Wells Fargo

When Corporate Culture Fails, Shareholders Pay

“You were given the choice between war and dishonor. You chose dishonor, and now you will also have war.” — Winston Churchill

Buffett is a shareholder of Wells Fargo, and as the title of the article suggests, he’s paying for the privilege (in the $ billions, enough to fund several new tech unicorns).

This reality is in stark contrast to the banal phrasing many managers will repeat as a mantra to warn away evil spirits, such as “do the right thing.” Saying so doesn’t make it so. Most of what corporate ethicists say can be inscribed on the inside of a Hallmark greeting card. The impact is about the same.

When will we learn ethics is a matter of choice? Parents used to say you didn’t know how good a job you did until your kids became teenagers. Similarly, corporate culture isn’t tested until it faces an ethical dilemma.

For Warren Buffett, ethics is business model. He goes out of his way to avoid conflict of interest. He doesn’t take a dividend, he and his board are paid paltry salaries, less than any other in the Fortune 500.

His rationale, there’s no point to skimming the take if you’re not planning to take the skim.

You might say, Buffett is so successful just doing ordinary business with his brain and a spreadsheet, why take a chance?

So why did Wells Fargo take the chance? That question is certainly not lost on the 5,000 employees of Wells Fargo who gave up their jobs or the company’s shareholders who paid nearly $200,000,000 in fines. Nor to CEO, John Stumpf, whom Elizabeth Warren gave the worst public flogging on Capitol Hill since automotive CEOs flew their $65 million Gulfstreams to a Senate hearing.

Warren Buffett is Wells Fargo’s largest investor, which is ironic since he takes reputation so seriously. But for Buffett, Wells Fargo is an investment, it’s not his company nor his employees. He doesn’t control their actions or as an outsider is he privy to the self-dealing.

While investigations and inquiries are ongoing, both by board and Government, one can only hazard a guess. Why does anyone do wrong when it’s likely to backfire? The short answer is ego allows us to think we will get away with it. Secondly, our flawed sense of proportion deludes us into believing what we do incrementally will not amount to much.

But it’s too bad the board and senior management didn’t take his instruction to heart. They could have saved themselves and the company a bundle — of reputation. The long term fallout over this fiasco can’t be easily calculated. For a parallel, ask Exxon Mobil what it would have paid to avoid the Exxon Valdez wreck?

At the conclusion of the 1990’s Salomon crisis, where Buffett was also largest shareholder, a bond trader stupidly violated US Treasury regulations. Buffett issued employees this stern warning: “If you lose money for the firm I will be understanding. If you lose reputation I will be ruthless.”

Watch Warren Buffett describe his “ethics letter heard around the world”. For the full length video go to: www.IconicVoices.TV.

Author of “Be Somebody — Extraordinary Lives” (published 2021); 2019 Telly Award for Documentary @IconicVoices.tv; ex-publisher @Forbes

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