Two Million Fake Accounts: Sales Misconduct at Wells Fargo

Brian Kenny 0:00 [upbeat music]

Brian Kenny 0:02 In July 2010, at the peak of the global financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. A year later, Dodd-Frank would pave the way for the Consumer Financial Protection Bureau, an agency that's supposed to make sure that banks, lenders, and other financial companies treat you fairly. Their website keeps a running tally of how many complaints they've fielded since opening the doors in 2011. As of this morning, that number was 996,214. The searchable database where they post all the complaints, as well as the responses from the financial institutions, reveals that 61,372 of those complaints are about Wells Fargo and Company. JP Morgan, the largest bank in the US, had 11,000 fewer complaints than Wells Fargo. Today, we'll hear from Professor Suraj Srinivasan about his case entitled Sales Misconduct at Wells Fargo Community Bank. I'm your host, Brian Kenny, and you're listening to Cold Call. [upbeat music] So we are all sitting there in the classroom. The professor walks in and-

Suraj Srinivasan 1:10 And they look up and you know it's coming. Oh, the dreaded cold call.

Brian Kenny 1:17 Suraj Srinivasan teaches in the MBA and executive education programs at Harvard Business School. His research examines the institutions of corporate governance in the US and internationally, and he doesn't shy away from writing controversial cases, which is why we love to have you on the, the program, Suraj. Thanks for joining me.

Suraj Srinivasan 1:34 Thank you, Brian. Thank you very much. I... This is, this is... By the way, those statistics are fascinating-

Brian Kenny 1:39 Yeah

Suraj Srinivasan 1:39 ... uh, and, and tells you the scope of the problem, um.

Brian Kenny 1:42 Yeah, and this website, if you have a chance, you should visit the, the, the consumer protection website because they have-- they really do post all the complaints as well as the responses, and it's really interesting to see the nature of those, and of course, they vary widely. But Wells Fargo is pretty, [chuckles] pretty prominent there. Um, and this case was, um, was headline fodder for, a-and continues to pop up in the headlines, you know, since it first surfaced a couple of years ago. So I think people will really be interested to hear your take on it and what you discovered. But maybe you could start just by, uh, telling us sort of what's the context, how does the case begin, and, and who are the central characters in the case?

Suraj Srinivasan 2:15 Absolutely. Uh, by the way, from a case writer's perspective, it's the gift that keeps giving.

Brian Kenny 2:19 Yeah. [chuckles]

Suraj Srinivasan 2:20 Uh, you know, you, you have a case B and a C and a D keep happening every, every few months. Uh, but stepping back, the case is set at around the time that the regulators, uh, several of them, started levying huge fines and holding the board and the company accountable for the, uh, for the scandal. We wrote the case, uh, so the case is written with, uh, my co-authors Dennis Campbell and Susanna Ghelani. Uh, we wrote the case because it actually serves a very, very useful pedagogical purpose. The central characters in the case, uh, are the CEO John Stumpf and the head of the community bank, Carrie Tolstedt. But also looming large in the background is the board of directors-

Brian Kenny 2:59 Hmm

Suraj Srinivasan 2:59 ... uh, of the company. And as those numbers from, uh, CPFB indicated, this was a huge problem. This was a problem, uh, not of a few bad apples. This was a systematic problem. The bank itself, uh, fired over 5,000 employees. It's a large bank, no doubt. You know, there are more-

Brian Kenny 3:16 Yeah

Suraj Srinivasan 3:16 ... than 200,000 employees, but not all of them are in the sales department, and 5,000 people were let go of the sales department. Two million customers at that point, and that number has increased over time, and it has, uh, crossed the community bank into other parts of the business, the insurance business, even the lending part of the business subsequently. But it was a systematic problem, and it was fascinating and a puzzle, frankly, because Wells Fargo was the most successful bank coming out of the financial crisis.

Brian Kenny 3:41 Mm-hmm.

