Wells Fargo and Its Ethical Platform

Founded in 1998 as a result of a merger between the initial Wells Fargo and a Norwest based financial corporation, Wells Fargo is currently the largest financial company in terms of global market capitalization and the fourth largest bank in the United States (Rau, 2001). It is a public company traded in the NYSE as WFC S&P 500 and has its headquarters in San Francisco, California. Currently the company is involved in offering the following services: direct Consumer banking where it takes in deposits from the public, corporate banking, finance and insurance where it offers investment advice and works hand in hand with small, medium size and large companies (Fradkin, 2002). It also launched a mortgage and homes credit and loan facility in 2007.

The company had a revenue and operating income of US$ 86.08 billion and US$ 28.47 billion by 2015 respectively. Globally it has a total of 269,200 employees and an annual net profit US$ 18.89 billion (www.yahoofinance.com, 2016). Creating Solutions for Stronger Communities by Wells Fargo is the social corporate responsibility slogan for the organization globally.

Business ethics are values that govern the actions, behaviors and policies of individuals in an organization and the organization at large. Ethical platforms are channels used to ensure that organizations can be held liable and responsible to ethical issues and actions (Fradkin, 2002). Different ethical issues can be addressed using different ethical platforms depending on the sensitivity of the matter. Wells Fargo deals with one of the most sensitive items in the society: money. There is need to ensure that there is an ethical culture that keeps a tab on the business ethics practiced by the organization globally.

Wells Fargo has intranet and internet websites that have interactive options to allow for proper communication to the necessary authority. For the internet website, it is mostly meant for the public, both members and non-members where they can be able to access products offered by the organization. The products’ features are clearly stated and the terms and conditions attached as well. In case of complains and compliments there is a contact number and email address that one can send their message to and they can have their issue solved. There is an online access agreement that every website visitor has to agree to before getting into the website. In an attempt to keep the public informed on the actions taken by the organization, the website indicates the bank’s vision, mission and goals and consequently it is liable to fulfilling them to every individual. The website outlines some of the corporate social responsibilities taken up by the organization.

The platform communicates the social responsibility of the organization starting with the priorities like social inclusion and diversity that allows for equal treatment, access to resources, services and opportunities offered by Wells Fargo (La Marca, 2008). The organization does not foster gender, race and age based discrimination and seeks to ensure that the society also has the same outlook on the aforementioned factors. The organization is highly involved in economic empowerment of women and youths. This is a global activity that is open for all to plug in and give their contribution in terms of monetary and professional assistance. It is meant to ensure self-sufficiency and empower underserved and marginalized communities (Fradkin, 2002). This is especially so in developing countries in the Asia.

Due to the increasing nature of the effects of global warming, the organization has an ethical right and obligation to ensure environmental sustainability by using lower carbon producing management and production methods and this information can be viewed on their website. The bank also advocates environmental sustainability by having a volunteer program that aids in creating awareness on the effects of human activities on the environment. The program allows for staff and bank clients to come together and interact in a less corporate and official environment.

For the internal website meant for the employees and shareholders, there are ethical platforms where unethical treatment and actions can be reported to human resource for disciplinary actions to be taken. The HR policies are clearly stated in the intranet and any updates properly communicated to the employees to ensure that they are kept aware of the changes in the organization (La Marca, 2008). Disciplinary actions to be taken due to unethical internal actions are clearly stated under the laws and regulations concerned with employment. The ethical platform is clear, concise and detailed to cater for the needs of both the clients and the employees of the organization. Conversely more requires to be done to ensure business ethics are adhered to and improved in accordance to the changes in the laws and employment acts.

Currently Wells Fargo is facing stiff competition from its competitors JPMorgan chase & Co, Bank of America and Citigroup (Hume & Thacker, 2010). The three have the large and well-structured financial networks around the world. They have the competitive advantage because they control substantial size of the financial market globally. With the current litigation, employment issues and decrease in market influence, the organization is seen to be on a downward spiral.

The company’s returns started declining during the 2012 United States economic recession that led to a decline in the price of mortgages when households sold them off because they could no longer afford. This led to a significant decline in the profits gained and consequently reduced the competitive edge that the organization had gained from the sector.

