Sunday, February 8, 2009

It's Time To Empty The Wells Fargo Wagon!

I mentioned last week that Wells Fargo bank, one of the original recipients of federal bailout money last fall, had been planning several lavish trips to Las Vegas for its employees. The company eventually cancelled the trips under the scrutiny of the media and federal lawmakers who had started to howl.

You would think that Wells Fargo would lay low in the wake of this embarrassment. But CEO John Stumpf is being defiant instead. He must have really loved those Vegas trips, because he's taken out full page ads in the New York Times, Washington Post (2/8/09, page A15) and other major newspapers, to complain about having to cancel them.

Stumpf writes, "The funds to pay for recognition events such as these do not come from the government, They come from our profits. We believe our profits actually increase by rewarding and recognizing our best performers in sales and in service. Competition to be recognized inspires everyone to work harder and smarter. We're as frugal as any company in spending our shareholders' money thoughtfully and responsibly. " He finishes his letter by saying, "Since we aren't thanking our award winners in person this year, we'll have to do it this way. Thank you, all our 281,000 team members."

Mr. Stumpf - perhaps before you start figuring out how to spend your profits, you should figure out how to pay back the 25 billion dollars you took from the American taxpayers. These taxpayers are also your customers. People who are depositing their hard-earned money and paying their hardgotten loans back to your bank.

You have many customers - and shareholders as well, no doubt - who are currently unemployed, and would love to have an all-expense paid trip to Las Vegas. But those won't be paid out of Wells Fargo's profits, will they?

Times are tough for the rest of us, Mr. Stumpf. Perhaps you don't quite have your finger on the pulse of American society from your ivory tower, but you might find it helpful to know that some people in this economy might find the kind of largess you'd like to extend to your employees to be - frankly - a little tacky.

This is not to say you can't recognize your best employees - A nice (although fully taxable) bonus check could do the trick without all of the PR hassles of planning lavish trips.

A little humility can go a long way. You made a good start by thanking all of your employees in a newspaper ad.

It's just too bad you had to spend the rest of your full page ad having a temper tantrum .

Perhaps this latest PR faux pas will end with your forced resignation.


Chad S. Trease said...

If you're unemployed, then you no doubt have ample time to do some research. Wells Fargo tried to refuse the TARP funds, but they were forced to take them. They are the only recipient to make a dividend payment (371 million). Try doing some due diligence next time before you continue to crucify a company made made a profit of 3 billion dollars last year. What thet spend their own money on is none of your business.

edjones said...

You are ridiculous. Your suggestion to Wells Fargo is to issue "bonus" checks to their top producers instead of a lavish trip. If they did that, you and congress would blast them for bonuses to employees. They can't win. Congress should let Wells pay back the 25 billion that was forced on them. Then Wells can get back to running a business instead of a PR firm.

John Matthews said...

I shall take you both up on your suggestions and undertake some more due diligence on this subject. I will also tell you both this. For Wells Fargo - or other publicly traded companies - to be handing out junkets like these in times like these is tacky, regardless of the financial circumstances. And yes - if bonuses are going to be offered (which I have no problem with if they are a fair part of one's compensation package), they should be properly taxed. Bonus checks are at least transparent.

Mr. Trease - if I am indeed wrong about everything that you say I am, then like it or not, Wells Fargo has an even bigger big PR problem. PR is supposed to fix public misconceptions. Do you really think the ad did that? None of the information you've cited is explained or transmitted in that ad.

Wells Fargo DOES have to worry about its PR. It's a publicly traded company, with a stock price that rises and falls on the information the public receives about it.

Thanks for reading!

Chad S. Trease said...

The fact of the matter is that Wells Fargo doesn't owe anyone any explanations, aside from it's shareholders. Wells was the only large bank to keep it's large dividend intact for the shareholders. The company made just shy of 3 Billion dollars in one of the worst economies we've ever seen. The shareholders understand that a trip like this helps to reward and motivate the key people that helped to make the company so much money. Wells is in a can't win situation, because people like you don't take the time to do actual research before they publicly crucify them for doing things that would help their company and inject thousands to millions of dollars back into a very weak economy. The vegas economy is in shambles, and a trip such as this could have done wonders. Nothing is going to get better with this economy until people start spending money...but shame on Wells Fargo for trying to spend a very small portion of their 3 BILLION dollar profit to give back to their hardest working employees. And the employees actually do pay taxes on the value of the trip...but keep looking for reasons to trash one of America's best companies.

Julie Matthews said...

Sorry you're missing your mostly free trip, Chad...

A. J. said...

Here is an interesting extract from a Fortune article published on 5/4/09. It talks about the conditions under which banks had to accept the TARP money. Full article available at
On the last weekend of September the FDIC conducted a forced auction for Wachovia, with Citigroup and Wells Fargo as the two bidders. Citi won that round, agreeing to pay $2 billion for Wachovia's banking franchise, with the government guaranteeing a portion of the losses Citi would assume. Wells thought it could pay more, so after two days, with Kovacevich in Manhattan negotiating with regulators and Stumpf in San Francisco leading a team of 300 numbers crunchers, Wells offered to pay $15.4 billion for all of Wachovia without any help from Washington. Or so they thought.

Two weeks later, on Oct. 13, Kovacevich was sitting at a long conference table with eight other bank chiefs in Washington, listening to Treasury Secretary Hank Paulson tell them why they should take the government's money. Kovacevich says he protested, telling Paulson that compelling banks to accept TARP funds would lead to unintended consequences. It would erode confidence in the banking sector by making investors question the healthiest banks rather than instilling confidence in the neediest. Other industries undoubtedly would come to expect a bailout themselves. Still, Kovacevich took the money.

His displeasure leaked to the public, but what hasn't been reported is exactly how Paulson flipped the seasoned banker so quickly. In what an observer in the room describes as a "true Godfather moment," Paulson told all the assembled bankers, "Your regulator is sitting right there" actually the industry's two biggest overlords were in attendance: John Dugan, comptroller of the currency, and FDIC chairwoman Sheila Bair "and you're going to get a call tomorrow telling you you're undercapitalized and that you won't be able to raise money in the private markets." For Kovacevich this broadside was the horse's head on his pillow. He and his bank were in an unfamiliar position of vulnerability. Wells had just agreed to buy Wachovia, a bank it had coveted for years, and it needed the government's approval and, critically, the ability to raise money to complete the deal. Reflecting on the episode with righteous indignation, Kovacevich points out that each of his warnings to Paulson was later validated. Yet he turns sheepish in explaining his decision. "You want to do what your country and your regulators want," he says quietly in his office, decorated with miniature replicas of Wells Fargo's iconic stagecoaches. "There was no ambiguity," he says, as to what was expected of him.