Archive for the ‘Integrity’ category

The Week in Ethics: Wells Fargo Culture Lessons 8 Months Later

May 21, 2017

After eight months of headlines, with likely more to come, Wells Fargo’s consumer fraud (affecting at the very least two million customers) echoes so many other corporate crises….what some of us did isn’t who we are. The drama playing out at the bank underscores the importance of companies regularly addressing how their values and actions align.

Wells Fargo certainly isn’t the first company in crisis where leaders have justified their efforts, defended their culture and blamed a few bad employees. Or been dropped from the list of most admired companies. Their approximately 235,000 employees and 70 million customers suggest they knew the check list of Leadership 101 as well as anyone, including: respect your customers, reinforce your code of conduct, make it safe for people to give you bad news, ask the right questions and expect answers.

And yet, it didn’t happen. Yet another company with a values statement that if followed would have avoided crisis. Touting values and ignoring them when making business decisions invites crisis.

In April 2017, Wells Fargo’s independent directors released the findings of an internal Sales Practices investigation report on the consumer fraud; it placed blame on specific leaders’ failings, organizational decentralization, sales integrity issues, and made a case for how the board was misled. The report identifies 10 corrective actions done or underway. While risk measures and having the ethics function report to the board twice a year is included, absent is the role of values in helping reshape culture.

The report pointed to culture chaos using a variety of descriptions: “culture of strong deference to management,” “sales culture,” “cowboy culture” and “insular culture” along with “company culture.”

Culture failures are hugely embarrassing. Changing leaders doesn’t ensure a culture regains health and purpose, especially if values have been passive, more marketing slogans than actually defining a culture. The report indicates that as early as 2002, there was evidence that sales goals couldn’t be met without “gaming” the system to the detriment of customers. The commercial bank unit had at least 14 years operating in conflict with the bank’s stated values which impact the spirit of the entire culture.

For years, Wells Fargo’s values statement has said: “We strive to be recognized by our stakeholders as setting the standard among the world’s great companies for integrity and principled performance. This is more than just doing the right thing. We also have to do it in the right way.”

This standard now needs to move from platitude to practical application. It needs to be looked at with humility and fresh eyes –no matter how long someone has been on the board or worked at the bank.

Questions the board and leaders should ask themselves and each other include:

  • What specifically (in behaviors and actions) do we want striving for integrity and principled performance to look like in 2017 and beyond throughout the bank?
  • What does respect for customers mean at every level and how will we demonstrate accountability in delivering it?
  • How do we expect leaders to show up in ways all leaders did not before?
  • How will we re-earn employee trust and inspire them to live (with us) the bank’s values?

There is distinction between aspiring to the highest operating standards and holding employees accountable to unattainable sales goals. The report indicated: “In many instances, Community Bank leadership recognized that their plans were unattainable….” Those goals were demoralizing and incentivized unethical behavior. While striving for the highest standards of integrity and principled performance can transform an organization.

In the words of Thoreau’s Walden “If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.”

The report likely won’t change the minds of opinion leaders angry at the harm caused to customers in their community. Short of extraordinary measures, the bank’s explanation of what it’s doing to right wrongs won’t generate quickly the trust Wells Fargo wants regained. That was evident last month at Wells Fargo’s annual Shareholders’ meeting by the “tepid” re-election of board members. The board chair’s defense “…the board took the appropriate actions with the information it had” falls short. However, a focus on the ethical implications of the report findings offer a direction to identify what integrity and principled performance will mean going forward.

Three additional lessons grow out of the Wells Fargo experience that address culture:

Wells Fargo’s report indicated direct reports and others recognized former CEO/chairman John Stumpf  disliked conflict and receiving bad news. This weakness impacts what is shared, held back and received by the board. CEOs often won’t see themselves as conflict or bad-news adverse, winning at any cost or not aligning business strategy with company values. Even when CEOs have the dual role of board chairman, (now separated at Wells Fargo) independent directors create success when they clarify leadership attributes expected, discuss areas of potential concern and ensure CEOs receive developmental support when falling short.

A board should monitor regularly, with HR facilitation, how company leadership shows up in feedback (surveys, town meetings and ethics hot line etc.) to enable a more complete picture. The Leadership Circle’s Leadership Culture Survey is one of the outside assessment tools available. It looks at the health and effectiveness of organizational leadership and measures the balance between creative and reactive leadership competencies.

