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Wells Fargo Scandal: Ethical Issues and Possible Prevention Measures

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Wells Fargo Scandal: Ethical Issues and Possible Prevention Measures essay

Table of contents

  1. Facts of Case
  2. Ethical Issues
  3. Was Wells Fargo Wrong or Not?
  4. What is the Root Cause or Source?
  5. How Could This Have Been Avoided?

In today’s society the scandals that hit large corporations are discovered and discussed quickly due to the use of the media. How a company responds and resolves the issue can become detrimental to the bottom line of success and growth. In the following text we will discuss a recent Wells Fargo scandal, the ethical issues and how or if the scandal could have been prevented.

Facts of Case

In 2008/2009 Wells Fargo mandated a companywide quota for opening, or the cross selling of services, on new customer accounts by employees. However, it was discovered that in order to meet the quota employees began creating fake accounts for customers. Those “free” accounts promised by employees to customers were actually premium accounts, Wells Fargo premium accounts are associated to large fees. Those large fees lead to over drafted accounts and those over drafted accounts lead to larger issues such as ruining a customer’s lines of credit.

Ethical Issues

The most evident ethical issue with the 2008/2009 Wells Fargo scandal was the loss or misuse of trust, which resulted in the loss of integrity of Wells Fargo employees. The loss of honesty for a personal incentive had an effect on the corporation as a whole. Incorrect decision making issues chosen and followed through by employees and not the consumers lead to lowered reputation and moral of Wells Fargo.

Was Wells Fargo Wrong or Not?

Wells Fargo employees were wrong for lying, creating and opening false accounts as well as hiding the fact that they were doing so in order to receive an incentive. Piazza & Jourdan (2018) recognized that without publicity, an organizations misconduct may or may not alter organizational membership, meaning that if not caught, employees would stay to reap the benefits to their paychecks. Carberry, E. J., Engelen, P., & Van Essen, M. (2018) found that the costs of misconduct by corporations begins with the cost of replacing employees and can lead to reputation penalties, which can be rooted to the decline of a corporations stock price and loss of stakeholders. The entire account opening scandal of Wells Fargo was systemic in the sense that it was companywide, and not caused by one individual.

What is the Root Cause or Source?

The knowledge and distribution of incentives to employees for cross-selling services and accounts began the largest issue of Wells Fargo’s scandal. The choices made were companywide in order for all who participated to benefit.

How Could This Have Been Avoided?

First of all, by not offering an incentive for quota purposes. When you create a reward, but do not monitor how it achieved or earned, then you begin to allow employees to engage in unethical business practices. More so, when Wells Fargo executives discovered that there was an issue with fake accounts they needed to stop the program, announce the issue, and resolve before it got worse. Corporations facing misconduct findings, attempt to limit the discloser of issues in order to limit outside damages. In an attempt to correct the situation, Wells Fargo fired 5,300 participating employees, which amounts to about 1 percent of the 300,000 total company employees. However, when there are multiple reasons for hitting certain market thresholds, more than your daily employees are at fault. Piazza & Jourdan (2018) recognized that when a member of an organization are tied to it, and have to deal with the consequences, the less they are to react to a scandal. The corporate culture would need to change, starting by verifying that the CFO or CEO’s ethical decisions are in line with the company’s. The higher powered employee has the ability to trickle down to all employees the ethical business values necessary to run in a truthful way.

When misconduct becomes the central focus of attention, an organization has the opportunity to show that they have better ethical norms or they become perceived as non-strict enforcers to ethical practices. With the combination of personal and business ethics, organizational controls and governmental regulation, a company to creation of an unethical corporate culture becomes less. However, more than one person or department is responsible for how an organization is run and becoming or being socially responsible leads to better end results, great profits and attraction of more consumers for business growth.

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