This week, Wells Fargo will launch new compensation packages for its employees that aim to reward customer satisfaction. And 25,000 entry-level workers, including tellers and customer-service reps, received raises on Sunday that bring minimum pay from $12 to $13.50 per hour.
These are positive steps towards digging out from a badly mismanaged scandal. In September, the bank was fined $185 million after employees under pressure to boost sales opened as many as two million accounts that customers didn’t request.
Yet Wells Fargo doesn’t appear poised to capitalize on the full public relations potential of these changes: to position its new chief executive as a thought leader on compensation in the financial industry.
The bank has been quick to claim that this week’s pay hike is, in the words of a spokeswoman, “completely unrelated” to the scandal.
That’s hard to take seriously. However, it’s understandable, said Helio Fred Garcia, who as president of the crisis management firm the Logos Consulting Group has advised hundreds of Fortune 500 chief executives. “You shouldn’t tell employees you’ll pay them more so they won’t cheat customers,” he said. “You should tell them not to cheat customers.”
But the announcements open an opportunity for Timothy Sloan, who became chief executive in October, to take a public leadership position on the issue of financial industry compensation.
The concept of “CEO activism” – chief executives taking public stances on controversial topics – has recently been popularized by corporate leaders. For example, Apple chief executive Timothy Cook publicly opposed an Indiana bill that he argued discriminated against gay and transgender people, and Starbucks chief executive Howard Schultz asked Americans not to bring guns to his stores.
CEO activism is often associated with topics outside the core business of executives. But, in the Wells Fargo case, Sloan has an opportunity to reap reputational dividends by exercising leadership on an important issue in his industry.
Research shows that this is the kind of advocacy that improves leaders’ reputations. A 2016 study by the global public relations firm Weber Shandwick and KRC Research found that 31 percent of Americans have more favorable views of chief executives when they take positions on hot issues, but the number drops to 20 percent when the issues are not tied to the business of their companies.
Specifically, Sloan should become an activist on two issues related to compensation in the financial industry: eliminating incentives for financial risks and crimes, and closing the gap between the highest- and lowest-paid workers.
It’s easy to spot the dangers of excessive risk-taking on Wall Street, which contributed to the 2008 financial crisis.
And according to the Economic Policy Institute, there is an “easy-to-understand root of rising income inequality, slow living-standards growth, and a host of other key economic challenges: the near stagnation of hourly wage growth for the vast majority of American workers over the past generation.”