Wells Fargo Ethical Update - Identification of Ethical, Legal and Industry Related Business Issues

This report summarizes an introduction to the Well Fargo Company. The identification of legal, ethical and industry related business issues have been given. The Application of Research-Pay for performance has been justified. How the issues were resolved and personal opinion with conclusion has been given.

Wells Fargo Ethical Update 0
Title: Wells Fargo Ethical Update
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Wells Fargo Ethical Update 1
Executive Summary
This report summarizes an introduction to the Well Fargo Company. The identification of legal,
ethical and industry related business issues have been given. The Application of Research-Pay
for performance has been justified. How the issues were resolved and personal opinion with
conclusion has been given.

Wells Fargo Ethical Update 2
Contents
Introduction......................................................................................................................................3
Identification of Ethical, Legal and Industry Related Business Issues............................................3
Application of Research..................................................................................................................3
How the Issues are Resolved?.........................................................................................................4
Personal Opinion.............................................................................................................................4
Conclusion.......................................................................................................................................4
References........................................................................................................................................5

Wells Fargo Ethical Update 3
Introduction
Wells Fargo and Company is a USA based multinational financial services firm
headquartered in San Francisco, California. It is the fourth largest bank in the USA. Wells Fargo
delineates 3 different consumer segments which are wholesale banking, retirement, wealth and
brokerage and community banking. There are a number of cases for apparent fraudulent
activities of Wells Fargo. This includes improper incentives, poor leadership, questionable
organizational plan, inadequate auditing and human traits as well. Wells Fargo fraud scandal is a
continuing controversial state which is brought by the creation of millions of checking accounts
without the consent of account holders. There are ample of regulatory bodies which includes the
Customer Protection Bureau has fined the company with one hundred and eighty five million
dollars as a consequence of the illegal trading accounts and the company had to face the criminal
and civil suits. The customers of Wells Fargo had been charged with the unanticipated fees on
debit cards and credit cards. According to the initial reports, the blame was on branch managers
and workers. Later on, it was recognized the blame was shifted to sales associated who were
linked to selling the financial products or multiple solutions. The bank had taken fewer risks until
the financial crisis of 2008 and this led to the image of high level management to open saving
accounts as many as possible through the help of cross selling.
Identification of Ethical, Legal and Industry Related Business Issues
The Wells Fargo bank has decided to undergo for cross-selling of products and services.
Cross-selling implies consumers who are using one service can be motivated to use other
services like credit cards and savings. A specific strategy was established for encouraging cross-
selling. Well Fargo was engaged with time honored tactic of providing the incentives to

Wells Fargo Ethical Update 4
employees who get successful in cross-selling (Smith Jr. & Reiners, 2017). Employee’s response
to this cross-selling resulted in creation of fake accounts in the names of present customers. The
problem was big and the company had to fire five thousand and three hundred employees and
also lost the CEO-John Stumpf (Moore, 2005).
Business-Industry Related Issues-Cross-selling is an attempt to sell the multiple
products to bank customers. This can be explained with the help of an example-A bank customer
has been encouraged to open an online bank account or avail credit card facilities or take the
mortgage. The success stories of retail banks have been measured by the average of products
which are held by the customers and Wells Fargo was the successful cross-seller. The strategy
was to link the bank saving accounts with credit cards and mortgages to the typical customers
and it was revealed branch employees were considered as the salespeople and encouraged to sell
the eight products (Watson, 2008).
Ethical Issues-The cross selling strategy and sales culture and its effect on ultimate bank
customers had been documented through the Wall Street Journal. Bank managers had to undergo
intense pressure and individual bankers had to produce the sales against the impossible quotas
(Watson, 2008).
Legal Issues-Employees had been encouraged to place the order for credit cards for all
the pre-approved customers without any consent. Employees used the contact information for
filling the request form and therefore preventing the customers from discovering the fraud. The
Employees had made the creation of fraudulent savings and checking accounts. This is a process
through which movement of money is possible through the legitimate accounts. The formation of
additional products had been made possible through the process of Pinning. This implies that
client pin is set to the “0000” and bankers had the complete control of client accounts and

