Last week we looked at some ways the recent Wells Fargo controversy could relate to the ESG social issue, Customer Privacy and Data Security, and how the illegal actions of employees might affect revenue and goodwill.

But reports say that those employees who signed customers up for unauthorized accounts did so with the collusion and urging of those further up the command chain — possibly much further. In fact, CEO John Stumpf just endured a public lashing before the Senate and will be forfeiting his stock options and salary while the issue is under investigation.

No matter where the buck stops internally, the corporation on the whole is on the hook for poor behavior — at least insofar as their ESG score is concerned. A big part of that is the controversy in the social category (you know, the S in ESG), but there’s also a major ding in the governance score.Wells Fargo scandal hits their ESG score: governance

We’re going to focus on an issue SASB calls Management of the Legal & Regulatory Environment, which deals with fines, enforcements, civil actions, and whistleblowing actions.

CEO John Stumpf is quoted saying that Wells didn’t disclose the latest controversy to shareholders because it was “not a material event.” Based on the low amount of the settlement itself, at least one analyst has agreed with him. But that doesn’t take into account the rest of the picture.

A casual Google search will tell you that Wells Fargo is no stranger to whistleblowers. Employee alerts were responsible for the recent revelations as well. Moreover, former employees allege that their attempts to bring corporate attention to ethics violations sparked retaliation.

Perhaps unsurprisingly, some of these former employees are filing a class action suit against Wells Fargo

To the tune of $2.6 billion.

How’s that for a material event?

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