Suraj Srinivasan 3:42 They were held up as a role model for how a bank should have behaved during the crisis. It was the second-largest bank in the US. At, at the time this, this all broke, they were one of the most profitable banks. They were the fifth largest in the world. So it was, it was a surprise and a puzzle that a bank that is, uh, that actually survived, not just survived, but thrived through the crisis and, and subsequently after, uh, ended up in this kind of a problem.

Brian Kenny 4:07 Right. And, and you mentioned they are one of the largest banks in the country still, probably in the world still. I think they come in third right now in the US.

Suraj Srinivasan 4:15 A-absolutely. One-- At that point, $1.8 trillion balance sheet, so the, the total size of the assets that they had, which now the Federal Reserve has capped at $2 trillion until they show effective risk management, so there's actually a cap on the size of, of what they can do and grow, which they are, you know, r-right now feeling the heat from.

Brian Kenny 4:32 Yeah. And I think the optics of this case as it played out in the media were, you know, for most people saw it as a situation where the 5,000 employees who were let go were sort of taking the brunt of the punishment, and really the people who needed to be held accountable weren't being held accountable. So we'll get into that a, a little bit further because the case really-- that's one of the central questions in the case. Um, but perhaps before we do that, can you talk a little bit about the retail banking industry and sort of, you know, what are the competitive pressures in that segment of the financial services space?

Suraj Srinivasan 5:02 You know, as you can well imagine, it's a highly commoditized industry. You can open a savings account, uh, a checking account, get a credit card, get a car loan, get a, get, you know, any, any mortgage. Most of these financial products have become commodities. So it's, it's, it's highly... The rates are fairly similar. You can shop around very easily. It's a, it's a fairly commoditized business and a business where technology has, uh, has played a huge role in improving efficiencies. Branch banking has fallen. Um, I, I know, for example, Citibank pulled out of Massachusetts and doesn't have any branches in the state, and that's been going on for a long time.

Brian Kenny 5:37 Mm-hmm.

Suraj Srinivasan 5:37 The other, uh, big, uh, idea in this is that this sort of cross-selling, which got Wells Fargo into trouble, is actually a well-established phenomenon, uh, that several banks pursue. You, you, you might have received offers. I have, uh, received offers where to open an account, you get $500 to open an account in a-

Brian Kenny 5:56 Yeah

Suraj Srinivasan 5:56 ... in a local bank, uh, because the value of getting a customer, the lifetime value of getting a customer is higher.

Brian Kenny 6:02 Mm-hmm.

Suraj Srinivasan 6:02 Yeah, so you combine the commodity nature of the business with the cross-selling, uh, part of it and, and that creates a, a competitive dynamic which Wells Fargo was facing.

Brian Kenny 6:11 Yeah. So it's not like, you know, you go into your local neighborhood bank these days. People do all of this by phone, or they do it digitally, so you're distanced. Uh, you don't have the relationship necessarily that you might have had 20, 30 years ago with your local bank.

Suraj Srinivasan 6:24 That's absolutely true. Uh, though for some kinds of transactions, for a loan for instance, uh, you might still, uh, try to go in. But you're right, I mean, a lot of these things are done online, over the phone, and so on.

Brian Kenny 6:33 Yeah, and that sort of sets the stage for, you know, as we get into what, what actually happened at Wells Fargo. Maybe you can describe some of the, the things that were happening and that began to surface at Wells Fargo.

Suraj Srinivasan 6:43 It's very much a retail bank, uh, and, and the largest retail bank therefore. Uh, so lots of branches, lots of, uh, front-end people, tellers and, and customer service folks who are helping customers and, and, and trying to open accounts and so on. Any sales force, any sales-driven organization thrives on, on, on a certain sales culture, which includes targets and, and sales pressure, and that's not just banking. That's any-

Brian Kenny 7:07 Yeah

Suraj Srinivasan 7:07 ... industry.

