Warren Buffett assails Wells Fargo, defends 3G at annual meeting

NEBRASKA: Warren Buffett, the chairman of Berkshire Hathaway Inc, on Saturday criticised Wells Fargo & Co for failing to stop employees from signing up customers for bogus accounts even after learning it was happening, causing a scandal.

Wells Fargo, whose largest shareholder is Berkshire with a 10 per cent stake worth $27 billion, gave employees too much autonomy to engage in “cross-selling” multiple products to meet goals, Buffett said.

This “incentivised the wrong type of behaviour,” and former chief executive John Stumpf, who lost his job over the scandal, was too slow to fix the problem, Buffett said.

Wells Fargo was among many topics discussed at Berkshire’s annual meeting in Omaha.

“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,” Buffett said. “The main problem was they didn’t act when they learned about it.”

Still, Buffett’s support of current management and board was key to ensuring the re-election of the entire board last month.

Wells Fargo spokesman Mark Folk said “we agree” with Buffett’s comments, and have taken “decisive actions” to fix the problems and “make things right for customers.”

Buffett likened the situation to Salomon Brothers Inc, where in 1991 he was installed as chairman to clean up a mess after the former CEO failed to tell regulators a trader was submitting fake bids at Treasury auctions.

Asked whether Berkshire’s structure could lead to a similar scandal, Buffett said “as we sit here, somebody is doing something wrong at Berkshire,” whose units employ 367,000 people. — Reuters