The Impact of Big Business – Wells Fargo

The Impact of Big Business – Wells Fargo

Evaluate what Wells Fargo has done to repair the damage to its reputation. What should they still do?

According to Thomas Sloan, the former CEO of Wells Fargo, one of the things that the company has done to repair its reputation is conducting a thorough independent investigation that has been made public for everyone to follow. John Stumpf, who is also a former CEO of the company, mentioned that the company has also removed the sales quotas that contributed to the fake account scandal (Warren, 2016). This has been done to convince the public that the scandal cannot arise and that the company cares about the welfare of its customers. The company also initiated an online campaign to portray a good image by portraying its new company goals that were more centered on the welfare of its customers and reducing pressure on its employees. John Stumpf also added that the company had changed its compensation and incentives to make them more favorable for employees. This was done so that the company would attract employees because the damaged reputation had made most employees leave, and people were afraid of working for the company. Pymnts (2016) states that the company is also regularly involving executives in decision-making. According to Lenzner (2018), The company is also engaged in corporate social responsibility by offering food and supporting projects aimed at providing affordable housing.

Although the strategies mentioned above have enabled the company to restore its damaged reputation, other things need to be done to sustain a good reputation. One of the things is firing all the senior officials who participated in the scam and ensuring that they do not get any benefits from the company. The company should also come up with a payment plan to pay the customers who lost their money as a result of the scam. The payment scheme could include making monthly or annual payments until all the money is paid off.

Should top leaders be responsible for the behaviors of their customer-facing employees? Why or why not?

Top leaders should be responsible for the behaviors of their customer-facing employees because they are the ones who introduced cross-selling to increase the price of the company’s stock. The leaders also set a target requiring customers to have 8 banking accounts. Employees, therefore, had to make sure that this number of accounts was achieved, and when they were unable to convince the customers to open these accounts, they opted to open fake accounts to please top leaders. The top leaders also set sales quotas for the employees, thus forcing them to do everything they could to meet their targets so that they could not lose their jobs (CBS, 2018). Top leaders are also responsible because they set unrealistic targets for the employees without consulting them. For instance, Thomas Sloan, who was the company’s financial officer during the time the scandal happened, had bragged to investors about the company’s commitment and ability to open new accounts for existing customers. He had assured investors that this could be achieved by stating, “I can’t wait to get a credit card in every one of our credit-worthy customers’ wallets” (Warren, 2017). Top leaders also promoted the unethical conduct of employees because they were benefiting from the scam since the money from the sale of its stocks was getting into their pockets. Their awareness of what was going on is evident in their act of allowing Carrie Tolsted to retire and get her benefits without being held accountable for the scam despite the fact that she ran the community bank division where the scam occurred during the entire time the scam was being committed. She was also not fired even though 5300 of the employees who were reporting to her were fired. It was, therefore, evident that she retired to avoid being held accountable because her retirement was approved before the facts of her involvement in the scam became public. Top leaders also failed to verify whether existing accounts were legit or fake because they were only interested in the rise in stock prices.

In your judgment, why is this Wells Fargo situation an “ethical dilemma”? Bring in a philosophy (or philosophies) that you have learned about in this Module.

Figar & Đorđević (2016) argue that an ethical dilemma occurs when an individual is unable to choose between two alternatives. Ethical decisions are characterized by meeting obligations, observing moral principles, and meeting required obligations (Marks & Rainbow, 2017). In business, ethical dilemmas occur when employees are unable to decide whether to meet the needs of the organization or the customers (Marcus & Hargrave, 2020). The Wells Fargo situation is an ethical dilemma because employees were benefiting the organization at the expense of the clients. They felt they were more obliged to help the company because they were getting paid, and the company could fire them if they failed to meet their responsibilities. The situation is also an ethical dilemma because top leaders were benefiting from the scam. For instance, the company CEO, John Stumpf, profited from the scam because of the high stock prices that resulted from the company’s high performance. The scam also helped the company increase its profitability and its stock worth, hence creating a good reputation for the CEO. He would, therefore, not be willing to stop the scam because he was already benefiting from it and was not willing to forfeit the benefits for the sake of investors because the investors had not realized what was going on. The situation is also an ethical dilemma because it was caused by top leaders who were in charge of protecting the future of the company. The leaders put too much pressure on the employees by setting targets, forcing them to open fake accounts so that the company can recognize their efforts and reward them. They also needed to create fake accounts to avoid losing their jobs.

References

CBS. (2018). YouTube. https://www.youtube.com/watch?v=mua-_cQOC5Q&t=309s

Figar, N., & Đorđević, B. (2016). Managing an ethical dilemma. Economic Themes, 54(3), 345-362. https://doi.org/10.1515/ethemes-2016-0017

Lenzner, R. (2018). Wells Fargo Stages A Reputation Comeback. Can It Convince The Fed It’s Changed? Forbes. https://www.forbes.com/sites/robertlenzner/2018/06/29/wells-fargo-stages-a-reputation-comeback-can-it-convince-the-fed-its-changed/?sh=4b177018a15a

Marcus, A. A., & Hargrave, T. J. (2020). Managing business ethics: Making ethical decisions. SAGE Publications.