Given the huge internal, reputation and financial costs of ethical failures, board members should consider recommendations in “The Ethics Officer as Agent of the Board” to leverage ethical governance capability. In addition to walking the talk themselves, they create focus when they reinforce organization accountability to live up to its stated values.

Gael O’Brien, May 21, 2017, The Week in Ethics

Gael O’Brien, a Business Ethics Magazine columnist, is an executive coach and presenter focused on building leadership, trust and reputation. She publishes The Week in Ethics and is a Kallman Executive Fellow, Hoffman Center for Business Ethics, Bentley University.

Additional Wells Fargo columns: Where Wells Fargo Goes From Here (December 2016) and Wells Fargo’s Next Move? 10 Suggestions (September 2016)

The Week in Ethics: Wells Fargo’s Next Move? 10 Suggestions

September 22, 2016

Update: See my 12/10/16 Business Ethics column on Where Wells Fargo Goes From Here .

Update: In October 2016 Timothy Sloan replaced Chairman/CEO John Stumpf, becoming CEO and President. The chairman role was split and given to independent lead director Stephen Sanger.

Update: September 27, 2016: Wells Fargo Independent directors issued a statement  they will lead an investigation into “the bank’s retail sales practices and related matters” with the Board’s HR Committee and independent counsel. Chairman/CEO John Stumpf to forfeit $41 million unvested equity awards and “will forgo salary during the investigation.” The U.S. House Financial Services Committee will hold a hearing on bank’s “unauthorized customer accounts” on 12/29/16.

How will Wells Fargo resolve the ethical and culture issues it faces? And, how will it move beyond a poor showing at the Senate Banking Committee hearing and start to rebuild trust? First some background. Then 10 suggestions.

The best thing a CEO with strong convictions about the “rightness” of his/her own position can do when embroiled in a crisis is to spend time with trusted sources (inside or outside their company) who see things very differently. Being open to these viewpoints and questions iphone-pictures2-222and multiple perspectives raised make it harder for  CEOs to stay wedded to their position. However, once a CEO is under fire the temptation to stick with like-minded people can increase. What’s lost then is stimulation to think deeply about different aspects of an issue to gain new insights and awareness that enable developing alternatives legitimately aligned with values. Being stuck in “rightness” can lead to error blindness, a term popularized by Kathryn Schulz  who points out, “Trusting too much in feeling you are on the right side of anything is dangerous.”

It can lead to decisions that put a CEO on the defensive in front of a U.S. Senate hearing, as John Stumpf Chairman and CEO of Wells Fargo experienced September 20, 2016 testifying before the U.S. Senate Committee on Banking, Housing & Urban Affairs.

Stumpf was questioned about the bank’s unauthorized accounts and allegations of a pressure-cooker sales culture which became public in 2013 (Los Angeles Times story) and continued. Wells Fargo has fired 5,300 employees, paid a fine, faces an investigation into its sales practices by New York and California federal prosecutors and can anticipate an upcoming hearing by the U.S. House Financial Services Committee in addition to follow up from the Senate Banking Committee. Earlier this month The U.S. Consumer Financial Protection Bureau filed a consent order outlining findings of the bank’s “improper sales practices”from 2011 to 2016.

A few days before the Senate hearing Stumpf, in an interview, disputed Wells Fargo has a culture problem. He maintained that stance with Senate committee members, while indicating changes the Bank planned to make. However, the bipartisan committee was united in criticism that Stumpf, the Board and senior leadership hadn’t gone far enough, fast enough and weren’t showing accountability. From the Republican Committee chair to Democratic challengers, Senators didn’t buy that the bank’s culture isn’t an issue.

Where does this leave Wells Fargo? Anyone who has been through corporate crises — as I and many others have — knows that criticism from outsiders is hard to take. However, there are huge pitfalls if Mr. Stumpf stays locked in the “rightness”of his position (in spite of his 30 plus years service at Wells Fargo, presiding over several of its acquisitions and knowing his industry and company better than outsiders).

His performance at the Senate hearing this week indicates his time has been spent with legal and public relations teams and like-minded insiders. Getting out of a crisis, turning around a culture and re-earning political and public trust, doesn’t happen by working harder with the same mindset. (The much touted definition of insanity is doing the same thing over and over and expecting different results.)