Brian Kenny 7:08 Yeah.

Suraj Srinivasan 7:09 What, uh, comes along with that, uh, of course, is the need to have tight boundaries around what is allowable and not al-allowable practices, uh, how much can you push.

Brian Kenny 7:19 Mm-hmm.

Suraj Srinivasan 7:20 Uh, and, and that's where Wells Fargo seems to have had a, a slightly harder time. What you learn, um, exposed now b- from the inquiries is that the pressure was high. It was higher than what you might have, uh, expected in a relationship bank. The employee turnover, for instance, was over 30%. They would benchmark that with other sales organizations such as departmental stores, and retail is seen as a high-turnover industry. However, a relationship bank, uh, is not exactly comparable to, you know, selling clothes, for instance.

Brian Kenny 7:53 Yeah.

Suraj Srinivasan 7:53 But that seemed to have been the idea behind the, uh, sales culture at, at Wells Fargo.

Brian Kenny 7:59 And, uh, they weren't making a lot of money either. The... one of the things the case talks about is the average salary for a retail salesperson was about $30,000.

Suraj Srinivasan 8:07 Right. So, so this is a typical, you know, front-end sales force. Uh, you c- you could imagine an alternative, uh, approach where you have, uh, a much more empowered sales force, you know, higher paid employees, better trained therefore. Uh, if you have 30% or more turnover, you can imagine what, what, uh, the investment in training is not-

Brian Kenny 8:26 Yeah

Suraj Srinivasan 8:26 ... uh, is not gonna be very high because, you know, a third of the people are leaving every year. So it, it appears that along with, uh, more than usual, uh, sales pressure and sales incentive was combined with weaker boundaries around what was possible. The, the people who were held up as effective salespeople weren't the ones who were really, you know, going the... plowing the tight and narrow-

Brian Kenny 8:47 Yeah

Suraj Srinivasan 8:47 ... uh, a- a- as you say. So for example, there was a practice of running the gauntlet. You know, every week in the m- morning meeting, people would run up to the front and write on a, on a whiteboard, write the number of sales prospects they had converted.

Brian Kenny 9:00 Yeah. [chuckles]

Suraj Srinivasan 9:00 And then you can imagine the ones who had not would feel the pressure in a, in a very public-

Brian Kenny 9:04 It's like shaming

Suraj Srinivasan 9:05 ... uh, shaming exercise.

Brian Kenny 9:06 Yeah.

Suraj Srinivasan 9:06 Exactly. And, and the ones that were doing well, even though it wasn't with the best of practices, would be sent around as role models to other branches to teach... quote, unquote, "teach others"-

Brian Kenny 9:15 Uh-huh

Suraj Srinivasan 9:15 ... how to do this. Uh, so, so it created a very high pressure front-end sales force, which one can say is, is useful in a sales-driven environment, subject to having the right checks and balances.

Brian Kenny 9:28 Yeah.

Suraj Srinivasan 9:29 Um, one of the things that Wells Fargo initiated afterwards was a customer notification every time an account was opened. That's just risk control 101, you know, if... that the customer be notified if there was some a-activity on the account, uh, which would have automatically prevented an employee from opening a, a, a fake account.

Brian Kenny 9:46 Yeah.

Suraj Srinivasan 9:46 Essentially, what happened, uh-

Brian Kenny 9:48 Yeah, I was gonna say, tell... So w-what did they actually do that was fraudulent?

Suraj Srinivasan 9:52 The big problem was-- and subsequently we've learned of so many other things, but the big problem was that they op-opened, uh, over 2 million fake accounts. So, you know, if you had a, a, a savings account at the bank, you would get a credit card even though you would not have opened that.

Brian Kenny 10:08 Mm-hmm.

Suraj Srinivasan 10:08 You would have gotten something else, uh, even though, uh, y- you, you not open that particular account. And the pressure on the employees to do this, so, so the, the company had this eight is great.

