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Wells Fargo CEO resigns due to scandal

Courtesy of JUSTIN RUCKMAN
Courtesy of JUSTIN RUCKMAN

The CEO of Wells Fargo, John Stumpf, recently announced his resignation in the midst of company fraud.

Stumpf has also resigned from his position on the Target and Chevron board.

Earlier this year, it was discovered that employees had opened credit and bank accounts for their clients that had not been requested since 2011, according to CNN. It is believed that 1.5 million unauthorized accounts were opened during this time.

“The phony accounts earned the bank unwarranted fees and allowed Wells Fargo employees to boost their sales figures and make more money,” according to CNN.

This worked by moving money from existing accounts to others without consent. The organization also submitted over half a million unauthorized credit card applications.

“Roughly 14,000 of those accounts incurred over $400,000 in fees, including annual fees, interest charges and overdraft-protection fees,” according to CNN.

Over 5,000 employees have been fired over this scandal.

When asked about the CEO resigning DeNisha McCollum, professor of business at John Brown University, believed that he did the right thing in stepping down.

“In this case, a significant trust has been broken between Fargo and its stake and shareholder communities, and in circumstances such as these, new organizational leadership presents the best opportunity for the beginning of the restoration of such.”

McCollum said she believes this is consistent with what other CEO’s have done in similar situations.  “What is perhaps somewhat unique in this situation is that there are no current pending legal actions against Mr. Stumpf.”

“It is the responsibility of organizational leadership to set the tone and expectations for an the ethical culture within their organizations, regardless of size or scope,” she said

“While he may or may not have had direct knowledge of these more specific profit generating practices, other leadership within organizational ranks undoubtedly did. And again, it remains the responsibility, and I believe obligation of senior leadership to know just as much about how profitability is being achieved, as it is to be aware of when and why profits are lagging. ‘Don’t ask, don’t tell’ is a poor excuse for absent leadership.” McCollum said.

According to CNBC, Wells Fargo has named Jim Sloan the new CEO.