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Wells Fargo & Co.: The Wells Fargo Scandal

427 Words2 Pages

Wells Fargo & Co. is a popular banking company that provides various banking services to individuals and businesses alike inside the United States. As of recently, a massive scandal within this company has come to light. On September 8, 2016, evidence was reported to the Consumer Financial Protection Bureau (CFPB), Los Angeles City Attorney and the Office of the Comptroller of the Currency (OCC) suggesting that Wells Fargo & Co. had opened more than 2 million bank accounts and issued unauthorized credit cards without their customers’ knowledge/consent between the months of May 2011 and July 2015 (Masunaga and Koren, 1). To make matters worse, there were managers that tried to silence the employees that spoke out against the opening of these …show more content…

Wells Fargo is currently facing a $185 million dollar fine for allegedly committing these acts of fraud. The CEO of Wells Fargo, John Stumpf, received feedback from numerous U.S. senators including Massachusetts Senator Elizabeth Warren accusing him of “gutless leadership” and suggesting that he resign (Taylor, 1). Stumpf had to forfeit his multi million dollar stock benefits/awards and has retired from his position as CEO due to this incident of scandalous proportions (Bryan and Turner, 1). This scandal is problematic because the employees were motivated to open these accounts because the managers incentivized them to do so for monetary rewards via the employee sales goals program. The CEO also knew about the incentives that the employees were trying to achieve and the means that they needed to go about to achieve them and didn’t change the means to go about achieving those incentives. Obviously, what was morally important (treating all stakeholders in a way that maximized their net happiness) was not in line with what was valuable to Wells Fargo and its employees (offering more monetary incentives so the employees could live comfortably while simultaneously earning Wells Fargo more money by opening more

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Wells Fargo is accused of creating over two million fake deposits and fake credit card accounts starting in 2011 (Blake, 2016). This was done to make the company look more appealing. This means that all these accounts and credit

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Wells Fargo has been in the news lately. Thanks to the scandal surrounding reports that bank employees have opened accounts without client’s approval. As a result, Wells Fargo’s share price has taken a beating, losing 14% of its market value for the year. Berkshire Hathaway is the bank’s biggest shareholder with almost 10% stake. Its famous CEO, Mr. Warren Buffett is known as a long-time WFC fan, even praising the bank’s untarnished ethical culture.

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Fines against banks and other corporate firms for unethical practices are tallying up but their deterrent value seems to be negligible. Simply prosecuting the institution alone for not operating morally is not going to ‘fix’ the problem. According to logic, you have to get to the root of the problem and the root of financial fraud problems are not the institutions themselves but actually the person committing the heinous acts. The first question to ask is why do individuals (executives in this case) engage in unethical behaviour? Many inquiries show that the incentives for executives to engage in unethical transactions which are not in the interest of the company outweigh the cons in the end.

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The Wells Fargo scandal included the creation of fake banking accounts, savings accounts, and credit cards. People who were employed at the bank opened these accounts in order to meet goals and make profit. When the fake accounts were discovered 5,300 employees were fired. However, the problem went beyond the fired employees.

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As all this came to fruition, the bank was penalized with $185 million dollars in fines and other penalties by county and federal organizations (Blake, 2016). On top of getting slapped with millions of dollars worth of fines, Wells Fargo fired 5,300 employees that may have been involved in the scandal (Blake, 2016). Some of Wells Fargo’s top executives where asked to step down in court proceedings as well as in other meetings with federal agencies. There have also been several lawsuits filed against Wells Fargo by customers and former employees of the company that feel that they were wronged and bombarded with threats. Thankfully, this scandal did not affect most of Wells Fargo’s clients.

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early stages of the scandal, the San Francisco based financial institution was investigated by the local Los Angeles City’s Attorney and California state officials. Preliminary investigations revealed the extent of the fraud and malpractice predated as far back as 2011. As a result, on September 8, 2016, federal investigators followed suit and the Consumer Financial Protection Bureau Agency opened an investigation against Wells Fargo and handed a $185 million penalty to settle the dispute. This settlement would become the largest fine levied in the agency’s history. Of the $185 million, $100 million comprised of fines from the Consumer Financial Protection Bureau (CFPB), $50 million originated from the Los Angeles City Attorney’s Office, and

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Wells Fargo Banking Scandal: A Case Study in Ethical Management The Wells Fargo banking scandal, as detailed in the Santa Clara University Markkula Center for Applied Ethics case study, highlights the significance of ethics in managing businesses. This essay explores the values embodied by former CEO John Stumpf, their impact on Wells Fargo's culture, and the importance of leaders modeling ethical behavior to promote a moral organizational climate. The essay also addresses the failure of Wells Fargo's ethics hotline and the steps leaders can take to design effective systems that encourage ethical conduct. Ethics play a pivotal role in shaping the conduct of organizations and their employees.

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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.

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