Brian Kenny 10:19 Yeah.

Suraj Srinivasan 10:19 Uh, said rightly rhymes, you know, uh, um-

Brian Kenny 10:22 [laughs]

Suraj Srinivasan 10:22 ... eight is great. [laughs] Uh, it, it rhymes, and the CEO-

Brian Kenny 10:25 Sounds like a marketing thing. I hate to say it, but yeah.

Suraj Srinivasan 10:27 I-i-it, it was, and, and, uh, the CEO would go on conference calls and, and investor presentations and say that was their target, and when asked why, literally would say it rhymes well.

Brian Kenny 10:37 Mm-hmm.

Suraj Srinivasan 10:38 Um, so there wasn't a theory behind, you know-

Brian Kenny 10:40 [laughs]

Suraj Srinivasan 10:40 ... eight is the optimal number of, uh, accounts that a customer should have. But it was just a nice target, [chuckles] nice sounding target. Like you said, it's, it's a good sort of marketing slogan. But something like that adds enormous pressure to the front end, absent control, absent boundaries that can, uh, lead to the trains going off the rails.

Brian Kenny 10:58 So these sales folks were, um, just opening up accounts to try and get as close to that number for each customer they represented as, as possible.

Suraj Srinivasan 11:04 Absolutely, and they had targets for how much they could cross-sell. You, you find out subsequently, this is not in our case, but, uh, subsequently you found out several other places, so the insurance products that were being sold fraudulently. You found out, uh, recently from a whistleblower complaint that there were mortgages that people were being asked to repay when they're actually not taking them out.

Brian Kenny 11:24 Wow.

Suraj Srinivasan 11:25 So this practice seemed like was quite prevalent. The, the big issue that they got fined on, uh, was these false accounts. Uh, you, you asked about, you know, when did all this all start surfacing. The key trigger was a LA Times exposé-

Brian Kenny 11:38 Mm-hmm

Suraj Srinivasan 11:38 ... in 2012 that the newspaper wrote, and following that, the, uh, district attorney from, uh, Los Angeles started investigating and, and started filing lawsuits against the company. So this was not new when it actually broke in 2016. Uh, it had been around for three or four years. But, uh, several of those practices actually kept continuing, uh, till much later, several years, much later, which raises several other questions that I know you'll get into, uh, about the board and the risk management of the company and so on.

Brian Kenny 12:07 Yeah. So why don't we actually transition to that now? Let's talk a little bit about Carrie Tolstedt and John Stumpf. John's name came up in a podcast that we did before with you around the data breach at Target, so J- John's had a, you know, checkered past here as it comes to some of these things where he's been on watch. But tell us a little bit about Carrie and what her role was.

Suraj Srinivasan 12:26 Carrie Tolstedt was the head of the community bank, and like I said, the... this was a very, very successful community bank, one of the best performing retail banks in the country. In fact, their cross-selling was held up as a role model for other banks. So Carrie Tolstedt was a very well-respected banker within the bank. She had spent a large part of her career at Wells Fargo. You learn from the board report subsequently that the bank held her in high esteem, John Stumpf held her in high esteem, um, which turns out perhaps was part of the problem. She was so well respected for her past successes that there was a certain reluctance to question her. So on, on the one hand, she was very highly performing, a, a well-respected banker, had won awards, well-respected within the bank, had spent a lot of time in the company. On the other hand, her role in the bank, uh, because of this background, protected her from certain kinds of questioning, also protected her from the otherwise useful risk controls and other governance that was prevalent at the bank. A, a related issue is that the bank was highly decentralized. The structure of the bank was that while there was a central risk management, you had the community bank and other parts of the bank having their own risk controls, which they should have. But it turns out that the force of Carrie's personality was strong enough that the communication outside of the community bank to other parts of the organization were not just weak, were expressly discouraged and frowned upon by her. So there are instances that have subsequently come to light on the central part of the bank asking questions, and Carrie would, uh, reprimand people who would actually answer those questions or-