I’ve limited myself to 10 suggestions for Wells Fargo to support the start of a turnaround:

  1. The board should appoint a new chairman — an independent director — separating the role from the CEO for many reasons including signaling stronger board governance.
  2. The board should immediately decide about claw backs related to compensation of former head of community banking Carrie Tolstedt, Stumpf and any others. As part of re-earning trust, all their actions should be transparent and well communicated.
  3. The board should direct Stumpf and his team to meet with Wells Fargo’s ethics and compliance teams and risk officers to discuss/evaluate ethics, compliance and risk operations for strengths, weaknesses and safeguards to better integrate sales and all business strategies with corporate values and prepare a report for the board.
  4. The compliance and ethics leaders (and C-suite leader to whom they ultimately report) should initiate meetings with leaders of the Ethics & Compliance Initiative and the Society of Corporate Compliance and Ethics to address best practices, implementation challenges and examples where ethics and compliance leaders weigh in on business strategy discussions in sales and all areas.
  5. The board and senior management should identify outside experts to discuss how to  realign authentically culture around values. A place to start is the nearby Markkula Center for Applied Ethics.
  6. Stumpf and his management team should become acquainted with Margaret Wheatley’s concept of self seal (the rightness of one’s position), Kathryn Schulz’ TED Talk (error blindness) and Margaret Heffernan’s  Willful Blindness for starters. These are lenses that encourage conscious and unconscious unethical behavior.
  7.  A cross-functional team of senior leaders with ethics and compliance leaders should review the company’s five primary values; for each, identify five or six specific expected behaviors to be incorporated into company policy and discussed in ethics training and performance reviews. Currently, the values are too abstract.
  8. Under the value “Ethics” the company says “We strive to be recognized by our stakeholders as setting the standard among the world’s great companies for integrity and principled performance. “This should become a business objective with Board and CEO focus to keep this commitment at the center of the turnaround’s activities.
  9. At the upcoming House Financial Services Committee hearing, Stumpf and those testifying can start rebuilding trust by being fully prepared to answer questions directly and completely, having with them information relevant to committee questions. Stumpf should also make himself available to Senate Banking Committee leadership to make sure information provided since that hearing addressed open questions.
  10. Trust is a relationship where “integrity” and “principled performance” are realities, not marketing slogans. In relationships with employees, customers, customers affected by unethical actions, employees pressured by aggressive sales tactics, Wells Fargo leaders have to admit what went wrong and make systemic changes. A start is to amend the vision statement that says “We want to satisfy our customers’ financial needs and help them succeed financially” and add “in ways that build lasting relationships of trust and integrity.”The Week in EthicsGael O’Brien, September 22, 2016Gael O’Brien is The Ethics Coach columnist  for Entrepreneur Magazine. She is also a columnist for Business Ethics Magazine where her September column is “One man’s Leadership Toward a Goal: ‘The Great Mission of Business Ethics.'”

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The Week in Ethics: Is Ethical Leadership Contagious?

July 24, 2013

If you were trying to foster ethical leadership in your organization, could anything make it “contagious?”

For starters, labeling it as “ethical leadership” might not take you as far as you’d like. How often do people say they are on board, “get it” and don’t need more?  While they might be willing to read about or take courses in strategic or global leadership, for example, many equate ethical leadership with what they learned growing up; if they need to spend more time talking about it, it might look like they are deficient in Golden Rule 101.

That’s the problem with blinders leaders, high potentials and any of us can have about our own ethical development — why it can suddenly be hard to give voice to values (because we’ve never thought about a potential conflict that suddenly surfaces) or why decisions are made weighing only legal and financial consequences (without noticing the potential for unintended ethical consequences) or why we need to be right.

When we talk about ethics and leadership in organizations, we need to translate it into values and behaviors we want visible in the culture that in turn build off a company’s values. While we say that ethical leadership encompasses the highest personal and organizational standards that vagueness creates an abstraction where everyone “gets it”  in theory, and can overlook it in practice.

Our language sets up creating the norm of what the organization stands for — and the behaviors supporting that — which then demystifies and brings the type of leadership we want to see and cultivate into day-to-day reality. If those qualities are talked about in examples and stories when the CEO meets with the board, direct reports and others; if they are linked to business success, reinforced in informal and formal mentoring programs, meaningfully incorporated into performance reviews, and play a role in why people get recognized, promoted or let go: the norm can be imitated and then owned.

Emotional Intelligence (EQ) is increasingly being reinforced in organizations as a way to develop leaders and help them succeed. (See Daniel Goleman’s What Makes a Leader.) Reinforcing EQ reinforces attributes important in ethical leadership so it is a win-win.

