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Cause of Wells Fargo unethical behavior
What happened at Wells Fargo with regard to past activities that led to this major scandal
What happened at Wells Fargo with regard to past activities that led to this major scandal
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In this paper I have compared two financial institutions, Wells Fargo and Co and its competitor Bank of America using different tools and techniques given in chapter 12 of text book. In this paper I will give a detailed analysis of both the Banks as well as ratios on ROE, ROA, Equity Multiplier, Profit Margin, Asset Utilization, Net Interest Margin, Interest Expense ratio, Provision for Loan loss ratio, Noninterest Expense ratio, Tax ratio, Interest Income ratio, Noninterest Income Ratio, The Spread, and the Overhead Efficiency Ratio. After each ratio for the two Banks are calculated, I have performed the time series analysis. Each company ratios are compared to each other for the past five years to compare the performance of both companies
Wells Fargo has been in business for over 160 years and was founded on March 18, 1852, by Henry Wells and William Fargo. The company opened its first office, in San Francisco, on July 1852. Wells Fargo served the West with banking needs, which included gold and paper bank drafts, and offered quick delivery of gold or other valuables. In1855, the first of many financial dilemmas took place when a drought made it impossible to mine for gold, and this caused almost 200 businesses in San Francisco to fail, but Wells Fargo didn’t fail, they prospered. In the early1860s, Wells Fargo acquired almost all the stage lines from the Missouri River to California, giving them a monopoly on transcontinental delivery services.
The one thing I think organizations are doing to appear trustworthy to its customers and employees is being active on social media and responding to customer complaints and issues real-time. Social media is forcing companies, to tell the truth. We are in an age of transparency thanks to social media. With transparency comes trust. This transparency touches all aspects of the organization such as leadership, employees, company culture and values (Klein, 2011).
According to Fortune, “Executives sought to drive growth by putting undue pressure on its employees to hit sales quotas, and many employees responded by fraudulently opening customer accounts. In most cases these accounts were closed before customers noticed, but in other cases consumers were hit with associated fees or took hits to their credit ratings. The bank was forced to return $2.6 million in ill-gotten fees and pay $186 million in fines to the government. But the biggest hit Wells Fargo will take is to its reputation, as the media and government officials spent much of the year slamming the bank for its fraud,” (Mathews). The victims being the unknowing customers who saw their credit ratings plummet and faced steep financial fees, that were brought about through no fault of their own.
By 1918 Wells Fargo was among the 10000 communities. That year the express network taken over by the Federal government as part of First World War and Wells Fargo left with one bank in San Francisco. Wells Forgo earned reputation from the events and tremendous growth of 20th century. In depression and war, even greater post war prosperity, social changes and faster communications technologies, Wells Fargo’s focus was only the customers’ business and it has seen it through great events and brought prosperity.
The three banks I have chosen for this activity are Wells Fargo, Bank of America, and Citi-- all three branch-type banks to make it an even match. I will be focusing on the next factors when deciding which bank I am most comfortable with : Saving accounts, CD rates, and top rate credit cards. 1) Saving Accounts Wells Fargo Wells Fargo’s top savings account (Way2Save Savings) has an APY of 0.01%, a monthly $5 fee, and a minimum balance to open at $25. Indeed, by investigating more I was able to disclose that the minimum amount required in a savings account to evade monthly fees is $300. Furthermore, the APY falls behind the national average of 0.13%.
Moving forward with this option rebuilds trust and establishes long-term sustainability. Rebuilding trust with the customers of Wells Fargo after previous scandals can show the genuine commitment to the bank, regaining credibility. Focusing on ethical conduct is an essential aspect of a business trying to achieve long-term sustainability. By prioritizing the integrity of the business instead of quick profits, Wells Fargo can eliminate future scandals and penalties from occurring, as well as safeguard its reputation. Implementing Option B also ensures that Wells Fargo is compliant with regulations and can avoid costly fees relating to unethical practices, saving the company money.
Wells Fargo Mockup Wells Fargo’s agreed to pay $110 million dollars to customers because unrealistic sales goals prompted personal bankers to open over 2 million fake accounts, this settlement is over and above, the $3.2 million in fees refunded when the scandal became public in September 2016. The practice allegedly started in early 2009, notorious and unrealistic sales goals were the primary cause of the “widespread fraud”, according to a top Federal Reserve official (Egan, 2017). According to Warren Buffet, who owns 10% of Wells Fargo stock, failing to address the problem, was the real “terrible mistake” (Cummings & Malter, 2016). Was there oversite? One might think, how does this happen, how could they miss such an obvious problem?
Due to the scandal, Wells Fargo faced customer confidence issues. Trevino and Nelson suggest customer confidence issues include confidentiality, product safety and effectiveness, truth in advertising, and special fiduciary responsibilities (126). Based on the unethical behavior noted in the scandals, the organization violated the customer’s privacy and failed to perform their fiduciary responsibilities on multiple occasions. Wells Fargo and its employees broken several laws to meet quotas and make profit for the organization. In this scandal, there are legal implications to be faces noted in court documents include but not limited to fraudulently opening accounts without the consent of a customer, falsifying credit documents, identity theft
Balance scorecard system is a strategic management and planning system that enables the organizations to monitor the performance against strategic goals by aligning business activities to the organization's mission and vision. Wells Fargo has implemented a balance scorecard system (Banking sector) in its online financial services group (OFS) to track and measure performance .The two variance measures that can be employed by Wells Fargo (the identified Company) are, Customer aspect: The balance scorecard system can be used to check the rate at which the customers have grown over a period of time, what factors have influenced growth and which factors can lead to further increase in customers. Financial aspect: The organization can use the balance
The customers of Wells Fargo who were affected by this scandal had many issues. Where customers had their funds moved to another account created by a Wells Fargo employee without the customer’s knowledge that their money is being moved
Wells Fargo commenced an extensive television advertisement campaign to reestablish confidence and its public image. It intensified its ads in newspapers and established a presence in major sporting events showcasing its signature horse-drawn carriage ad. According to Mark Folk, a Wells Fargo spokesman, “the advertising reiterates Wells Fargo’s commitment to customers and the steps we are taking to move forward and make things right.” Class action lawsuits have erupted across the country from enraged customers; however, these have been quickly struck down due to mandatory arbitration clauses Wells Fargo customers are required to sign as part of new account opening agreements. Wells Fargo has filed motions for courts to defer any class action lawsuits to arbitration since these arbitration agreements are typically binding and are resolved on a case by case
Wells Fargo is a well know bank and financial service company in the United States who takes diversity to the next level. “Meeting the increasingly diverse needs of Wells Fargo’s global customer base is critical for our company’s long-term growth and success. We’re committed to advancing diversity
Organizational Strategy and Objectives The foundation of Wells Fargo’s strategy is its focus on customers. The company’s strategy tends to drive the choices they make and also enable them to prioritize its efforts, differential from peers, and build a lasting value for customers, employees, communities, and shareholders. The diversified business model tends to provide the company with the stability and the strength as it assures communities and customers that it exists to serve them and also the future generations. The objectives of the company are to be the leader in financial services in areas of team member engagement, customer services and advice, shareholder value, innovation, corporate citizenship, and risk management (Wells Fargo n.d).
Wells Fargo’s “Gutless Leadership” Wells Fargo is one of the largest banks in the United States, with “…more than 8,600 locations [and] 13,000 ATMs” (Wells Fargo Today). Millions of Americans trust them with their finances. However, after a federal investigation, Wells Fargo has admitted to opening up to two million accounts without customers’ permission. While this had financial implications for many customers, this scandal most heavily affected Wells Fargo’s low-level employees.