Brian Kenny 13:59 Hmm

Suraj Srinivasan 13:59 ... not keep her in the loop when questions, uh, such as those were being asked. The board subsequently has claimed, uh, has said that they were ill-informed or misinformed by Carrie Tolstedt about the number of people that were being let go of, uh, in, in the bank, that the, the numbers were low-balled after the "LA Times" article came out, that these were a few bad apples. They were, you know, letting 100 people go when it was in fact six, 700 per quarter. And the board used that as a defense on, uh, you know, "We can only ask. You know, we have no means of verifying," especially coming from a person as well-respected as Carrie. So there was this kind of dual thing going on with respect to her role, a very highly performing manager, on the other hand, trying to keep a tight control over what was going on and not liking when, uh, questions were asked or risk was-

Brian Kenny 14:41 So, so isn't it John's job to [chuckles] look a little bit more closely at this and-

Suraj Srinivasan 14:46 Absolutely. I mean, as the CEO, the buck stops there. Uh, so absolutely. It's interesting you refer to the Target cyber breach. John's role there was, of course, secondary in the sense that he was on the board. He was not the CEO of the company. But one can imagine, you know, certain parallels between those two situations. Yes, uh, that should have been the CEO's job, and now he paid for it with his job and all the reputational harm that's come his way because of this. It, it appears that he relied a lot on Carrie, and their relationship was one of mutual trust, or at least trust one way, and did not push very much.

Brian Kenny 15:19 Mm-hmm.

Suraj Srinivasan 15:19 It's quite possible that did not... Uh, it's hard to tell, you know, what was going on inside the bank, but it, it, it sounds like there was a level of delegation that ex post looks like was not the wise thing to do.

Brian Kenny 15:31 Yeah. And, and, and your research with other companies, I would suspect this is not unusual, that if you've got somebody who's really performing well by appearances at least, and revenue's coming in, you don't really wanna mess with that, right?

Suraj Srinivasan 15:44 Absolutely, and that's true at every level. That's true at the level of investors don't question companies when they're doing very well, and subsequently-

Brian Kenny 15:50 Right

Suraj Srinivasan 15:50 ... the, you know, uh, uh, the crash. Boards don't question CEOs when things are going very well. You, you, you know, it's, it's hard to start looking under rocks when things are, uh, going very well, and it's true at every level beyond that, which is why you have risk management. You know, risk management is the flip side of strategy. Every strategy comes with... These are risks that companies voluntarily take on because that's how you make money. But then you have to make sure that the risk doesn't go out of control.

Brian Kenny 16:17 Yeah.

Suraj Srinivasan 16:17 So structurally, there was a problem, and that was John Stumpf's job, I would think, to try to understand where was the risk coming in the bank and how would... Think about it. This is a bank. This is one of the largest banks in the world. Risk management is a core competence of banks. Otherwise-

Brian Kenny 16:30 Right

Suraj Srinivasan 16:30 ... you don't run banks. Uh, it, it appears, though, that operational risk, uh, somehow they discounted that just a front end sales force can create risk. You think about all kinds of risk. You think about lending risk. You think about foreign currency risk. You think about, uh, money laundering risk. You think about high-level risk. But this kind of should not have, perhaps at least by in hindsight, but seems to have blindsided them.

Brian Kenny 16:53 So blindsided is one way to look at it, but the case also talks about the fact that there were some red flags that were popping up here and there. In fact, there were a couple of reports that were written so that the, the, you know, the board... Let's go to the board now, 'cause the board, this wasn't the first time they had heard about it. It wasn't like, uh, somebody, you know, flipped a light switch on.

Suraj Srinivasan 17:12 Well, you, you would imagine an "LA Times" article [chuckles] and subsequent, uh, governmental investigation on that should have made this a prime board.

Brian Kenny 17:21 Yeah.

