Wells Fargo Fights Back

Wells Fargo ran a full page in the Wall Street Journal recently defending the right to manage its business as it thinks best, as compared to how pundits and politicians think it should be run.

The issue in question relates to an employee recognition event, where Wells Fargo was taking employees on a four-day event to recognize their achievements. The company did cave to public pressure and cancelled the event, and all similar events for the rest of the year. But its ad defended the value and importance of such events to reward good performance throughout the company and to help in business planning.

The general criticism of companies, of which we have heard a never-ending bashing of the financial services in particular the past several months, is that they are inappropriately focused on making money.

But such critics don't fully appreciate the logic of their position, because it means that companies' actions and policies are guided by a desire to make the most money they can. So whether it is the size of bonuses paid, Citigroup's marketing efforts by sponsoring the new baseball stadium for the Mets, or team recognition events by Wells Fargo (and most companies), companies undertake these actions in the belief that it will help them maximize profits in the long-run.

Corporate critics need to choose what they really believe: are companies self-interested entities out to maximize profits, or altruistic institutions who like to pay above-market bonuses, subsidize baseball teams, and give free trips to employees?

Companies generally are, and certainly ought to be, in the business of making the most money they legally and ethically can for their shareholders. That is just and moral, reflecting the very reason for their existence.

The criticism of such corporate behavior, reminiscent of attacks on business during the Great Depression, will only lengthen the recession and make recovery harder. We need an increase in the willingness of companies and investors to make investments, and such criticisms tend to encourage businesses to retrench rather than expand their activities.