The organization currently is involved in one of the biggest credit card fraud cases in history of America. Wells Fargo employees since 2011 had been creating pretentious credit card accounts using their client’s information in order to boost the volume of clients in numbers and achieve targets. These credit cards would, as expected, attract credit card application and processing charges to the client’s account which the client was expected to pay or deductions were automatically made from his savings or salary account. The employees went further to open 1.5million pretentious deposit accounts by coming up with fake PIN numbers and email addresses but using other prevailing client details. After opening these accounts the staff would transfer cash from the client’s bank account balances to the newly opened account and then back to then back to the clients’ accounts. This was done to ensure that the new accounts have been activated and are viewed as active since they have an inflow and outflow of cash. The transfers would be conducted several times. Since transfer charges are system automated, the clients would lose their cash in the transfer processes that they had not approved.

In an effort to prove that they were properly marketing the bank’s credit cards, the employees tabled more than half a million credit card application forms that went through the rigorous approval process which in turn attracted administrative fees to the bank leading to losses. In a nutshell, the unethical practices by the employees since 2011 led to losses of $400000 annually in terms of interest charged on credit cash advanced via the phony credit cards, application and processing fee and annual charges for retaining the card. Additionally, $150000 annually was lost from clients savings accounts in the form of transfer charges to and from the phony accounts opened. It led to firing of 5300 employees who were also charged with several counts of malpractice and case laws relating to misappropriation of system rights and inconveniencing clients. The bank accepted to refund clients $5 million for their losses and was fined $185 million for damages.

Even though the fired employees have been held liable and some of their personal accounts have been frozen and cash is to be used to pay for the fines. The bank has experienced massive losses. Their share value price has greatly reduced at the NYSE and the shareholders are threatening to sell at leave before more losses are incurred. The situation was also made worse by Brexit that adversely affected their offshore branches in United Kingdom. Since the case started the bank has lost 32% of its clients due to lack of faith in their system and fear that the bank will go under receivership after payment of the fines and refunds to client’s accounts.

The Wells Fargo former employees blame the bank’s working environment for their malpractices. The managers put them under high and toxic pressure to achieve highly set quarterly and annual targets. The sales team usually has eight products to sell per day and when the season is high they are expected to sell 20 products a day in what is termed as a “jump into January rush”. When the pressure becomes too much the employees would crush and start crying and some even threw up in their waste bins. This pressure was what made the employees to come up with the plan of faking documents because the targets are just too high and they feared getting fired.

With increase in the launch of new products, there were always on job trainings conducted and the employees were expected to completely understand the products instantly and cross-sell them to clients. Some employees admit to rote memorizing product features and advantages without understanding them in case the manager asked them impromptu. The bank focused solely on the daily outcomes of the employees and did not bother to check on the validity of the information offered on the client. The information would be entered in the data base and the managers would quickly approve and congratulate the employees.

The credit card approving staff, even though they were mandated with the role of verifying the information brought by the credit card sales team, they were always overwhelmed with more work than they could handle. They were also put under pressure to quickly approve forms leading to less validation and just approval. This is the reason why the fraudulent activities went on for so long without the realization of the management team and when it was realized it was too late to be corrected.

The bank, through overemphasis on profits, targets and financial returns, it violated its ethical code to the public and to the employees. The employees did not get a safe and healthy working environment as they were constantly being threatened with losing their jobs. The welfare of the clients was not catered for as transactions were made on their accounts without their approval and led to financial loses. The public lost faith in the bank’s operations.

In light of this, tougher banking regulations are being put in place to act as counter check watchdogs in protecting the public from bank’s malpractices. There are two agencies that have been liable for not preventing the malpractice and fraud from happening. The consumer financial protection bureau and the banks welfare association should have checked the increased complaints from Wells Fargo clients before the whole case blew up and led to losses. The banks welfare association should ensure that the behavior is not also present in other banks as there is constant cross selling and exchange of clients amongst banks could mean that there is still more in store by other banks. The welfare of the employees should be checked as well with increased regulations on the targets set for the employees. The CFBP is lobbying to be allowed to make checks on the level of satisfaction from banks account holders. This can be achieved by constantly conducting surveys that reveal whether there are any unsigned and unauthorized transaction conducted on their accounts and investigations should be made.

The CFBP has also come up with a blog and web page that allows for anonymity of those posting, to report any unprecedented transaction and charges made by the banks without a proper explanation. The bureau is lobbying to sue the bank for damages and inconveniences caused to the clients due to lack of the right amount of funds in their accounts. The bureau seeks to also to investigate the bank’s competitors on the same issue in an effort to defend the rights of the public and ensure that bank’s staffs are not engaged in malpractices that can lead to financial losses to the client.