Suraj Srinivasan 17:21 The- there's a doctrine developing in, in Delaware on... it's called the red flag doctrine. You normally depend on the company and managers, the board, I, I mean, for information because you're not, you know, launching your own investigations and calling four levels down the line, asking for... You know, you trust the CEO, you trust the next level for information, uh, when, when they give you information. But if there are red flags, uh, like you said, then you have to be on, on your alert on what was happening and, and it seems like there were more than enough red flags. To be fair, though, there were some processes being put by the risk part of the board, but, uh, probably not Enough, and they still relied on the, on management a little too much.

Brian Kenny 18:01 Yeah.

Suraj Srinivasan 18:01 If you think about it, the, the bank actually there were, uh, terms that the employees were using, such as bundling. The front-end employees would falsely tell, uh, a customer, for instance, if you open a checking account, that you have to open a savings account along with that.

Brian Kenny 18:14 Mm-hmm.

Suraj Srinivasan 18:15 That these are bundled products, when actually in reality there were no bundled products. That you have to take a credit card along with it, when in reality you didn't, you didn't have to do that. There was another thing, uh, called sandbagging, uh, these, these were informal terms that the sales force was using. They would try to manage targets in, in, in particular ways. Uh, and of course, the eight is great-

Brian Kenny 18:32 Yeah

Suraj Srinivasan 18:32 ... was, uh, floating around there. Even way back in 2004, there was a gaming report, a gaming quote-unquote, that, uh, the, the bank was at risk because employees would game targets.

Brian Kenny 18:41 Yeah.

Suraj Srinivasan 18:42 So this was not new for the bank, and this is certainly not new for Salesforce sales-driven companies.

Brian Kenny 18:47 So do you think that, uh, in the wake of something like what happened at Wells Fargo, that board directors should really be thinking hard about their role and the commitment they're making when they step onto a board?

Suraj Srinivasan 18:59 Absolutely. Uh, I think it's, it's... You know, board roles are hard for the following reason. Like we said, you know, you don't want to be getting on a board always with the attitude that I am going to be second-guessing everything that management is telling me. I want to be probing under rock for risks and bad news that doesn't exist because you are entering into a trusting relationship. The board monitors the company, the, the, the management, the management runs the business.

Brian Kenny 19:24 Mm-hmm.

Suraj Srinivasan 19:25 It's a fine line to try to figure out where to draw that line. And the norm, especially in the US, uh, is for the boards to defer much more to management unless there's a reason to believe otherwise. Now, when do you decide there's reason to believe otherwise? You know, were these red flags enough?

Brian Kenny 19:40 Yeah.

Suraj Srinivasan 19:41 My personal feeling in this is that boards are too safe a place, the boardroom is too safe a place, uh, for, for management. But again, like how do you draw that line? When do you decide it's too safe, and when do you wanna make it a little unsafe-

Brian Kenny 19:54 Mm-hmm

Suraj Srinivasan 19:54 ... uh, in terms of the kinds of questions that, that you want to ask? These are, like I said, it's a two trillion organization, you know, two trillion asset organization, hundreds of thousands of employees. So it has to be a little more... You know, it has to be almost a full-time job for some of the people who are doing this. On the other hand, uh, the management does run the business. So yes, I think incidents like Wells Fargo raise very important questions for management too on how you should involve the board more, that you have to be much more willing to be transparent and expose, uh, the board to what's happening inside the organization.

Brian Kenny 20:26 Mm.

Suraj Srinivasan 20:26 It should not be taboo, uh, and it should not be-- Uh, you should in fact have somebody on the board who asks the tough questions, but there should be some process by which we are not indulging in, in groupthink. And it's not the first time anybody's mentioned about groupthink in the context of a board or, or just, you know, it's a group of ten, 12 people and, you know, who bells the cat.

Brian Kenny 20:49 Right. Right.

