Ethical Leadership of Wells Fargo | Assignment

Introduction
Each company is responsible for maintaining good ethical standards. These standards can
help the companies develop its positive image as well as reputation in the eyes of not only its
employees but also other stakeholders, especially customers. Although this matter sometimes
is neglected by the companies, the consequences of unethical activity in business can be very
severe, which means that it can destroy the firm’s reputation or even make the whole firm
collapse.
Realizing the importance of ethical issues, this report aims to analyze the case study of Wells
Fargo on ethical leadership. The report will answer and discuss different questions on ethical
leadership of Wells Fargo in the case study, thus proposing recommendations for the
company under this circumstance.
An overview of the case study
San Francisco-based Wells Fargo is a worldwide financial services corporation based in the
United States. It is the third-largest bank in the United States in terms of total assets and the
second-largest bank in terms of market capitalization. However, due to unethical leadership,
the bank was embroiled in a major ethical crisis.
There is no disputing the fact that a company’s culture is greatly influenced by the principles
its leaders espouse and the personal examples they set for its employees. Under the
circumstance of Wells Fargo, the company’s CEO, John Stumpf, prioritized profit before
ethical behavior. Cross-selling was heavily supported by upper management, which in turn
prompted aggressive sales tactics on the part of employees (Tayan, 2019). The bank's
management ignored the bank's questionable sales techniques. Even though the CEO and
senior management had been aware of this problem for many years, they did nothing (Tayan,
2019). Employees may have gotten the impression that unethical behavior was acceptable
and even promoted by the company's leadership because of this.
As a result, when this problem comes to light, the scandal shocked the whole corporate
world. In 2016, the company had to pay 185 million dollars in fine for around 2 million
unauthorized customer accounts. 5300 employees of the bank were fired. The reputation of
the bank degraded (Tayan, 2019).
Discussion of the ethical leadership of Wells Fargo using relevant theories
Question 1: Values of Stumpf model to Wells Fargo employees and its impact on the
culture of Wells Fargo

Under the circumstance of Wells Fargo, it is obvious that Stumpf exemplified the
dishonorable sales methods as well as encouraged ethical delinquency to promote sales
performance of the bank.
There are many different ways to define corporate culture, but the most common definition is
that it is a set of shared values and beliefs that is specific to a particular organization (Chen et
al., 1997). It is this set of shared values and beliefs that sets the tone for corporate activities
and actions, and it describes the implicit and emergent patterns of behavior and emotions that
characterize corporate life (Khalili, 1998). The corporate culture will be guided as well as
navigated by the leaders of the corporate. Under the circumstance of Wells Fargo, it is
obvious that all the action of Wells Fargo has changed the culture of the company. As a result
of this action, the culture of the company has been changed. Unethical sales techniques have
a wide range of negative consequences, including unfairness and abuse. While some
employees were punished for reporting unethical behavior, others were rewarded for
engaging in unethical behavior, for example. There was a lot of pressure on former
employees who left the organization to use unethical sales tactics. In addition, some
employees were fired for calling the company's ethics hotline and disclosing wrongdoing.
Having a hotline active raises questions about the administration's rationale for doing so and
implies that the administration was in conflict with itself ethically (Tayan, 2019).
Question 2: Encouraging ethical conduct and how leaders encourage ethical behavior
within the organization
It is very important for leaders to model, thus encouraging as well as promoting the ethical
behaviors within the organization. One of the leader’s models is that leaders should
encourage employees to report any instances of unethical activity that they come across by
providing them rewards, positive comments, etc. Moreover, confronting with individuals that
conduct unethical behavior, the leaders should thoroughly investigate the problems, thus
issuing the appropriate punishments based on the well documented course of those unethical
action as well as the conclusion of the investigation (Schwarts, 2013).
From the perspective of the employees, each individual should be dynamic in building his/her
organization’s ethics programs as well as ensure that others contribute, either (Stevens,
2018). In addition, leaders should engage in ethical behavior and allow others to see them as
doing so. An ethically questionable behavior, "Stick to my words and not my actions," cannot
be sustained for long-term profitability (Weaver, 2014).
Question 3: Discussion of the ethical system of Wells Fargo and recommendation for
leaders to design the system for encouraging ethical behavior

