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#3 Company Response/Explanation to Ethical Situation

As we all know the initial response of a company when a scandal is discovered is very important to how the public and media will react as more information comes to the surface. Unfortunately, the first response of Wells Fargo was to deny that any of this fraud was occurring and interfered with the investigation on multiple occasions. If they had nothing to hide they wouldn't need to be trying to stop investigators from digging into their records.

This behavior of illegal account creation was so widespread in the company it is almost impossible to believe any executive who says that they were completely unaware. Wells Fargo eventually confirmed to CNNMoney that it fired 5,300 employees related to the shady behavior of fake accounts. Many employees who got fired also received fines for their work misbehavior.


The company received the largest penalty since the Consumer Financial Protections Bureau (CFPB) was founded in 2011. The bank agreed to pay $185 million in fines, along with $5 million to refund customers. Of the total fines, $100 million will go tot the CFPB's Civil Penalty Fund, $35 million will go to the Office of the Controller of the Currency, and another $50 million will be paid to the City and Country of Los Angeles.

"We regret and take responsibility for any instances where customers may have received a product that they did not request," Wells Fargo said in a statement.

As part of their settlement, Wells Fargo needs to make changes to its sales practices and internal oversight. This is a good example of a case where both their financial and company reputation would have been better off if they had been ethical from the beginning. A good video of how the company explained their actions can be seen at (http://fortune.com/2016/09/15/wells-fargo-scandal/).

Based on the articles and news videos I have seen on this scandal the company seems to play the situation off as a few bad apples. This is not the answer to the problem but rather an aversion and excuse. Even when you fire the "loose cannons" if the corporate culture is unethical nothing will change.


Wells Fargo needs to strip down its incentive programs and change the corporate culture- this is a long and hard process- but they don't have a choice. When the public sees a company as unethical they will stop using their services, the future of Wells Fargo depends on their ability to turn around the deceitful practices and start on the path of having an ethical corporation who cares about serving- not using their customers. It is proven highly satisfied customers will produce high profitability.




Sources:
https://www.wellsfargo.com/about/press/2017/long-term-goals_0321.content
http://money.cnn.com/2016/09/08/investing/wells-fargo-created-phony-accounts-bank-fees/
https://www.forbes.com/sites/maggiemcgrath/2016/09/23/the-9-most-important-things-you-need-to-know-about-the-well-fargo-fiasco/#5447dcd83bdc
http://fortune.com/2016/09/15/wells-fargo-scandal/)
https://www.youtube.com/watch?v=kHs7SNx6x_Q

Comments

  1. AnonymousApril 23, 2017 at 6:24 PM

    Your last paragraph of this blogpost perfectly sums it up. Wells Fargo needs to not only make copious internal changes, but they have to make changes that are reflected externally as well so the public can see authentic transformation. It's the only way the bank can attract customers and even then, it will be extremely difficult. Eventually someday, people will not recall this scandal, but it will be many years from now and Wells Fargo doesn't have time or the resources to waste or they'll be out of business.

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    1. UnknownApril 24, 2017 at 5:05 PM

      I think one of the big issues with finding a solution to this problem is not only how wide this infection spread through the company but also who really started this. When considering this situation I feel it most likely started with one banker that then told their coworkers and the word just spread through the unethical banker grapevine.

      Delete
  2. AnonymousApril 24, 2017 at 11:30 AM

    I like how their statement is signed off as “said Wells Fargo”. I wonder if there were an executives specifically that stepped up to the occasion. The SNL skit was a pretty accurate presentation of what the lower level employees were probably thinking. Working by fear is never a good incentive in company culture. There may have been a much better way to approach this situation. Maybe some real sales skills or incentives that were not unattainable.

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    1. UnknownApril 24, 2017 at 5:10 PM

      I found it sort of strange that it didn't say "so and so" from Wells Fargo. I think if a spokesperson for the company would release a statement and put a name to the statement it would have been seen as more personal. Right, working by fear isn't a good incentive but i wonder how that translated in the bankers mind into being okay will setting up illegal accounts to reach the goal. I wonder if any employees tried talking to management about how they felt the goals were unrealistic.

      Delete
  3. Erin RApril 24, 2017 at 2:17 PM

    What types of methods do you think should be used in changing both the internal and external culture? It seems like the first step here is changing banker access and abilities with company records, but that does not at all related to changing the culture.

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    1. UnknownApril 24, 2017 at 5:17 PM

      Internal: Using ethical language, having ethics training programs, incorporating ethics in performance reviews, and training bankers how to encourage customers to buy more financial products and teach them how best to help the customers the ethical way.

      External: Promotional material admitting they made a mistake and explanation of how they will change,customer loyalty letter to those affected, corporate social responsibility efforts.

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  4. UnknownApril 24, 2017 at 7:16 PM

    There seems to be a trend with companies denying their mistakes at first hand. I don't know what their media strategy is or if they think they can get away with all of this but companies need to accept their mistakes when things happen. It makes them look even worse than they already look. Why do you think companies tend to deny first? I am sure it is discussed as to what they are going to say when the scandal first happens. What causes them to do this?

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    1. UnknownApril 24, 2017 at 7:19 PM

      Yes if companies admit they are wrong and made a mistake and cooperate with the investigation instead of interfering in the long run things will work out better for them. They would probably receive a smaller punishment or fine and the public would be more sympathetic and not feel like they are being lied to once again by the company.

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