Marks, L., & Rainbow, D. (2017). Making ethical decisions. Working with Dysphagia, 193-202. https://doi.org/10.4324/9781315148816-12

PYMNTS. (2016, December 28). Wells Fargo’s reputation rebuilding strategy. Payments News & Mobile Payments Trends, Consumer Payments News, Financial Technology News | PYMNTS.com. https://www.pymnts.com/news/cfpb/2016/wells-fargo-reputation-rebuilding-strategy/

Warren, E. (2016). YouTube. https://www.youtube.com/watch?v=xJhkX74D10M

Warren, E. (2017). YouTube. https://www.youtube.com/watch?v=AyVr4qcn8EM

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The Impact of Big Business – Wells Fargo

Assignment Overview
Case 3 focuses on how a large, well-respected financial institution can seriously put its reputation at stake and what happened to bring that about.

Begin by watching the following series of videos:

WatchMojo.com. (2016, September 15). Wells Fargo scandal: 5 things you need to know! [Video file]. Retrieved from https://youtu.be/zLm9c9rdrfQ.

Senator Elizabeth Warren. (2016, September 20). Senator Elizabeth Warren questions Wells Fargo CEO John Stumpf at Banking Committee hearing [Video file]. Retrieved from https://www.youtube.com/watch?v=xJhkX74D10M.

C-SPAN. (2017, October 3). Sen. Warren to Wells Fargo CEO: “You should be fired.” (C-SPAN) [Video file]. Retrieved from https://www.youtube.com/watch?v=AyVr4qcn8EM.

CBS News. (2018, August 3). Wells Fargo whistleblower on fraudulent banking practices [Video file]. Retrieved from https://www.youtube.com/watch?time_continue=309&v=mua-_cQOC5Q.

Pope, K. (2017, April). How whistle-blowers shape history [Video file]. Retrieved from https://www.ted.com/talks/kelly_richmond_pope_how_whistle_blowers_shape_history.

And finally, read the follow-up:

Flitter, E. and Cowley, S. (2019). Wells Fargo says its culture has changed. Some employees disagree. The New York Times. Retrieved from https://www.nytimes.com/2019/03/09/business/wells-fargo-sales-culture.html

These optional sources might also be useful to you:

Armstrong, R., and Noonan, L. (2019). Wells Fargo: repairing a damaged brand. FT.Com, Retrieved from ProQuest in the Trident Online Library.

Forbes (2014). 10 simple ways to improve your reputation. Retrieved from https://www.forbes.com/sites/yec/2014/01/28/10-simple-ways-to-improve-your-reputation/#6cd6373e6b9f

Iraci, J. (2017). The complex process of managing reputation risk. The RMA Journal, 99(10), 40-43. Retrieved from ProQuest database in the Trident Online Library.

MarketingWorks (2014). 6 ways to rebuild reputation with PR after a crisis. Retrieved from https://marketingworks360.com/2014/03/marketing-tips/6-ways-to-rebuild-reputation-with-pr-after-a-crisis/

Case Assignment
Address the following in a 3-page essay demonstrating your critical-thinking skills. It should be written for an audience of business owners. As an ethics expert working for a national ethics association, you have been asked to address the following:

Evaluate what Wells Fargo has done to repair the damage to their reputation. What should they still do?
Should top leaders be responsible for the behaviors of their customer-facing employees? Why or why not?
In your judgment, why is this Wells Fargo situation an “ethical dilemma”? Bring in a philosophy (or philosophies) that you have learned about in this Module.
This assignment should include a third-person voice, in-text citations, and a reference list. It should be evident that you followed some of the basics of APA formatting. Write a well-integrated paper with a strong introduction and conclusion, and use a few section headings (e.g., do not simply follow a Q & A format).

Bring in subject matter expert viewpoints (authors or speakers) to validate and support your writing. Utilize at least 3 sources that are not included as background readings in this course and use ones that are new to you. These sources, for example, can be found by searching the Trident Online Library databases (such as Academic Search Complete, Business Source Complete, Skillsoft Books 24×7, and/or ProQuest Central).

General References Useful for Preparing Graduate-Level Papers:

For a list of general reference sources related to locating library sources, using APA formatting, applying critical-thinking skills, and so forth, see General References Useful for Preparing Graduate-Level Papers. You are not required to read these sources page-by-page; rather, you refer to them for guidance as needed.

Assignment Expectations
Your submission will be evaluated using the following criteria from the Case grading rubric located in the Case Dropbox:

Assignment-driven criteria: Covers all key elements of the assignment in a substantive way.

Critical thinking: Conceptualizes the problem. Multiple information sources, expert opinions, and assumptions are analyzed, synthesized, and critically evaluated. Logically consistent conclusions are presented with appropriate rationale.

Business writing: Mastery in written communications and a skilled, knowledgeable, and error-free presentation to an appropriately specialized audience.

Effective use of information: Locates relevant and quality sources of information, using strong and compelling content to support ideas, convey an understanding of the topic, and shape the whole work.

Citing sources: Mastery using in-text citations of sources, proper format for quotations, and correct format of full-source information in the reference list using APA style (bibliography).