Wells Fargo Scandal and Ethical Issues: Essay

This paper covers five published articles that report on the Wells Fargo case. These online articles show many different ways the Wells Fargo Scandal affected the customers and employees. One article covers what actually happened throughout the whole process and investigation of Wells Fargo. Another talks about how employees still aren’t satisfied with how things are being run at Wells Fargo. Many people were fired and fined and that is also talked about in one of these articles. Leadership is a big key to making organizations work. Not everyone was raised the same and has different ethical views so it’s important for Wells Fargo to implement their values, visions, and goals forcefully.

How would you feel if a bank made a fake account in your name just so the employees can achieve their daily goals and not get penalized? That’s what Wells Fargo did as early as 2011. Wells Fargo is one of the biggest banking company’s around the world, serving one in three U.S. households (McFarlane, 2019, p. 2). So why would they owe over $1.7 billion in fines, you might ask? They put their workers under an illegitimate amount of pressure to try and hit sales goals to receive a bonus but those workers created fake accounts because the goal was practically impossible. Wells Fargo adopted the short-term perspective for the temporary gains but that came with long-term negative effects.

Wells Fargo is a financial services company based out of San Francisco, California, and has central offices all throughout the United States. It is one of the world’s largest banks by market capitalization and total assets. Founded in 1852, Wells Fargo provides banking, investment, and mortgage products and services globally. Wells Fargo is, “committed to being the best we can be” and they “have the will and the drive to build a better Wells Fargo, every day” (Wells Fargo, n.d.). That is until 2016 when Wells Fargo was involved in one of the biggest banking scandals in history. This case is still being looked at today as they are finding more and more information about what happened and why.

Firstly, the lack of leadership and pressure put on these employees is absurd. The goals that Wells Fargo decides on should be able to be met without 24/7 surveillance and control. All organizations like this are responsible for money and cash flow and their customers should be able to trust them. Many things can happen if the duties of the leader are not performed fully - such as forgery, unethical and illegal activities, and security breaches. CEO John Stumpf and community banking head Carrie Tolstedt were highly criticized by many. “Stumpf did not appreciate the scope and scale of sales practices violations” (Tayan, 2019, pg. 10). According to Tayan (pg. 2), Stumpf did not negatively react to learning that one percent of employees were terminated in 2013 for sales practices violations. This means Stumpf was more focused on the other people doing their jobs correctly instead of confronting the problem. A good leader would want to figure out why those violations are happening instead of ignoring them. People come from different places all over the world to work for this company. Everyone is going to have different views on how things will work so the leader of Wells Fargo needs to implement their values more clearly and forcefully.

Continuing with that, Tolstedt played a big role in how things were running in the business. Stumpf looked up to her and thought the way she was controlling things were perfect. That wasn’t the case, though. Others described her as, “obsessed with control” and faulted her for maintaining “an inner circle of staff that supported her and reinforced her views and protected her” (Tayan, 2019, pg.10). Tolstedt ignored the views of her employees when they told her the sales goals were unreasonable and that is what led to negative outcomes and improper behavior. Many employees begged for a raise and complained about how hard it was to achieve these goals every day. In 2013, one employee wrote to the CEO’s office and said, “This is sad and hard for me to say, but I had less stress in the 1991 Gulf War than working for Wells Fargo” (Bomey, 2020, pg. 2). The pressure on these employees was too high to where they had to sell unneeded products and make fake accounts because they were so scared of being punished or even fired.

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In 2016, Wells Fargo was first charged with millions of dollars in fines from the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, and the City and County of Los Angles for creating fake deposit and credit card accounts. Later it was found that employees faked 3.5 million accounts to try and reach their goals (Management, pg. 152). Many people ended up getting refunds and Wells Fargo agreed to play a billion-dollar settlement with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. John Stumpf stepped down and 5,300 employees were fired.

