Elizabeth "Betsy" Duke, board chair of the scandal-plagued Wells Fargo, said Monday that “siloing” and sheer size are the biggest threats to a company's culture.
Speaking at a conference in New York, Duke, who took over as board chair in January, discussed the experience of leading the San Francisco company amid its recent string of scandals, as well as takeaways for others in the industry.
In her remarks, Duke said that siloing can establish subcultures within a company and prevent leaders from having a “single view” of what’s happening. In the aftermath of its phony accounts scandal, Wells, which at one time viewed its decentralized structure as a competitive advantage, has taken steps to consolidate a number of its corporate functions, including risk and human resources.
Duke also said that scale can be disruptive to a company’s culture. At small community banks, bad conduct can be quickly dealt with, but at larger companies small problems can often fester and become much bigger problems down the road.
“Scale has a lot of very positive impacts on companies, but as companies have gotten larger and larger” problems that emerge are much more visible, Duke said, speaking on a panel discussion on corporate culture at the New York Fed.
“What might be a very tolerable failure rate in a small community bank ... if you have that same problem at Wells Fargo, it’s going to affect hundreds of thousands of people,” she said.
The remarks come as Wells struggles to turn the page on nearly two years of reputational problems. In addition to revelations that its employees’ opened as many as 3.5 million accounts without customers’ authorization, the $2 trillion-asset company has uncovered misconduct in auto lending, mortgage and business lending divisions.
Asked what went wrong at Wells, Duke recalled joining the board in 2015, at a time when Wells’ marquee reputation was still intact, and then discovering shortly thereafter that the company had big problems lurking under the surface.
“You can imagine how shattering it is to realize that there are things going on in your organization that you are not seeing,” she said, noting that it’s a risk facing boards at banks across the country.
While Duke avoided going into detail about Wells’ rehabilitation efforts, she said that the company has taken steps to figure out the root of its cultural problems.
For instance, she said the company hired an academic in 2017 to conduct an extensive culture survey. The survey has helped company leaders understand some of the “subcultures” that exist within the company.
Duke also said that Wells will emerge stronger from the “self-examination” it is going through today.
“Wells Fargo will be a better company for the wake-up call that we have had—better than we would have been if we would not have come to this intense self-examination,” Duke said.