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employees can enroll in the online banking programs easily (Wilkinson, 2010). The bank had
created approximately 1,534,279 unauthorized saving accounts and 5,65,000 credit card
accounts. There were reports of unreachable goals and inappropriate conduct through employees
to supervisors (Schmitz, 2012).
Application of Research
The Wells Fargo case has been using the strategy of pay for performance. The negative
outcome is to pay for performance on the wrong results. The performance systems in most of the
organizations are completely guarded through the HR. People who are in running effective and
ethical organizations need to understand the HR practices (Aasland, 2004). The company can be
in a better position of avoiding the legal and ethical crisis, if its employees understand the reward
system. The company cannot leave organizational theories and practices to be adopted and
followed due to the organizational bureaucracy initiated by the employees (Manvelyan, 2018).
1. Corporate Image and Corporate Leadership System-The corporate damage was swift
and extensive. According to the public opinion in the USA, the position of Wells Fargo
had fallen from seventy to ninety-nine place in the year 2017. Wells Fargo has been
viewed by observers as bankrupt. Some of the leading causes are-
a) There has been a misalignment between the actual and stated organizational
values and mission (Gupta, 2018).
b) The employees had to undergo cut-throat sales pressure that was created through
the aggressive sales mismanagement and unattainable sales mechanisms.

Wells Fargo Ethical Update 6
c) Corporate structure has been decentralized which led towards accountability of
the issues and leadership was in denial, minimizing the nature of the problem
(Schmitz, Lee & Lilien, 2014).
2. Performance Management-Some of the causes of ethical breaches and incentive
programs were the performance management measures. The identification was on the
motivator reports, sales campaigns, retail scorecards and individual gaming system which
led ethical misconduct and fraud. The company had created the competitive atmosphere
by frequent ranking performance between regions, branches and individuals. Rankings
had been circulated bank wide and this has created significant pressure for outperforming
the peers. However, goal setting has been recognized over the number of years through
researchers for employee motivation (Mittal, Singh, Aggarwal, Kumari & Yadav, 2014).
The bank has shown commitment towards regaining its corporate image. Some of the
remedial measures include
1. Reorganization and replacement of corporate leadership.
2. Centralizing the control functions.
3. The complete removal of sales goals and objectives.
4. To work on improving the performance management systems and incentive programs
(Periatt, LeMay & Chakrabarty, 2004)
5. New code of conduct and integrity.
In order to make the goal setting a successful plan, the organization will be required to
closely monitor the implementation and supervise the goals programs. The setting up of
unattainable goals has been linked with the compensation and employees’ needs to engage

Wells Fargo Ethical Update 7
themselves in risky behavior and take advantage through the financial rewards and job security
(Hansen, Singh, Weilbaker & Guesalaga, 2011).
How the Issues are Resolved?
Wells Fargo had to undergo testimony before the congressional committee. The
committee suggested to get rid from informers and avoid allegations of reprisal. Another strategy
involved the close monitoring of working employees who were reporting the mishaps in the sales
department (Sharma, 2016). Wells Fargo had been planning to alleviate this issue. The largest
company of America was at stake and therefore the correct address of issues has been evident
and this was the chief concern. Wells Fargo attempted to solve the fraudulent issues from
different fronts.
a) The first front had been to inform the stakeholders and the public. The company had to
make it clear about the informational objective of the well Fargo campaign. The objective
will include the attempts made through the company from spreading the incorrect
information regarding the scandal (Ciarrapico & Cosci, 2011).
b) The next objective had been to address the restructuring of the company’s management and
policies. The goal of restructuring policy will be preventing the similar issues to this present
fraud from occurring ever again. This lead to a change in the business practices of Wells
Fargo and resolving the accounts that were affected.
c) The last objective had been addressing the change in perception and public relations
campaign towards the crisis fallout. Dealing with these objectives has been more difficult
for the company. The crisis need to restructure the policies and programs of Wells Fargo as
a lot of negative image has been created and the company needed to come back very