Nobody should tolerate this kind of misconduct at any bank because what they did to their customers and employees is amiss. Stumpf actually ended up being banned from working at a bank ever again. Stumpf also had to, “pay a $17.5 million fine for his role in the scandal” (Bomey, 2020, pg. 1). He tried defending himself in front of a Congressional committee, saying he had no part in it, but the committee then charged him and five other former executives of Wells Fargo. The OCC stated, “Senior leaders knew or ‘should have’ known about the issues… The bank received 5,000 customer complaints that the bank had opened accounts without their consent” (Bomey, 2020, pg. 2). Wells Fargo was transferring funds between accounts and enrolled them in online banking without approval and also told customers their products were more important than they actually were. Because of the excessive pressure to achieve sales goals, most employees were led to make unethical and illegal decisions.

Recently, some Wells Fargo employees are sharing their feelings about how almost nothing has changed. Many changes have been put into place but they are still receiving complaints from customers. “Frontline bank workers, many of whom felt scapegoated during the scandal, are still mistreated” (Sainato, 2019, pg. 2). Supposedly, workers are still under the same intense pressure to get their bonuses. “There’s no real respect for people’s work-life balance” (Sainato, 2019, pg. 2). Wells Fargo has started to discuss the pay and bonuses that led to the problem. In 2017, they raised their pay to $15 an hour but that still wasn’t enough for the workers as they wanted $20 an hour. “Wells Fargo saved an estimated $3.7 billion annually from Trump’s tax cuts” (Sainato, 2019, pg. 2). $15 an hour is hard to live off of, especially if you have a family and own a home and have to pay back school debt and other things. Most of these workers are probably having to work two jobs so they can afford everything.

In most situations, I would say, “Well if you don’t like it then change and find something better” but the fact that this is one of the largest financial institutions in the country you would think they could reevaluate and give their employees the best. The Committee for Better Banks has asked to set up several meetings with Wells Fargo but Wells Fargo always cancels on them. Apparently, this is a “typical pattern from Wells Fargo of being untrustworthy, saying one thing and doing another… It’s abhorrent how the eighth wealthiest company in the world treats their workers, all for profit” (Sainato, 2019, pg. 3). Wells Fargo has been like this for a long time now and have started to make it look like they don’t care if anything changes or not.

This ultimately goes back to the leadership. The higher-up people don’t seem to care if their workers or customers are happy and only care about the profit they are making. Leaders, their goals should be to motivate their employees and customers and make them feel important. Nobody should ever hate their job so much that they are saying war is less stressful than work. This scandal wouldn’t even be a thing if the leaders listened to their workers and made the goals reasonable. It is okay to push your employees but you cannot drown them in so much work that they have to perform illegal actions to fulfill the company goals. The truth always comes out eventually so as a leader, instead of avoiding the problem you need to resolve it right away.

References

1. The Vision, Values & Goals of Wells Fargo. (n.d.). Retrieved January 23, 2020, from https://www.wellsfargo.com/about/corporate/vision-and-values/
2. Tayan, B., & Stanford University. (2019, February 6). Retrieved January 20, 2020, from https://corpgov.law.harvard.edu/2019/02/06/the-wells-fargo-cross-selling-scandal-2/
3. Sainato, M. (2019, January 4). Wells Fargo employees say little has changed since the fake accounts scandal. Retrieved January 22, 2020, from https://www.theguardian.com/business/2019/jan/04/wells-fargo-fake-accounts-scandal- employees
4. Bomey, N. (2020, January 23). Ex-Wells Fargo CEO banned from banking must pay $17.5M fine for role in the fake-accounts scandal. Retrieved January 23, 2020, from https://www.usatoday.com/story/money/2020/01/23/wells-fargo-ex-ceo-john-stumpf-banned-banking-fined-17-5-m/4554673002/
5. McFarlane, G. (2019, December 4). How Wells Fargo Became One of the Biggest Banks in America. Retrieved January 22, 2020, from https://www.investopedia.com/articles/markets/093014/how-wells-fargo-became-biggest-bank-america.asp
6. Bierman, L., Ferrell, O. C., & Ferrell, L. (2019). Management: Principles and Applications (4th Ed.). (Pg. 151-152). Academic Media Solutions.