"The greatness and the genuine trait of your thought and writings lie on the fact that you positively and interestingly make use of philosophical thoughts and thoughtfulness in order to deeply and concretely cogitate about America's social issues. . . . This does not mean that your thought is reducible to your era: your thought, being inspired by issues characterizing your era . . . , overcomes your era and will still likely be up to date even after your era, for future generations." Bruno Valentin

Saturday, March 18, 2017

A Religious Stockholder-Test for Wells Fargo: Confronting Mediocre Accountability

Orienting executive compensation to accountability is easier said than done. For example, it might be supposed that the cause of accountability was aptly served by John Stumpf’s forfeit of $41 million in unvested stock when he resigned under pressure as Wells Fargo’s CEO because of the bank’s systemic overzealousness in signing customers up for unwanted services. Unfortunately, he “realized pretax earnings of more than $83 million by exercising vested stock options, amassed over his 34 years at the bank, and receiving payouts on certain stock awards.”[1] In other words, the man who presided over unethical business practices at the expense of customers received double that which he was forfeiting. How can accountability have any meaning against $83 million? This figure connotes reward rather than punishment. Tim Sloan, who succeeded Stumpf as the bank’s CEO, received compensation in 2016 of $13, up from the $11 million in 2015. Interestingly, it may have been religion to the rescue.
 Where accountability is so lapsed concerning even such a sordid organizational culture as that of Wells Fargo, it is interesting that the Sisters of St. Francis of Philadelphia were taking an active role as stockholder activists. The sisters wanted the bankers to commit to “real, systemic change in culture, ethics, values, and financial sustainability,” according to Sister Nora Nash, who is the order’s director of corporate social responsibility.[2] With the secular business ethicists presumably on the sideline, an order of nuns had come out swinging. The nuns even had a proposal to be voted on at the 2017 shareholder meeting demanding a full accounting on the root causes of the bank’s fraudulent activity, and the steps being taken to prevent taking advantage of customers in the future. Given the bank’s own lack of accountability with respect to executive compensation, I’m not sure that an internal investigation even by the bank’s board could be trusted. To be sure, the bank had fired four senior executives—including the former chief risk officer of the bank’s retail banking division and two regional presidents—who had been accused of wrongdoing. Even so, changing a company’s culture—especially one as cut-throat as Wells Fargo’s—is difficult at best.
Perhaps what the bankers really needed were regular visits from the nuns volunteering their time to see that the bank’s wealth is rightly used. A manager from another major bank said at the time of the scandal that it was well-known in the industry that "when you go to work for Wells Fargo, you know you are selling your soul to the devil." Perhaps it is no accident that the stockholder activists would be nuns, for they doubtless have prayerful radar for that sort of thing. Getting the lost back to right use of wealth would be a step in the right direction, for right use is two degrees of separation from using wealth in ways that harm other people.
When profit-seeking and wealth began to be accepted by theologians in the context of the commercial revolution, the legitimacy was conditional on right use.[3] Aquinas’ allowance of moderate profit on trade, for instance, was predicated on the assumption that the profit would not be subsequently used to hurt people. Such a use would violate Jesus’ notion of self-giving neighbor love. Similarly, the theologians during the Italian Renaissance stressed the virtues of liberality and munificence in the use of wealth, as opposed to self-serving uses or even hoarding. From this standpoint, $83 million is difficult to justify.
So the nuns could have added a second proposal—one that would reduce executive compensation. Lest it be supposed that talent would flee or avoid the bank, consider what sort of “talent” $83 million had bought. Turning an organization based on the sin of usury—which is based on the taking advantage of others instead of helping them (the original purpose of lending!)—to right use would be right and proper religious activity for the sisters, as secular ethicists look on from the sidelines.

[1] Stacy Cowley, “Wells Fargo Leaders Reaped Lavish Pay Even as Account Scandal Unfolded,” The New York Times, March 16, 2017.
[2] Ibid.
[3] Skip Worden, God’s Gold (Seattle, WA: Amazon, 2016)