These are an American financial multinational company whose headquarters is in San Francisco with most prominent offices throughout the US. It prides itself by being top five largest banks in the United States of America and the second worldwide in market capitalization. It was ranked the largest by market capitalization two years ago, but it was later discovered that the employees had created over two million fake accounts. By assets, it exceeded Citigroup inc but was not able to defeat the bank of America in bank deposits. The Wells Fargo is the second biggest financial institution in home mortgage retuning and credit cards.
It operates from the national bank and designates its core office in South Dakota. The company is as a result of a merger between Norwegian Corporation and Francisco based Wells Fargo Company. As a result of the merger, the company’s headquarters was transferred to San Francisco and became one of the big four banks in the United States with more than five thousand retail branches and twenty thousand automated machines. It operates in 35 countries and has millions of customers globally.
The bank has won several awards including the world’s most valuable bank. It is also seen as the best in the list of the public companies in the world. The well Fargo is the most admired company in the world and has been rated the 7th most respected institutions of the society. Its credit rating was at AAA putting it at the highest credit rating from three different firms.
Creation of Two Million Fake accounts
These are the opening of accounts bearing customers name without their consent which is a bad ethical practice meant to defraud customers of their hard earned money to benefit the employees and the bank itself. The case of Wells Fargo is that of an ill-treated employees against their bosses. The company was fined a hundred million and has since dismissed thousands of employees for creating such fake accounts (Cavico, F.,& Mujtaba, B. 2017). Employees are given targets to beat, those who do not reach the required targets by managers are demeaned and even threatened, and they are forced to work extra time to reach their quotas or face termination. It should be noted that this quota is unattainable for mere lack of customers entering the branch on a daily basis which makes it difficult to attain the target traditionally.
The employees, therefore, resort to a non-traditional way where a process called pinning is put in place to register fake accounts without the authority of the consumer. The bank’s employees impersonate and enroll the customer in online banking by use of fakes emails and reset of the pin. There was a creation of approximately two million of such fake accounts which might have been used in the transfer of-of cash from the customers’ existing accounts. Such malpractice made the well Fargo to lose two million which is its refunding now. The employees involved in the setup of fake accounts have been fired.
Well, Fargo Company stressed the selling of the multiple solutions to its consumers which they term as a good practice because it shows and inspires the loyalty of the customer. For instance, if a regular customer has a checking, savings accounts and do the online banking and own a credit card, they will at one point use one of the services.
Majority of the senior management of this company were of the idea that signing customers for online banking without their knowledge will not be of any benefit to the bank. Practically none of the customers would feel loyal for signing up for a product they are not aware of and do not use. It makes no sense to own a credit card that you do not know how to use. The management pushed for the attainment of the unreasonable targets, but the employees were smart enough to create fake accounts to satisfy their bosses’ demands.
The customers were made unhappy. Thousands of the customers remained unharmed, but the majority were charged, some had their credit card canceled and some stayed surprised by the discovery of the use of their personal information by strangers to open accounts on the web (Cavico, F.,& Mujtaba, B. 2017). In ignoring the turn of events, no one benefitted from this system, the company’s customers were harmed, their workers miserable and no money was made through this fraud.
Senior bankers associated with the well Fargo were not judged in connection with the creation of the fake accounts because they were very good at covering it, prosecutors could not find evidence to link them to the mess. Sometimes fraud can happen in an institution without the knowledge of the managers or even their approval .therefor the company is forced to comprehend that there could be the opening of unauthorized accounts but the senior employee did not want that to happen, they wanted employees to open real accounts and not the fakes ones. The system they designed to achieve lots of real accounts had setbacks that made employees create fake accounts.
Application of Ethical Theory to Explain Wells Fargo Company event.
