Trust is the Bedrock Beneath Every Lead With We Business — Part 7 “Redeeming Trust After Scandal”
This post is the seventh in a series of eight that examines the bedrock beneath every Lead With We business: Trust that builds reputation, culture, sales, and loyalty during a time of crisis.
The best news about trust in business is that it can eventually be redeemed. For example, today, thanks largely to an enforced revolution inside Volkswagen — including a pledge to become the global leader in electric car batteries — the German-based brand enjoys a stable share in the second position worldwide, behind Toyota but ahead of Honda, with 70 percent of the US passenger-car diesel market.
VW paid its debt to those it cheated in 2015 — $14.7 billion, to be exact, and undertook an extensive “Good Will” campaign, seemingly sincerely.
VW took the scandal head-on and pivoted to seek to become the leading alternative energy company in the world. It even addressed its past deception in a series of ads for its electric cars.
The hard-won lesson here is that there is a way back from the brink. You own up to your mistakes. You regroup. You take a vow of honest dealing. And you commence to Lead With We. There’s no other way to rebuild trust.
“New beginnings are often disguised as painful endings,” goes the folk wisdom. VW isn’t alone in this arena. British Petroleum (BP), largely responsible for the Deepwater Horizon disaster in 2010, which dumped 5 million barrels of oil into the Gulf of Mexico, offered free fuel to emergency services during the 2020 pandemic, moving it closer again to a trusted brand.
Another company forced to confront its absence of Lead With We culture because of a scandal, Wells Fargo (WF) emerged chastened, strengthened, and more impactful than before. According to the Harvard Law School Forum on Corporate Governance:
Wells Fargo has long had a reputation for sound management. The company used its financial strength to purchase Wachovia during the height of the financial crisis — forming what is now the third-largest bank in the country by assets — and emerged from the ensuing recession largely unscathed, with operating and stock price performance among the top of its peer group. Fortune magazine praised Wells Fargo for “a history of avoiding the rest of the industry’s dumbest mistakes.” American Banker called Wells Fargo “the big bank least tarnished by the scandals and reputational crises.” In 2013, it named Chairman and CEO John Stumpf “Banker of the Year.” Carrie Tolstedt, who ran the company’s vast retail banking division, was named the “Most Powerful Woman in Banking.” Wells Fargo ranked 7th on Barron’s 2015 list of the “Most Respected Companies.”
And then it all went to pot. The culture that exacerbated its “cross-selling” scandal arose out of a similar ethos that led to VW installing deceptive software in its cars. WF branch management aggressively insisted its salespeople upsell, establishing daily targets, compounding branch quotas, and financial incentives for cross-selling.
This tone, set from the top, led to fraudulent practices, mainly salespeople opening new accounts, and issuing debit or credit cards without customer knowledge — sometimes even forging customer signatures to do so, to the tune of nearly 2 million accounts.
Starting in September 2016, WF paid $185 million to settle a lawsuit filed by regulators. Its stock dropped. It paid back customers $2.6 million for fees associated with fraudulent accounts. It fired 5,300 employees over the next five years.
Although the initial financial repercussions were relatively trivial, “the reputational damage proved to be enormous,” Harvard reports — and here we start to see a pattern develop. CEO John Stumpf was hauled in front of the US Senate to defend his company’s fraud to the likes of Sen. Elizabeth Warren (D — Mass). Thereafter, the company started to rebuild from the ground up.
By 2019, it was continuing to take actions that matter and multiply. Because so much of WF’s core business intersects with assisting small businesses with loans and other banking services — and because small businesses, especially minority-owned establishments, were disproportionately affected by COVID-19 — the company saw a win-win opportunity there. If small businesses in a community wither, the economic roots and branches die soon after.
WF’s resultant “Open For Business” program, backed by about $400 million, and funded by gross (rather than net) donations from the federal Paycheck Protection Program (PPP) processing fees, funneled the money to nonprofit organizations that then provided support to mostly minority-owned small businesses. You want the public to trust you’re on the right track — solve a significant problem they care about.
WF has further committed to contributing up to $50 million to Minority Depository Institutions (MDIs). These funds will go to essentials like mortgages and small business loans in Black communities. Nate Hurst, Chief Sustainability & Social Impact Officer at WF tells We First: “I think it’s driven a sense of pride. It’s helped evolve some of the culture and show that we are a company that is best when we come together.” That cultural evolution took a took a few years.
Fast forward to September 2020. WF CEO Charlie Scharf found himself prostrate, profusely apologizing after he blamed the ongoing lack of diversity at his bank on “a very limited pool of Black talent to recruit from.” File that under What was he thinking?
The next month, the company had to fire 100 workers for conspiring to steal pandemic relief funds. Back to the drawing board in rebuilding public trust.
I get no gratification from recounting such a brutal step backward by a business that seemed to be leading its way out of problem territory. I employ Scharf’s story instead to remind us all of two key things. That the words and actions of every stakeholder affect all the others and people way beyond.
And that to Lead With We is an unending process — not a final destination. Nobody is perfect. We don’t need to be perfect for this to work. We need to be better. And we (individually) become better when we become We — collectively.