While its big bank brethren came to symbolize all that was wrong with the banking sector in the aftermath of the financial crisis, Wells Fargo managed to keep its head above water and its reputation relatively intact.

As some of its peers (Lehman Brothers and Bear Stearns) disappeared, others were slapped with eye-watering fines for a litany of failures and shoddy practices which seemed to epitomize the worst excesses of the industry. Although not completely whiter than white (the bank was hit with penalties over its Federal Housing Administration lending), Wells Fargo managed to portray itself as a solid, safe and conservative home loan lender. The background and early years of now-former CEO John Stumpf, who grew up on a dairy farm, propped up the bank’s family-orientated and reliable image — an image encapsulated in the company’s red-and-gold stagecoach logo.

But that carefully nurtured reputation is now at risk of being permanently tarnished after the San Francisco-based lender became embroiled in a scandal which saw employees create over two million unauthorized accounts in an effort to receive bigger bonuses. The root cause of the fiasco, which led to Stumpf resigning, would appear to be the lender’s pressure-cooker sales culture that made it difficult for employees to hit onerous targets without resorting to underhand methods.

The unsavory episode will prove costly to the third-largest lender in the US which will have to fork out $185 million to regulators. But perhaps the real cost will be the damage inflicted to the wider banking industry — an industry that has been trying to resurrect its reputation which sank to desperate depths after the crisis when bankers were blamed for pretty much everything that was wrong with the world.

Although the $185 million fine will not bankrupt Wells Fargo, the breakdown in compliance and ethics leaves the bank morally bankrupt. The scandal amounts to a huge failure in corporate governance. But such corporate governance shortcomings are by no means confined to Wells Fargo or the wider banking industry for that matter. The lender’s misdemeanors are part of a more widespread malaise sweeping the financial sector — that of corporate governance. Or lack thereof.

Shareholders are becoming increasingly vocal about the need to improve both performance and governance in an age when shareholder activism reaches new levels of potency. Excessive executive pay across corporate America (that often seems to reward failure) has triggered both a shareholder and public backlash.

Today’s corporate governance issues perhaps stem from a regulatory culture that has focused too heavily on trying to prevent, or limit the fallout from, another financial crisis. Post-2008 banking regulation in the US has tended to concentrate on beefing up capital buffers to ensure lenders can survive a future financial crisis. And perhaps this has seen the regulator take its eye off the ball when it comes to matters of governance and ethics. But it should be noted that Dodd-Frank contains some sound corporate governance policies.

It remains to be seen whether the Wells Fargo fiasco will act as a prelude to a stronger set of corporate governance rules and regulations.  What is important is that individuals are held to account. And more particularly, executives are held to account.  While the fraud at Wells Fargo was committed by relatively low level employees, culpability rests with those at the very top.

After being slapped with its fine, Wells Fargo’s share price plunged to a 31-month low. But shareholders may have more on their minds than the bank’s tanking share price. Investors are becoming more interested in the social impact of their investments and now look to ESG ratings as a moral screen for portfolios.

The Wells Fargo scandal pushes the governance in ESG to the forefront. Senators in recent congressional hearings lambasted Stumpf for firing the 5,300 low-level employees instead of having executives take responsibility. They also compared Stumpf’s lucrative compensation package to the salaries of lower level staff trying to meet high cross sale quotas. Senator Elizabeth Warren even went so far as to say that “at giant banks like Wells Fargo [business as usual] seems to mean cheating as many customers, investors and employees as they possibly can.”

Senators also called into question how the board of directors of a bank as systematically important could have a governance structure in place that would allow such events to transpire.

Furthermore, governance issues at Wells Fargo would appear to stretch further back than the recent debacle. A Business Insider article from 2012 details the bank’s poor showing on the ESG front. The article was based on a list of companies published by GMI Ratings — now part of MSCI ESG Research — with poor ESG scores. According to the article, Wells Fargo had a low governance score “due to unusually high CEO compensation without performance targets; a combined CEO/chair; related party transactions; overboarded directors; non-independent audit and compensation committees; discretionary incentive pay; and more.” The piece went on to say it had a low social score “due to a regulatory investigation into discrimination against minority borrowers; investigation into corruption and anti-competitive behavior; failure to endorse international labor policies; and numerous workplace safety violations.”

So it would seem that on the ESG front, all has not been well at Wells for some time.

Although these low ESG scores did not seem to put investors off at the time, appetite for ESG has since increased as responsible investing becomes the new norm and investors become more socially-conscious. In addition, proponents of ESG believe companies scoring well on this front will have better stock market and accounting performance over the long term.

While the bank will hope the resignation of Stumpf will draw a line under the scandal, it will take more than the exit of a CEO to fix its problems.  If Wells is to truly recover then it will need to implement a root and branch reform of its governance structure and sales culture. And that will take time.