Wells Fargo's fake accounts scandal is an example of a problem that is bound to plague companies over time, billionaire investor Warren Buffett said Saturday — but how management responds to the issue is what really matters.
Buffett's Berkshire Hathaway is Wells Fargo's biggest shareholder, with a stake it began building in the late 1980s.
Over the last two years, the bank has been slammed after it admitted employees had opened millions of accounts in customers' names without their knowledge, in a bid to meet aggressive sales goals.
The incentive to act badly is what caught up Wells Fargo, Buffett said. But the decision to ignore it was even worse.
"That was bad, but they committed the much greater error … ignoring the fact they had a faulty incentive system," Buffett said in response to a question at Berkshire Hathaway's annual shareholder meeting.
It is the same problem every company has to deal with, even Berkshire, he said, because at any given time there will be someone doing something wrong. "You can't have 377,000 employees and expect everyone is behaving like Ben Franklin," he said.
The billionaire added that "when we find that it is going on, we have to do something about it."
Wells Fargo has been working to correct its problems and move on to a new chapter, Buffett said. "I see no reason why Wells Fargo as a company from an investment standpoint and a moral standpoint is in any way inferior," he said. "I like it as an investment."