Suraj Srinivasan 20:50 Um, the best boards do have that. They do have somebody who's somebody or a group of people or that in, in, in different circumstances are charged with, uh, asking the tough questions so that you just don't, um, you just... Things don't go unasked because nobody knows, you know, whether it's their job to ask them.

Brian Kenny 21:07 Yeah. Yeah. Do you think there's a role here for, uh, activist investors too, who are... You know, you've-- We, we're hearing a lot about activist investors and, you know, sometimes they come off looking really bad. But I'm wondering if there's a, an important role that an activist investor plays in holding the board and the leadership of an organization accountable.

Suraj Srinivasan 21:25 Yes. Uh, yes and no. The, the no part is that the Wells Fargo case is not a very typical... The, the problems of Wells Fargo are not the typical issues that an activist investor would have surfaced.

Brian Kenny 21:35 Mm-hmm.

Suraj Srinivasan 21:36 Uh, because this is more a risk management issue, this is more an issue where things are happening in the, in the front end. This is certainly an issue for compliance and the role of whistleblowers.

Brian Kenny 21:44 Yeah.

Suraj Srinivasan 21:45 Are the whistleblower complaints getting through to the board? What is the process for understanding them? Are there enough of a certain kind of issue? I bet in a bank like this, they would have had some processes on the sort. It's unimaginable that they would not have had. But it's probably worthwhile for every board to go back and try to understand, yes, we think we have a process. Have you reviewed it recently? Have you actually... Are, are there blind spots that we're facing? So in this case, I wouldn't say activist investors would have, would have helped. But certainly in, in other cases where, where, you know, going back to this, is the board too safe a place, uh, analogy or the way of thinking about it, activists do make the board a little unsafe for managers. Uh, but again, you don't want it to be... The board management relationship is not an adversarial relationship. It's a monitoring advisory relationship, so you wanna make sure it stays that way. Um, but in a, in a, in a healthy, productive way so that the big risks get managed, the big opportunities do get taken, and risk and opportunity are just two sides of the same coin.

Brian Kenny 22:39 Yeah. You've discussed this case in class, have you?

Suraj Srinivasan 22:42 Several times. Uh, so we've done it in our MBA program. We've done it in-- We've used it in board programs. We've used it in programs for risk managers. We've used it in senior executive programs. And we use it for two big purposes. One is to understand risk management. One of the very common risk management frameworks is what we call the fraud triangle and how fraud triangle plays out so that the triangle, so the three legs of the triangle are opportunity, rationalization, and pressure.

Brian Kenny 23:05 Mm-hmm.

Suraj Srinivasan 23:06 So the idea is that all these three have to come together, uh, at the same time for risk controls to fail. So I think this case really illustrates very well that there was opportunity because internal controls weren't working, there was pressure because of the sales force, and there was rationalization in a way because the senior management was supporting it and everybody was saying, "Yes, you know, we are doing it for the benefit of the bank," in a, in a, in a way, and they were rationalizing their own, own behavior. And so when all these sort of the trifecta comes together, then you have a blow-up. And so we use it to try to understand how that happens and what can you do to prevent that. And certainly, there's higher level issues with respect to the board that you've been talking about.

Brian Kenny 23:40 Mm-hmm.

Suraj Srinivasan 23:41 This is a very good pedagogical, uh, from pedagogical point of view. It spans so many different issues that we use it in MBA program and, like I said, in so many other, so many other settings as well.

Brian Kenny 23:51 Suraj, thanks so much for joining us today.

Suraj Srinivasan 23:53 Thank you. It's really a pleasure to be here.

Brian Kenny 23:55 If you enjoyed listening to the Wells Fargo case, you can find Cold Call wherever you listen and subscribe to podcasts. Every episode features a business case taught to MBA students right here at Harvard Business School. We'd love to hear your thoughts, so take a few moments to write a review. I'm Brian Kenny, your host, and thank you for listening to Cold Call, an official podcast of Harvard Business School.