Warren Buffett on Saturday faulted Wells Fargo & Co. for failing to stop employees from signing up customers for bogus accounts even after learning it was happening, causing a national scandal.
Buffett was speaking at the annual meeting of Berkshire Hathaway Inc., the conglomerate he has run since 1965.
Wells Fargo — whose largest shareholder is Berkshire, with a 10 per cent stake worth $27 billion US — gave employees too much autonomy to engage in “cross-selling” multiple products to meet sales goals, Buffett said.
This “incentivized the wrong type of behaviour,” Buffett said, and former CEO John Stumpf, who lost his job over the scandal, was too slow to fix the problem.
“If there’s a major problem, the CEO will get wind of it. At that moment, that’s the key to everything. The CEO has to act,” he said. “The main problem was they didn’t act.”
Still, Buffett’s support of current management and board was key to ensuring the re-election of the entire board last month.
Buffett, 86, and Vice Chairman Charlie Munger, 93, were fielding five hours of questions from shareholders, journalists and analysts about Berkshire, its investments, their successors, the economy, and other matters.
Buffett likened the Wells Fargo situation to Salomon Brothers Inc., where in 1991 he was installed as chairman to clean up a mess after the former chief executive failed to tell regulators a trader was submitting fake bids at U.S. Treasury auctions.
Asked whether Berkshire’s decentralized structure could lead to a similar scandal — Berkshire subsidiaries employ some 367,000 people but just 25 work in the main office — Buffett said Berkshire welcomes being alerted to misbehaviour via an internal…