In Wells Fargo, there was a hotline for reporting unethical actions within the bank. However,
it was not effective since the firm’s higher administration, led by CEO John Stumpf, did not
help in any manner to prevent unethical practices. As a result, the hotline become a pointless
as well as useless tool. Even worse, ones that report the misbehavior via the hotline got fired.
Therefore, this system has changed from a tool that promote ethical behaviors to a tool that
promote unethical behaviors. Indeed, employees started acting in a systematic and planned
manner to support unethical practices within the organization.
To solve this problem, the leaders are under the pressure to design the system that helps
protect the whistleblowers, thus encouraging ethical behavior. In this part, the report
proposed several recommendations as follows
First, the leaders should set themselves as the role model for the employees as the image of
the leaders can affect the code of conduct as well as behaviors of the employees. Therefore,
the leaders must think ethics, speak ethics as well as act ethics. This is one of the most
important phases in the whole systems designed for promoting as well as encouraging ethical
behaviors within the company.
When the leaders successfully and truly think and act ethics, to some extent, their employees
understand that they will also need to do that. However, to promote the ethical behavior
effectively and efficiently, the leaders should be able to guide employees to do ethical
behavior by distinguishing as well as clarifying which action is considered ethical and which
is considered unethical. A clear communication on this matter will help employees
understand what they have to do and what they should not do, thus they will be able to
implement ethical behaviors (Cloninger, 1992).
In the next step, the leaders should emphasize as well as ensure that all employees within the
organization understand, remember and implement ethical behaviors. To do this, leaders
should organize regular conferences as well as meetings to train their employees. Moreover,
the line manager will need to throw meetings on this matter to ensure that the code of conduct
as well as culture of the company approach every single person in the company, regardless of
level or working, departments, etc.
In addition, the leaders should embed and promote the ethical behaviors in company by
supporting employees in reporting unethical cases. In reality, it is very hard for employees to
report unethical cases as it is very complicated. This action can affect their relationship with
others within the company or affect their benefits. Therefore, to promote them as well as
provide confidence for them to report unethical activities, the company as well as the leaders
need to show support for them (Ruiz et al., 2011).

The last step is to show the employees that their ethical behaviors are valuable and
appreciated by providing them rewards. As a result, the leaders should develop a system of
rewarding for staff that conducts ethical behaviors and have good attitudes towards ethical
issues. Moreover, there should be rewards for staff that are not only hardworking but also
courageous enough to report unethical cases within the company, thus setting them as an
example so that others will do that (O’Keefe et al., 2018).
Question 4: Key takeaways for leaders after the scandal
Based on the case study analysis, there are a lot of things that leaders need to take into
consideration to maintain ethical behaviors within the organization as well as develop the
integrity culture of the company. These key takeaways as described as follows.
The first one is the theory of ethical leadership. Understanding that leadership is a process of
social influence between leaders and their followers is critical for leaders. Because an ethical
leader is proactive in influencing their followers' ethical and unethical behavior, they are
more likely to succeed. Moreover, it is not enough for leaders to say that they are morally
upright, they must establish this reputation by practicing to think ethics, speak ethics and act
ethics themselves.
In addition, leaders should understand about the leader morality. Leaders must prioritize
ethics if they are to be considered moral managers. Ethical leadership requires that a leader's
ethical decisions be legitimate. Leaders cannot be ethical if their own actions are morally
dubious. As a result, ethical leadership practices such as transparency, fairness, and respect
for stakeholders are essential for leaders. As a result, leaders must cultivate a culture of trust
and openness among their personnel. Leaders should also be on the lookout for any
unfavorable signs.
Especially, in the situation of Wells Fargo, organizational leaders should learn to respect the
compliance with regulatory frameworks that are relevant to the organization. Moreover,
leaders should support the growth of truthful employees in the company by rewarding them
as well as devising measure to prevent unethical behaviors, avoiding setting impractical goals
for the employees to achieve within an impossible time frame. Also, leaders should avoid
encouraging as well as promoting unethical acts directly or accidentally within the
organization.
Question 5: Actions that Wells Fargo should have done differently to avert the scandal
as well as the cultural meltdown

When the first incident of pushy sales behavior was revealed in 2004 with the well-known
examples from 2002, the company has not taken any action to solve this problem. In fact, the
leaders respond slowly to this matter.
Instead, they could have devised steps to prevent recurrence. There should have been a
meeting among senior officials as well as leaders of the company. Senior officials should
have been summoned for an informal discussion to discuss appropriate recommendations for
preventing recurrence of such incidents, thus the company can take initiatives in solving this
problem as well as regain reputation in the market as well as rebuild relationship with other
stakeholders and partners.
In addition, the company should have developed a system for recognizing employees for their
integrity, morality as well as honesty to navigate the thoughts of employees on ethical issues,
communicating that these unethical behaviors are unacceptable and company hopes that
employees will not do that.
Furthermore, an investigation should have begun in 2004 to find out how aggressive sales
techniques affected sales in 2004, and to propose corrective measures against individuals
involved.
As a final point, senior administrators should have instructed their subordinates to refrain
from using pushy sales tactics. This means that all line managers need to understand their role
in this problem, thus acting ethics and thinking ethics. As a result, they are able to train and
ask their employees to do that.
Conclusion
In conclusion, the report successfully analyzed the case study of Wells Fargo, demonstrating
its problem and applying ethical leadership theories to answer the questions. Using the
relevant ethical theories learned throughout the course, the report successfully discussed
different questions on ethical leadership of Wells Fargo in the case study, thus proposing
recommendations for the company under this circumstance.
Reference
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