Wells Fargo Ethical Update 8
carefully. Wells Fargo needed to show to its customers that it had the capability to change
its operations.
d) Another objective was the time taken by the company to resolve the negative virtual media
coverage over the scandal received. The Wells Fargo company had the strong PR
department, which was ready to fight for such an event.
The strategy of Wells Fargo was to resolve the fraudulent savings account crisis had been
titled as the Commitment campaign. ‘This program comprises of different campaigns on the
organization’s social media outlet, especially Facebook and Twitter and press release and
television advertisements. Well Fargo had adopted the strategy of controlled media and specific
advertisement towards the magazines and television. However, the specific commentary and
comments on the social media page will be regarded as the uncontrolled media. The goals of
these campaigns were to help the affected saving account customers through verifications,
refunds and notifications. The public was informed in a buried way regarding the crisis and
sparing the concrete statistical details (Lu & Zhao, 2013).
Personal Opinion
The significance of the Wells Fargo lesson goes beyond ethics. The suggestions are taken
from business consultants on how to get more of the employees? The company needs to adopt
another reward strategy instead of opting to pay for performance. The complete idea is to pay for
performance, using another strategy which will reward the complete person and not only the
paycheck. When an individual and organization are responsible for themselves, this phenomenon
is termed as holacracy. This involves an absolute tangle of cross cutting outcomes and enforced
peer group thinking. A strict enforcement as well as high pressure due to unfeasible goals has

Wells Fargo Ethical Update 9
destabilized the consumer Centricity. The role of a bank has become distorted as that of the
product retailer. Employees were being rewarded by reaching towards the sales targets and no
consideration on how these objectives met. The company has formulated the revenue based
compensation mechanism that had motivated employees for seeking returns. The suggestion for
Wells Fargo has been able to devise the systems that can reward profits when customers’ needs
are being met in the ethical way. For instance-Wells Fargo would have quantified the needs of
the customer. This was possible through the financial goals and other specific indicators like
compliance and ethical goals. The employees must be rewarded who had the customer focused
consequences. The motivation is to offer the employees with financial rewards and develop
strategies to counteract. The prioritization of financial measures had to find the evaluations and
financial bias in bonus decisions.
Organizational values must be integrated with the employee evaluations and play the
huge role in how to assess the mixed result like tension from social responsibility and financial
performance. This emphasizes the significance of developing the awareness of the interaction of
organizational values and personal values. Competition is one of the elements which is
inescapable from employee and organizational dynamics, this may create promotional incentives,
bonuses and recognition. This emphasizes the significance of developing the awareness among
employees and the interaction of personal beliefs, organizational values and professional
ideologies has an impact over the decision making. Competition has physical impacts on the
banking individuals. Research shows how competition can form the divergent results. This is
based on the cultural context and sometimes led towards the creativity. The perception of
employees is that promotion of sales employees at retail banks had been based on the financial
performance.

Wells Fargo Ethical Update 10
Conclusion
The company Wells Fargo has taught the big lesson that people will get only what they
are paying for. Employees must know what is expected out of them and working instead of a
manager is a crucial aspect. Wells Fargo has always represented the fiduciary duty and treat all
the customers fairly. The bank is offering different services to all its customers. The management
had set unrealistic high sale goals and employees encouraged to game the accounts system.
Employees have been urged to bring cross sell services more to the company. Wells Fargo had a
conflict of interest and needs to launch the compensation program for the retail banking. This has
an emphasis over the product sales and this is required for the compensation. A corporate social
responsibility step must be taken in the right direction. The company’s PR policy must be
directed at designing incentive plans and motivating the employees with rewards who are
thinking of the long term benefits of the company. The company’s compensation program must
be aligned with the code of ethics and tap the employee motivation for providing the superior
customer output and create long term associations with the client.

Wells Fargo Ethical Update 11
References
Aasland, D. (2004). On the Ethics Behind “Business Ethics”. Journal Of Business
Ethics, 53(1/2), 3-8.
Ciarrapico, A., & Cosci, S. (2011). European banks and cross-selling. Applied Economics
Letters, 18(6), 555-559.
Gupta, N. (2018). Influence of demographic variables: customers' perception about cross-selling
and up-selling for eBanking. International Journal Of Electronic Customer Relationship
Management, 11(2), 126.
Hansen, J., Singh, T., Weilbaker, D., & Guesalaga, R. (2011). Cultural Intelligence in Cross-
Cultural Selling: Propositions and Directions for Future Research. Journal Of Personal
Selling & Sales Management, 31(3), 243-254.
Johnson, J., & Friend, S. (2014). Contingent cross-selling and up-selling relationships with
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Selling & Sales Management, 35(1), 51-71.
Lu, X., & Zhao, X. (2013). Keywords Selection in Search Engine Advertising With Cross
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Modeling And Optimization, 4(1), 25-30.

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Moore, G. (2005). The Institute of Business Ethics/European Business Ethics Network-UK
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