The Privilege of Being Wells Fargo
Last week, Wells Fargo was fined $1 billion by the federal government. Yes, that's Billion with a B!
The idea that a company's actions are so egregious that it is punished with a fine this big is beyond most peoples' understanding. And just to confirm, I don't believe that this is about most of the Wells Fargo employees, it's not. Most of them are good people working hard to support their family and their communities.
This is about institutional malfeasance, cultural deception and pure greed. This is a corporation that replaced human values and ethics purely for bottom-line enrichment.
Banks are supposed to help people. You make a deposit and they pay you some interest. They take that deposit and lend it to your neighbor to buy a house or start a new business. They support organizations in the community - not because of the PR value, but because it's the right thing to do. We see this with institutions like Self-Help Credit Union, which has eliminated the profit motive and replaced it with an environmental and community improvement motive. We see the same thing in commercial banks like Certified B Corps, New Resource Bank and First Green Bank.
But back to Wells Fargo. One Billion Dollars - sort of makes you think of Dr. Evil, doesn't it?
In a way, it's sort of the same. Banks hold consumers hostage because we need them. Few people can buy a new car, much less a house without loans and mortgages. Banks have the power to make or break your financial future.
But when Wells Fargo's first quarter net income was $4.7 billion, why would they really care about a measly $1 billion fine. Fines simply become a cost of doing business. Sort of like they do in mining and other extraction industries. Being bad only has a dollar sign associated with it - not the face of the person who is being exploited.
Ironically, when the fine was announced, shares of Wells Fargo went up 1.8% - the market was relieved that the punishment hadn't been worse.
So, the reality is that this huge fine won't do much to punish Wells Fargo. Sure, the government can now monitor individual employee actions closer and push to remove bad players, but the institutional practices won't change. It's still about the bottom line.
One of the reasons I mentioned New Resource and First Green Banks above is because they're Certified B Corporations (just like Earth Equity Advisors.) That certification lets you know that the company honors stakeholder value when making business decisions, not just shareholder value. This is an important distinction between a B Corp and a traditional corporation. B Corps are evaluated based on:
- Environment impact
- Employee welfare
- Customer treatment and products & services offered
- Community involvement
- Governance & transparency
Can you imagine how Wells Fargo would score on that evaluation? And here's another irony for you: According to the book, Firms of Endearment, companies that consistently place a priority on stakeholder value, outperform those that focus only on shareholder value. Makes sense, doesn't it?
Companies are granted the privilege to incorporate "for the public good." This is not just B Corps, but all corporations. When companies don't live up to that public good ethic, should their corporate charter be revoked? When a mining company repeatedly disregards regulations that result in the deaths of workers, or a chemical company has spills and other polluting events regularly, should they be given this corporate death sentence?
How about a bank that consistently takes advantage of its customers, opens fake accounts, overcharges them and has a hand in causing devastating credit defaults? State and Federal regulators have the ability revoke corporate charters. Perhaps, since fines don't seem to work, maybe the only option is the corporate death penalty? Hey, the Supreme Court said that corporations are people, so why not?