In 2016, when Wells Fargo (WFC) was fined $185 million for widespread cross-selling, the bank began a process of self-introspection.
Cross-selling, the practice of selling additional products to customers purchasing goods and services, was found to be an abused practice among the bank's employees.
When a customer would agree to add, for example, a credit card to an existing checking account, that wouldn't have been a problem.
But Wells Fargo employees were found to be signing customers up, even forging signatures, for financial products they had not agreed to.
At first, blame fell on the employees. But it was soon discovered the incentive structure for the employees was so intense from the top down that there was undo pressure on them to cheat.
Wells Fargo's Transformation Plan
Problems continued for years, but in 2016, after reviewing practices at the bank, it had at least begun a formal transformation process.
"We are committed to transparency as we examine our company, fix the issues we find, and make things right. We have made significant strides: We are simpler and less complex, and we have made fundamental changes to the way we approach risk management," Wells Fargo said in a 2019 report.
The report cited a new organization structure, revised incentives and improved customer experience as a few steps the bank had taken to address problems.
Wells Fargo says the transformation is ongoing.
Charlie Scharf Turns Down Raise
Recently, when CEO Charlie Scharf was offered a pay raise, he declined it, citing the transformation journey.
In a report to the Securities and Exchange Commission (SEC), Wells Fargo discussed the matter in print.
The bank said, based on individual performance, that Scharf was offered compensation of more than $27 million.
"Prior to the HRC (Human Resources Committee) reaching its recommendation on CEO compensation, Mr. Scharf approached the Chair of the HRC and asked the HRC and the Board to consider not increasing his compensation," it said in the report. "Mr. Scharf acknowledged the strong performance of the Company and significant progress in its transformation journey but noted the remaining work left to be completed and therefore, did not believe an increase in compensation level was appropriate this year."
In the end, Scharf passed up the opportunity to make more than $27 million this year and will have to get by with a mere $24.5 million.
