Wells Fargo is one of the vast retail banking firms known for its remarkable reputation, especially exemplary management and service provision. Undoubtedly, the bank remains one of the most stable entities in the U.S. The organization’s outstanding success is based on a commercial and social model that blends strong client relationships with a participatory sales culture. Unfortunately, in 2016, the company was hit by a scandal that nearly destroyed its respectable reputation. This essay explores this scandal in detail and highlights the problem and how Wells Fargo responded.
Essentially, Wells Fargo company workers engaged in deception to fulfill unrealistic sales targets. They opened several accounts in clients’ names without their knowledge, signed them up for credit cards and bill payment systems, forged identities, and even fraudulently withdrew clients’ money (Tayan, 2019). These activities began when the bank put excessive pressure on employees to meet their daily sales target. If the daily profit target were not met, the deficit would be carried forward.
In response to these fraudulent activities, the bank disclosed various steps and measures, some of which had been put in place in past years. For example, Witman (2018) notes that the corporation recruited an external consulting agency to evaluate all account openings since 2011 to detect possible fraudulent accounts. Further, Wells Fargo reimbursed $2.6 million to clients directly affected by its employees’ fraudulent activities.
At the same time, the retail banking manager retired, and five thousand three hundred people were sacked over five years (Witman, 2018). Wells Fargo also dropped marketing high-pressure product sales, improved employees’ salaries, and altered branch-level rewards to prioritize quality client satisfaction rather than cross-sell data. The corporation also implemented new protocols for validating account openings and provided extra education and control systems to prevent breaches (Witman, 2018). In this way, it is evident that the 2016 Wells Fargo scandal resulted from leadership failures and incompetency.
These failures were mainly attributed to the bank’s high-ranking leaders, such as the CEO. For instance, investigations showed that CEO Stumpf was unaware of the depth and magnitude of infractions of sales practices (Tayan, 2019). Moreover, he was so hell-bent on profit-making, which caused him to downplay resulting flaws, even when convincingly raised to his attention. A classic example is his failure to react when he learned that a few Wells Fargo workers’ contracts were terminated in 2013 for violating sales practices (Lilly et al., 2021). Stumpf was possibly blinded by the notion that a few Wells Fargo staff being discontinued from work meant that most employees were performing their duties properly. Ultimately, the investigation concluded that Stumpf liked winning, and negative news was a drawback.
To summarize, Wells Fargo affirmed its responsibility toward society by reacting appropriately when it emerged that its employees were engaged in unethical businesses at the expense of its customers. Society members are crucial shareholders in all organizations since their customer base resides in the community. Failure to take action against the employees that participated in the 2016 scandal would have shown that Wells Fargo lacked robust corporate citizenship. Overall, the rapid growth brought a lot of pressure to the organization. It was inevitable that the staff members would be required to perform daily to meet their targets. While the company is mandated to pursue its economic goals, its response to the scandal showed that it valued the interests of its customers above everything.
References
Lilly, J., Durr, D., Grogan, A., & Super, J. F. (2021). Wells Fargo: Administrative evil and the pressure to conform. Business Horizons 64(5), 587-597. Web.
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, 17-1. Web.
Witman P.D. (2018) “What gets measured, gets managed.” The Wells Fargo account opening scandal. Journal on Information Systems Education, 29(3), 1-10. Web.