This week we look at the principle-agent problem and what went wrong at Wells Fargo. On March 28, 2019, Tim Sloan, the CEO of Wells Fargo, who was supposed to restore the bank’s reputation, stepped down. After a very poor showing by Sloan in testimony about the bank before Congress and with long-standing restrictions by the Federal Reserve still in place, the bank seems unable to overcome the crisis created by a whole collection of deceptive practices which rose to the level of fraud. (For more information, refer to the 2018 article “Fed Won’t Lift Wells’ Growth Cap Until Deficiencies Are Fixed: Powell” from American Banker.)
On October 21, 2019, Charles Scharf officially assumed the role of CEO. Can he succeed in restoring the reputation of Wells Fargo as the bank that always does the right thing? This week’s discussion will provide you with an opportunity to put yourself in the shoes of someone advising Mr. Scharf.
For this discussion, you are going to advise Mr. Scharf on a key issue.
What about the incentive system employed by Wells Fargo resulted in massive creation of fake accounts by the retail operation? And why did it only get worse from there?
As you dig into this issue, remember Froeb’s rule from Chapter 1: “Avoid the temptation to think about the problem from the employee’s point of view . . . [and ask] how does the organization give employees enough information to make good decisions and the incentives to do so?” (1).
Your post for this discussion should answer the question above and address components of motivation and incentive in order to present Mr. Scharf with reasonable and evidence-supported advice on this issue.
Luke M. Froeb. 2018. Managerial Economics: A Problem Solving Approach (5th ed.). p. 8. Cengage.
Note: In your discussion posts for this course, do not rely on Wikipedia, Investopedia, or any similar website as a reference or supporting source.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more