New boardroom accountability in UK; shocking lapse at Wells Fargo
Expectations for high-quality ‘tone from the top’ at financial institutions appear to be gaining traction, and British lawmakers may add their voices to the chorus. The Daily Mail reported yesterday that ministers there are set to implement legislation that will make corporate boards “criminally liable” for illegal conduct of their staff members.
Changes to corporate criminal law will make possible the trial and possible jail time for executives whose employees are found to have committed money laundering, fraud, or other corporate corruption. According to the Daily Mail, the new legislation was first proposed by David Cameron and is supported by new Prime Minister Theresa May. Prior corporate-accountability laws focused on bribery rather than the new attention on money laundering and fraud, as well.
This emphasis on tone from the top follows the stunning reports last week of the U.S. banking giant Wells Fargo settling fines for $185 million due to illegal banking practices that included vast creation of fake customer accounts in order to meet sales targets.
U.S. regulators announced in the settlement that Wells Fargo employees had created approximately 1.5 million fake accounts and had issued more than half a million unauthorized credit cards.
According to regulators, the bank’s leadership had implemented a high-pressure sales environment in which compensation policies and incentives created an intense emphasis on cross-selling by Wells Fargo employees. Regulators noted that though the amounts involved in each individual account tended to be small, the overall behaviors point toward major problems with internal controls, oversight, and culture.
The bank terminated approximately 5,300 employees involved in the creation of fake accounts; whether any executives have been terminated because of the scandal is not yet known.
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