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Superior piece of work.

As much as badly-designed incentives may be at fault, this fiasco also points to serious cultural issues and inept (to say the least) internal auditing.

For a good laugh, and an even worse stomach ache, go read Wells Fargo's description of their pay risk assessment in the proxy. Insulting...

Wells Fargo has a tradition & history of highly leveraged producer incentive plans; I happened to review many of them a few years back. These plans need hold-backs that defer a meaningful portion of theoretically earned commissions until performance can be truly verified, which is almost impossible to do on a monthly basis. It isn’t a question of culture or pay, they march in tandem, and one reflects the other. There are banks that stay out of trouble on this, and there is a reason why – culture and pay two big ones. I agree that the WF proxy disclosed risk assessment is boilerplate, unfortunately it is the same with most companies.

Thanks to every one of you for your comments.

I agree that there were some real cultural and management issues that played into the failure of the incentive plan. As more comes to light, it seems like we may even find that people who raised issues were pointed elsewhere.

Hold-backs are one method for dealing with programs like this. Perhaps they would have best been applied a level (or many levels( above the people who were the main plan participants.)

I am a strong believe that language in a proxy (or just about anywhere) is a weak defense against cheating. The best defense is a strong offense. In this case a plan that incentivized a group of people to provide a a counterbalance to potential cheating may have been a good place to start. This again, would have needed to be a plan higher up the ladder with real motivation and dangerous teeth.

There is never a good reason for a plan to fail this badly for such a long time.

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