Beached by Bad Judgment: Another Challenge for Wells Fargo

Posted On: Saturday, September 19, 2009

Wells Fargo has an important question to figure out: was their recent public relations crisis caused by a renegade employee who ignored the rules, and operated outside the culture, to get what she wanted, and if so, what are the gaps that allowed that to happen? Or, could she do what she did precisely because the culture allowed her to?  The senior executive in question was fired this week for violating conflict of interest rules.
The bank’s internal investigation found that Cheronda Guyton, a senior vice president in Wells Fargo’s foreclosed commercial properties division, made personal use of a multi-million dollar beach house in the fabled Malibu Colony. Its owners were forced to sign over the house to the bank nearly four months ago. The investigation was triggered by complaints by the gated-community’s residents that the house wasn’t put on the market and a homeowner’s parking pass was issued to Guyton, who appeared to move into the elegant property with her husband and children. Guyton  entertained guests there, including hosting a party where dinghies from a yacht ferried people to the house. The bank’s public statement didn’t clarify whether any bank employees or current or prospective bank customers were ever entertained there.

The media was all over the story. The Malibu Colony is famous for the generations of Hollywood celebrities who’ve lived there. The owners of the house had lost their fortune in Bernie Madoff’s fraud which led to their signing over their  property to the bank. And reputation hits were becoming too common for Wells Fargo. The bank, a recipient of $25 billion in federal bail out money through TARP, suffered public relations fallout this year from their plans to have lavish employee recognition events in Las Vegas and huge pay increases for its top four executives, which appeared to get around TARP’s limits on executives’ non-salary compensation.

Wells Fargo said in its statement that their investigation found that the employee acted alone in violating bank policies. The statement said her conduct does not reflect what Wells Fargo expects of team members. Wells Fargo has now put the house, reportedly valued at $12 million in May, on the market for $21.5 million. While the investigation’s conclusion may be code to the media that the company operated in a timely way, fired the culprit and there isn’t a public relations issue anymore, that shouldn’t be the end of the story. The CEO now has a role, if he hasn’t assumed it already.

Behaving unethically in the workplace can go undetected especially if a code of conduct is not top of mind in an organization, if questions aren’t asked, or if isolated silos or individual players seem to have different rules and don’t come under scrutiny. In ordinary circumstances, Guyton’s astonishingly bad judgment should be a red flag to the bank that she had a boss and her boss’ boss who apparently didn’t know — and should have — how she was handling a significant bank asset.

These aren’t ordinary times. In the current debate of the financial meltdown’s causes and best remedies – and in light of the increased scrutiny being given to financial institutions, especially those receiving TARP funds – how Guyton could get away with her four-month Gatsby impersonation is a question that should keep the CEO awake at night.

Ethical leadership is about leading by example and having employees who can self-regulate. When that doesn’t happen, the CEO needs to ask why. Guyton was trained, supervised and mentored at Wells Fargo. A number of people had to have been involved in her career, evaluating her performance. What was the breakdown? A bad apple no one spotted,  or someone who saw gray areas and thought she could get away with it? The CEO could learn a lot about how the message of company values on the website broke down in daily application. It will tell him whether she acted alone or had unwitting accomplices.

Gael O’Brien is a catalyst for leaders leading with purpose and impact. She is an executive coach with a corporate and public affairs background. Gael is President of Strategic Opportunities Group.

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