The theory of utilitarianism which demands that the consideration of the action to be right or wrong depends on the consequences and the effects that accompany it. An activity that produces more favorable outcomes compared to the negative one to the culprits. In regards to the Well Fargo Company, the quotas set by the management were met by the creation of fake accounts. These satisfied the senior managers since they thought that their targets were achieved on a daily basis (Beauchamp, T. et al, 2014). It will be discovered later that the employees who were threatened to be sacked had used the system to create fake accounts to satisfy the management. The company was ranked the third in the US in asset due to the creation of two million fake accounts.
The risk assessment of the whole process of the Well Fargo scandal is not determined since the process happened without the knowledge of the senior managers of the bank. This theory could be of great help to asses such risk and help in making an informed decision on the same, as well as in determining the cost benefit to the employees who conspired to realize the fraud scheme. Due to the difficulties experienced in measuring the intensity of happiness that comes with it, utilitarianism theory fails to expound how the culprit at Wells Fargo felt after they were discovered and dismissed. The number of long hours spends in the office working to attain the supervisor’s targets means that one has ignored his or her family. These are contrary to the utilitarianism as the company pushes their employees to achieve what cannot be completed because fewer consumers are visiting the bank branches at a given time. It is meant to create massive profit at the expense of sacrificing the employees’ happiness. The company did not recover much in dismissing them because they had made an approximated a half a million dollars each from that practice.
Rights theory which obligates that the best way to deal with ethical issues is to recognize that every person has an entitlement to human rights. Other factors should not influence the human rights. It should be dependent. The opening of accounts by the well Fargo bank to its consumers without their knowledge was a way of violating the human rights as well as going against the above theory (Beauchamp, T. et al, 2014). The positives rights that allow people to provide services to others but with their consent is also another critical part that was not considered. Consumers should be informed and asked to give permission for their details to be used in account opening. This theory has its short comes since it does not show the hierarchy to determine which rights have more value between negative and positive rights. For the management to set some unattainable quota for employees and threaten them of dismissal is unethical according to the rights theory. Employees forced to work late in the evening to attain the targets and come to their regular duty schedule is unbearable. The argument condemns the action and prosecutes the creation of fears amongst the employees. Threats to fire employees who don’t attain the targets are also against the human rights.
The Kantian deontology emphasizes that an action that is ethical is accepted by every individual to be a universal law. It explains that for one to be morally upright, a set of rules must be followed. These financial company uses their senior managers to put pressure on their junior employees to attain a specific target no matter what it takes (Beauchamp, T. et al, 2014).They do not consider their health and subjects them to work long hours. Employees are pushed for achieving the goals by creating the bogus accounts to satisfy the manager’s need of attaining greatest profit margins. This action is termed as unethical because every individual should be treated with dignity and respect and should not be used as means to reach an end.
What did the company do to address the issue?
Wells Fargo CEO publicly accepted that the company failed in the sales practice matters and acknowledged that it had harmed the company performance as well as its reputation. He apologizes on behalf of the company to the consumers and commits himself and the senior leadership in making sure that thorough actions will be taken to ensure that the customers do not go through what they went through.
The key priority that the company did was to restore trust and pride that they lost after the event. The companies CEO put all the top management officials on task to engage all the stakeholders and make them know that their core values are not the ones portrayed in the social media and news and admits that in doing so, they were not going to deny the reality.
The company concurs that there are issues that need to be solved within its culture of conducting business and the weakness in it that they must change. Ways they behaved or performed business that did not impress the customers, investors and many communities that depends on the company to lead by example.
The company takes the community banks on task to do right what they did previously wrong. Phone bankers and branch managers are put on toes to make sure no repeat of such mistakes (Lawrence, A. & Weber, J. 2014). He continues to explain to the employees that the company’s reputation was at the siege and would require all of them to participate in regaining it.
Current employees are advised to take great care of the customers, evaluate and understand their wants, solve their concerns and offer quality services and counsel. These should be done ethically and with a lot of determination.
An encouragement to understand the reality and work as a team is also stressed by the company’s top management. Employees are advised to read the contents of working as a team and have the connection with the stakeholders as well as managers. They are cautioned to expect harsh headlines as the investigation was still going on, they would be tough on the company, but no one was going to allow them to paralyze the progress of the company.
