Table of Contents
Case Facts
Ethics
Wells Fargo: Was it Wrong?
What is its root cause or origin?
What could have been done to avoid this?
The media is a powerful tool in our society today. It allows us to quickly learn about and discuss scandals that have hit major corporations. The way a company handles the situation and responds to it can have a negative impact on its bottom line. We will examine the ethical issues surrounding Wells Fargo and whether or not the scandal was preventable.
Case FactsIn 2008/2009, Wells Fargo set a quota that employees had to meet in order to open new accounts for customers or cross-sell services. But it was later discovered that to meet their quotas, employees had created fake customer accounts. Employees were offering customers “free accounts” when they really meant premium accounts. Wells Fargo’s premium accounts have high fees. Overdrawn accounts are a result of these large fees. This can cause a customer to lose their lines credit.
Ethical QuestionsThe Wells Fargo scandal in 2008/2009 had a number of ethical issues. The most prominent was the mismanagement of trust. It led to the employees of Wells Fargo losing their integrity. The corporate impact of the loss of integrity for personal gain was felt by all employees. Wells Fargo’s morale and reputation were lowered when employees made incorrect decisions.
Was Wells Fargo at Fault?Wells Fargo employees lied, opened false accounts and hid their actions to get an incentive. Piazza & Jourdan (2017) acknowledged that an organizations misconduct might or might not change organizational membership. If not caught, the employees would remain to benefit from their paychecks. Carberry, E. J. Engelen, P. & Van Essen M. (2018) concluded that misconduct in corporations can have a negative impact on the stock price of the company and its stakeholders. Wells Fargo’s account opening scandal is systemic because it affects the entire company.
What is its root cause or origin? The biggest scandal that Wells Fargo has been involved with began because of the distribution and knowledge of incentives to employees in order to cross-sell accounts and services. All employees were involved in the decision-making process.
What could have been done to avoid this? First of all, not by offering incentives for quotas. You allow unethical behaviour by employees when you do not monitor what the reward is for or how it’s earned. Wells Fargo executives knew that if they wanted to prevent the fake account problem from getting worse, they had to stop the reward program, notify the public, and find a solution. To limit external damages, companies that have been found guilty of misconduct will limit the disclosure of information. Wells Fargo tried to correct the problem by firing 5,300 employees. That’s about 1% of their 300,000-person company. When there are many reasons why a market reaches certain thresholds, it is not just your employees who are to blame. Piazza & Jourdan (2017) noted that the more a company’s members are tied to them and are forced to face the consequences, they are less likely to react to a crisis. Corporate culture must change. The first step is to ensure that CFOs and CEOs are making ethical decisions in line with company values. The more powerful employee can help to instill the values of honesty and ethics into the company’s culture.
When a company’s misconduct is brought to the forefront, it has the opportunity to prove that they are committed to ethics or to be perceived as a non-strict enforcer of ethical practices. When personal and organizational ethics, as well as governmental regulation are combined, the chances of an organization creating a culture of unethical behavior decrease. However, the management of an organization is not solely in the hands of one individual or department. Becoming socially conscious and/or ethical leads to greater business success, higher profits, and increased consumer interest.
