost customers $1,000 to $1,500. So say four former employees from the Los Angeles region, as reported by ProPublica. One of the four ex-workers claims that total proceeds to the bank were in the millions of dollars.
Especially alarming about that last allegation is that it appears unconnected to the original fake-accounts scandal. The news suggests that, with the bank on the defensive, more employees may feel empowered to report other, unsuspected unethical or illegal practices.
That’s how this could eventually be worse than VW. At the very least, we now have two new epic case studies of scandals and their mismanagement. Watch and learn.
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What We’re Reading Today
Walgreens – Rite-Aid merger in jeopardy
Walgreens Boots Alliance had agreed to buy Rite-Aid for $9.4 billion, expecting to close the deal Friday. But the combination still hasn’t received antitrust clearance from Washington. Now both boards must extend the deadline in hopes that regulators will approve it. Bloomberg
Trump urges automakers to build more U.S. plants
At a White House meeting, President Trump told Ford’s Mark Fields, GM’s Mary Barra, and Fiat Chrysler’s Sergio Marchionne that he wants them to build more U.S. plants in return for his cutting regulations and taxes. Marchionne said after the meeting that Trump did not specify which regulations would be cut. Fortune
Supreme Court picks come into focus
Trump’s short list of candidates are all federal appellate court judges appointed by President George W. Bush, and all have conservative records. The finalists are Neil Gorsuch, Thomas Hardiman, and William Pryor. The nominee is expected to be named next week. NPR
Peter Thiel, the Kiwi
The PayPal co-founder, billionaire venture capitalist, and Trump supporter has reportedly gained citizenship in New Zealand. Why? A number of other wealthy people have bought property there in preparation for a potential doomsday scenario. Thiel‘s action has also raised questions in New Zealand about how he gained citizenship. Mashable
Building Better Leaders
Avoiding professional ghosting
Professional ghosting — when clients disappear on you without notice — has grown more common. To avoid it, ask for some money upfront and seek out references on the client. Fast Company
To retain millennial workers…
…create a feedback loop. With 80% of the age group saying they want frequent feedback, give them constructive criticism often. That might require extra coffee sessions or more one-on-one time. Fortune
Only 74% of prime-age women are in the workforce
It isn’t just prime-age men who are working in smaller numbers; the percentage of women not working has also remained low since the recession ended. One reason is lack of care options for family members. NYT
Trump to roll out executive orders on immigration and the Wall
Over the rest of this week, President Trump will sign orders to halt refugees from entering the U.S. for four months and temporarily ban entrants from some Muslim-majority nations. He’ll also sign an order to begin building a Mexican border wall. While he has authority to block refugees, Trump would need federal funding appropriated by Congress to build a wall. Fortune
Trump re-starts Keystone XL and Dakota Access pipelines
The actions urge review and approval of the two pipelines, which President Obama halted. The action helps energy companies, but environmental activists are calling for protests. WSJ
Trump moves to silence agencies
New orders reportedly limit how staff at the Environmental Protection Agency and three other agencies communicate with the public. Employees fear the move is an effort by Trump, a climate change skeptic, to stifle research and publicity on global warming. Reuters
Up or Out
Microsoft has named LinkedIn executive Kevin Scott its new CTO. Fortune
Fortune Reads and Videos
UK government seeks to stop employers…
…from forcing women to wear high heels. Fortune
Bob Evans Farms will sell its restaurant division…
…to Golden Gate Capital for $565 million. It will retain its packaged foods business and has bought Pineland Farms Potato Co. for $115 million. Fortune
Wine sales look strong…
…but labor shortages and legalized marijuana could slow this year’s projected 6% growth. Fortune
Fatal accidents in the construction industry…
…have increased to their highest level since 2008. Truck driving remains the deadliest profession, with 885 fatalities per 100,000 workers. Fortune
Sheila Johnson, co-founder of Black Entertainment Television (BET), turns 68 today. Biography