Some resources for thinking about how ideas can take hold in a culture include Contagious: Why Things Catch On by  Jonah Berger (video above) and the books that fueled his thinking: Gladwell’s The Tipping Point and the Heath brothersMade to Stick.

Applying that to what could make ethical leadership contagious involves first looking at what  natural advantages exist in your culture to tap into to help ideas take hold. Then, what ideas might offer perceived value. For example, creating a special leadership forum site with links to good articles, blogs, book reviews and news stories fosters leadership development that reinforces the norm you want, with triggers to keep the subject top of mind, while saving leaders’/potential leaders’ time in finding useful information they can apply and share with others. Launch it with a sense of exclusivity: perhaps needing a password. Enlist the support of admired leaders in the organization to make reference in meetings to an article on the site they liked, and find other ways to have the site talked about and positioned as a place high potentials go for useful leadership tips. Who wouldn’t want to be considered “high potential”?

How do the values and attributes of ethical leadership become contagious in organizations?

They are modeled by the board, CEO and other leaders. They are talked about and interrelated with business and personal success. They are mentored and cultivated, enmeshed in the culture’s stories and allied with how people feel/see they can make a difference. They are linked to reducing stress. They are connected to what stakeholders’ value, attached to what it takes to belong and reinforced throughout the organization.

Gael O’Brien July 24, 2013

The Week in Ethics

Gael O’Brien is The Ethics Coach columnist for Entrepreneur Magazine. Gael is also a columnist for Business Ethics Magazine; her November 6, 2013 column looks at whether loyalty is owed when a boss acts as a good leader. 

The Week in Ethics: Wisdom in Action, Andrew Pochter and Martin Richard

July 13, 2013

Our individual wisdom is what shapes our leadership and determines our humanity. It comes out of how we see, feel and interpret joys and sorrow in life and what we’ve learned from others.

How we live and act on our wisdom is our legacy, a true measure of how we inspire and impact others.

The deaths of eight-year old Martin Richard in the April 2013 Boston Marathon bombings and Kenyon College student Andrew Pochter, a bystander in Egypt’s June 2013 political uprising, are among the more recent tragic consequences of a world-wide breakdown in wisdom when intransigent intolerance and random violence become the overpowering language.

Martin Richard cropA makeshift memorial in Boston’s Copley Square, bound on three sides by what seemed like thousands of running shoes, framed the tributes to those killed and the more than 260 injured in the bombings near the finish line of the Boston Marathon.

Martin’s parents were injured in the blasts and his sister, an aspiring dancer, lost a leg. The tribute to Martin focused on his own words: “No more hurting people. Peace.”

He had written that message on a poster for a class project after 17-year old Trayvon Martin was killed in Florida.

Andrew Pochter was in Alexandria, Egypt for an internship teaching English to children Martin Richard’s age when he was stabbed to death watching a protest. He had planned to return after college, his parents said, “to live and work there in pursuit of peace and understanding.” At his funeral July 12, 2013, his sister read a letter he had sent recently to a 12-year old he’d been mentoring the previous five summers at a camp for at-risk youth in Maryland. The camper was graduating from the program.

In the letter, Andrew congratulated him on all he’d accomplished, called out his strengths and offered snippets of Andrew’s own wisdom, telling the 12-year old: to surround himself with friends who do “good deeds” and care about his future, not blame others for their mistakes, and speak with confidence “because your personal confidence is just as important as your education.”

We can’t know what Martin or Andrew or any of the thousands of youth killed each year by political, religious and sexual violence or other forms of rage could have contributed by their leadership had they lived. However, globally there has been a huge loss of potential talent and contribution. We know that Martin and Andrew, among so many others, knew the wisdom of peace.

That legacy in a world torn up by intolerance — the opposite of peace — fueled by the legacy of so many others who died in service of peace demand that leaders at every level start by acting on their wisdom to rout out intolerance in their own spheres crippling governments, workplaces, families, and communities, and then advance the conversation to act globally.

Intolerance is poison. The lyrics of “You’ve Got To Be Carefully Taught” in the iconic 1949 musical South Pacific (which Rodgers and Hammerstein adapted from James Michener’s Tales of the South Pacific) continue to resonate through Broadway revivals and community theaters. It reminds us of what we have yet to undo:

“You’ve got to be taught to hate and fear….You’ve got to be taught before it’s too late, Before you are six or seven or eight, To hate all the people your relatives hate, You’ve got to be carefully taught.”