The company changed the leadership of the retail bank and the process of risk management in the retail bank. These would allow senior members in providing credible and independent challenges to how the bank operates. In a commitment to the customers’ experience, the bank has eliminated sales goals to all members of the banking team.
A system automated confirmation email will be sent to the customers and every credit card applied will be acknowledged (Lawrence, A. & Weber, J. 2014). The consumers’ information will be safeguarded. A performance plan based on the customers’ service has been introducing to gain their trust. The company has invested heavily in ensuring that quality is monitored correctly.
Those affected and had savings, unsecured line of credits and credits card will be contacted or are free to contact the company through its toll-free number. Any customer with any grievances is encouraged to call.
My solution for this issue.
Based on the intensity of the event of this company and considering that many employees were fired due to the fraud, I will put in place an exceptional team of human resources managers to help in rehiring the suspended employees who were not guilty and are legible to work. I will survey with specific team members to understand their rating of the company’s handling of ethics issues and improve where necessary.
I will engage an investigative agency for a regular review of the company’s sales practice and a possible harming of the customer. These services are what I will extend across the company, therefore, performing beyond the orders.
The engagement of a culture expert who is independent is what I will propagate for. He will help the company to understand the outside culture and fix the cultural weakness in them. I will also remain free to learn from others on how to regain the faith the company lost through the fraud.
Pros and Cons Associated with Possible Solutions
In eliminating the sales based goals and changing the way retail bankers are paid, has worked towards putting the customers wants first. The company has invested in its customers and has increased the pay of their entry-level employees. These have worked to the advantage of the current employees.
Current managers have been subjected to managerial training and bankers’ to respond quickly to any malpractices reported (Solomon, R. 2014). These will depend on their goodwill and commitment to strengthening the risk and ethics management in the company.
The need to call for greater accountability from all employee is unattainable, some of them will always want to gain extra money. Money has never been enough. Hence it will be hard to get rid of the vice.
The steps taken to regain customers trust has cost the company a fortune. The refunds made are enormous and may affect the normal operation of the company before it restores its previous performance. The change of the management may not make the company regain its trust to the customers. Consumers will always think that the same system is in place and will seek the services of the company with a lot of fear.
In a conquest to build a better bank, I will fix all that went wrong and find ways of serving the customers better, manage risks and developing the people around us. Working towards regaining the company’s trust is my top priority. The board of managers should be tasked to investigate what went wrong and give their independent findings on the issue.
I propose that the previous system that was used to create bogus account be abolished. Employees should not be given unattainable targets as this will make them think of other ways of attaining them. A biometric system that will recognize all the consumers must be put in place to avoid bogus account registration.
Cavico, F. J., & Mujtaba, B. G. (2017). Wells Fargo’s fake accounts scandal and its legal and ethical implications for management. SAM Advanced Management Journal, 82(2), 4.
Mims, J. H. (2017). The Wells Fargo Scandal and Efforts to Reform Incentive-Based Compensation in Financial Institutions. NC Banking Inst., 21, 429.
Beauchamp, T. L., Bowie, N. E., & Arnold, D. G. (Eds.). (2014). Ethical theory and business.
Lawrence, A. T., & Weber, J. (2014). Business and society: Stakeholders, ethics, public policy. Tata McGraw-Hill Education.
Thomas, T., Schermerhorn Jr, J. R., & Dienhart, J. W. (2014). Strategic leadership of ethical behavior in business. Academy of Management Perspectives, 18(2), 56-66.
Vitell, S. J., Dickerson, E. B., & Festervand, T. A. (2016). Ethical problems, conflicts and beliefs of small business professionals. Journal of Business Ethics, 28(1), 15-24.
Solomon, R. C. (2014). It’s Good Business: Ethics and Free Enterprise for the New Millenium. Rowman & Littlefield.