Analysis of Wells Fargo Scandal in Principles of Management Course

This report provides a comprehensive analysis of the Wells Fargo fraud scandal, examining it through the lens of ethical decision-making within the framework of Principles of Management. It begins with an introduction to ethical considerations and then delves into the specifics of the scandal, outlining the origins of the problem stemming from the "Eight is great" rule and incentive structures, and the role of key decision-makers like John Stumpf and Carrie Tolstedt. The report details the unethical activities that occurred, such as the creation of millions of fake accounts. It further explores the potential preventative measures that could have been taken to avoid the scandal, emphasizing the importance of communication between management and employees, and the significance of ethical leadership. The conclusion underscores the critical role of ethical decision-making for businesses and the necessity of adhering to company guidelines and regulations. The report references relevant books and journals to support its findings.

PRINCIPLES OF MANAGEMENT
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Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5
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INTRODUCTION
Ethical decision making is a way of evaluating and choosing the best option out of
various alternatives on the basis of its ethical grounds (Tayan, 2019). To discuss more on ethics,
Wells Fargo fraud scandal is taken for consideration in which millions of fake current and saving
accounts were made without the consent of customers. Actual cause and source of the problem
will be discussed. Besides this, primary decision makers, different ethical activities occurred etc
will be scrutinised and determine in the latter part.
MAIN BODY
Whole scandal has started when CEO John Stumpf joined the bank and started “Eight is
great” rule which states that every customer of Wells Fargo should have eight products from the
company resulting in high pressure and unachievable target of retail banking division. Besides
this incentive were also the reason as employees has only two options while working i.e., earn
incentives or get termination letter. Apart from that, U5 forms, forced arbitration and claw back
provision were also the reason behind bank scandal (Cavico and Mujtaba, 2017). Primary
decision maker behind this scandal is John Stumpf former CEO, Tim Sloan CEO Wells Fargo,
Carrier Tolsedt, ex-employee and former head of retail operations and retail banking division
employees. Their motive to conduct this scandal is to sustain in the market crisis of 2008 and
become the market leader in terms of market share. To attain this and enhance profitability to a
certain level, company have started making fake accounts, credit and debits cards and setting
their pin to “0000” so that bank can use it at the time of internet banking (Ochs, 2016). Wells
Fargo fraud was uncovered by Los Angeles Times Newspaper who has revealed the amount of
pressure employees is into and how their number of customers are increasing on a constant basis
as compare to other banks who was into recession at that time. John Stumpf and Carrier Tolsedt
should be blamed for this as all these activities were conducted under their direction and
monitoring. Due to Eight is great rule implemented in the bank, employees were getting
frustrated and depressed due to unachievable target resulting in illegal actions to attain their
target.
I would have left the organisation as illegal activities conducted in the past or present will
always affect the future in a negative way so it’s better to avoid in the first place. The scandal
could be prevented if the board of directors and leader have communication with their ground
level employees as they are the one brings business to the bank. To avoid these types of failures
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in the future, management should have proper communication with the employees working there
(Glazer, 2016).
CONCLUSION
As from the above information, it can be concluded that company must take ethical decision
while running their business operations as unethical one affects their profitability and goodwill in
a negative way. To make ethical decision, one should follow proper guidelines and regulations
set by the company and state authority.
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REFERENCES
Books and Journals
Cavico, F.J. and Mujtaba, B.G., 2017. Wells Fargo's fake accounts scandal and its legal and
ethical implications for management. SAM Advanced Management Journal. 82(2). p.4.
Glazer, E., 2016. How Wells Fargo's High-Pressure Sales Culture Spiraled Out of Control. The
Wall Street Journal. 16.
Ochs, S.M., 2016. The leadership blind spots at Wells Fargo. Harvard Business Review, 10.
Tayan, B., 2019. The Wells Fargo cross-selling scandal. Rock Center for Corporate Governance
at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate
Governance No. CGRP-62 Version. 2. pp.17-1.
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