Gael O’Brien July 13, 2013

The Week in Ethics

Gael O’Brien is The Ethics Coach columnist for Entrepreneur Magazine. Gael is also a columnist for Business Ethics Magazine; her June 2013 column looks at leadership vulnerabilities of departing OSU president Gordon Gee.

The Week in Ethics: Leadership Lessons at American Academy of Arts and Sciences

June 18, 2013

column photo of ethics under microscope The integrity of the leader of an honorary society for independent public policy — founded  in 1780 during the American Revolution — is  under question as a result of misrepresentations on her resume and criticisms from former employees over her bullying, micromanaging management style.

While there is never a good moment for negative media attention, it is coming at a particularly awkward time for the American Academy of Arts and Sciences. It is landing on the eve of the June 19, 2013 release of a commission report the academy has guided for more than two years, expected to offer far reaching recommendations for education and cultural institutions.

Leslie Berlowitz, the head of the academy for the last 17 years, is now on leave while an internal investigation by an outside law firm addresses issues raised in a series of articles in the Boston Globe in June 2013. The articles indicate that the academy’s applications for at least three federal grants list Berlowitz having a doctorate from New York University (NYU) that NYU has no record of her completing. The National Endowment for the Humanities, which gave $1.2 million to the academy based on grant applications that included Berlowitz’s inflated credential, has referred the issue to its inspector general.  The Massachusetts Attorney General’s Office (charged with overseeing nonprofits) has also announced an investigation. Two others who gave grants to the academy (US Department of Energy and Carnegie Corporation of New York) are checking to see if false information was provided on their grant applications.

The articles indicate that in checking her resume against NYU records, where she worked before joining the academy, a job title for one position is misstated and length of service for another is misrepresented.  Academy employment ads refer to Berlowitz as “doctor” and further investigation by the Globe reporter found an email two years ago from Berkowitz where she implied she had a doctorate.

A month after turning down requests to be interviewed by the reporter and two weeks after the first Globe story was published, Berlowitz said in a statement that she “never intentionally misrepresented her accomplishments,” accepted responsibility for materials that left “an incorrect impression,” and acknowledged that she had the title of vice president of institutional advancement at NYU rather than academic advancement which, the Globe reported, has appeared on the academy website and in grant applications.  An academy spokesman originally blamed Berlowitz’s staff for resume errors, saying she was unaware of them.

The profile that emerges in the article is of a board/governing council extremely supportive of Berlowitz, who in 2004 bypassed the normal election process for membership into the Academy of Arts and Sciences — which honors the most accomplished scholars, innovators, and artists in their fields — when they added her as an inductee. They quietly inserted her name into “the original six-month-old announcement, a spokesman acknowledged, making it look as though Berlowtiz had been voted in along with everyone else in the spring.” Berlowitz’s $598,000 salary — higher than many college presidents’ — and first travel perks also indicate Board support. Former employees quoted in the article indicated the board ignored complaints about Berlowitz’s management style made to them.

The significant number of former employees willing to talk (anonymously and as named sources) to the Globe about their criticisms of Berlowitz’s leadership, calling her management style bullying, harsh, dismissive and micromanaging raise the question of what is motivating them. Is it a set up or revenge by those who believe they were treated badly capitalizing on her current vulnerability? Or is the issue an outcome of a detached governance process with too heavy reliance on the internal leader and no means to ensure that the leader’s management style and the organization’s work environment are functional and appropriate?

Either way it offers a cautionary tale about leaders vulnerability when they are unaware of the impact their leadership tone, style and communication have on employees; or worse, when they ignore or rationalize that impact without seeking to address it.

The unfolding saga at the academy also sends a message to boards that they have a responsibility to help an organization’s leader succeed by not just looking at the results, but being aware of the impact a leader is having on the larger team; and when there are red flags, stepping up to ensure the leader gets coaching in emotional intelligence or other issues, monitoring his or her workplace performance to be clear about expectations of improvement.

The academy’s purpose is to honor excellence. The need for all the investigations indicate that excellence has been compromised in terms of how the academy and their leaders have operated internally. Restoring integrity will involve transparency about the investigations’ findings, dealing directly with allegations about Leslie Berlowitz’s leadership, and putting as high a priority on how things are done internally as the achievements that result from them. The founding fathers would expect no less.

Gael O’Brien June 18, 2013

The Week in Ethics

Gael O’Brien is The Ethics Coach columnist for Entrepreneur Magazine. Gael is also a columnist for Business Ethics Magazine; her June 2013 column looks at leadership vulnerabilities of departing OSU president Gordon Gee.