Sample Business Studies Paper on Ethical issues and Dilemma faced in Wells Fargo


Ethical leadership plays a significant role in originating and maintaining the reputation of any business. The critical focus of moral leadership in the workplace is on the values, beliefs, and guiding principles that individuals and their organisations share as a whole. Business leaders must uphold and act as role models for the moral values of their companies as well as its spirit and soul. These supervisors don’t only watch over their staff members.

Wells Fargo is a well-known bank in the US is served for many financial industries and other businesses, a company that works with banking and the financial sector. Since 2008, the Company, which has its headquarters in San Francisco, has gained a reputation as a sizable and organised vital bank (Ladkin,2018).

Due to the firm’s workers’ unethical decision-making processes and dishonest business methods, clients were no longer protected. The employee’s lack of an adequate ethical decision-making process resulted in unethical judgments that destroyed the Company. The employees’ dishonest actions were vital because they misrepresented financial data, deceived marketers by overbilling, lost clients, and damaged the reputation of the Wells Fargo Company. I chose the issue of irresponsible leadership in the Wells Fargo organisation for this report in order to highlight the importance of having strong leadership and business ethics while managing a company (Monrouxe et al., 2017).

Background of Issue


The fraud issues have been faced by Wells Fargo related to its financial activities. Without the clients’ knowledge or permission, the Company had its employees discreetly hand out credit cards to their customers. When the accounts began to amass large sums of money, the consumers discovered that the employee had created false email accounts in order to provide online banking services. A substantial fine was levied on the Company as a result of the workers’ unethical behavior. Wells Fargo was fined $100 million by the Consumer Financial Protection Bureau in addition to the $185 million it lost due to unlawful banking. The Company also made other payments totaling $50 million, including $35 million to the Los Angeles County Controller office and the city of Los Angeles. The lawyer collaborated with the financial regulators . The Company hired outside experts to review and evaluate tens of millions of accounts from May 2011 to July 2015 since the refunds given to customers were so minimal that each transaction might cost up to $25. In addition, the Company’s governance and culture had severe weaknesses that the federal banking regulation had identified as dating back to 2011 (Belle,2017).


About 5,300 workers who participated in the cultural norm problems were fired by the Company as a result (Corkery, 2016). There were 40 million retail customers included in the case of surreptitiously opening credit cards, amounting to 565000 credit cards that were issued without their authorization and the opening of about 1.5 million bank accounts. Employees used to produce paperwork detailing tiny transfers so that clients would not be aware of changes to their current versions (Rodriques et al., 2018).


Despite the dishonest tactics of creating new accounts and issuing new credit cards to misrepresent finances, some of the firm’s consumers discovered comparatively larger expenses than anticipated. Additionally, the customer started receiving calls from debt collection agencies for the accounts they did not recognise and obtaining debit and credit cards by email that they had not authorised. The majority of the phone accounts created by the employee went undiscovered, though, since the employee was able to delete them after establishing, using, and then deleting them. By publicly expressing its willingness to pay back the unexpected charges made from customer accounts, totaling $2.6 million, the Company was able to accept the charges and penalties . When new clients created accounts, the Company’s reward rules encouraged the staff, which led to stress and pressure to open as many accounts as possible in order to maximise revenues. The Company vowed to totally prioritise its clients by putting their interests first. Additionally, the Company admitted responsibility in circumstances where the clients were able to get compensation for the errors made by its employees (Corkery, 2016).



Ethical issues and Dilemma faced in Wells Fargo


Making ethical decisions is seen to involve selecting and weighing as fundamental and most significant ethical standards that are appropriate for the business in the cutthroat marketplace. To have ethical leadership necessitates having a sense of what is required to remove the immoral possibilities and select the best is the most applicable practice. The argument for Wells Fargo calls for ethical stances that included different ethical theories, for instance, deontology, virtue theory, and utilitarianism. In order for utilitarianism to be dominant in their current views about management, business, and economics, one must be in alignment with free-market attitude and economics (Noothigathu et al., 2018).


The Company did more wrong than the right to the majority of its clients. The personnel was required to base their decisions on what was important to the majority of people rather than themselves. However, the management and staff failed to apply the viewpoint since they could not provide their customers with equity and safety while doing wrong with vast majority of bank holders because they had amassed 40 million customers in their bank. The utilitarian approach is constrained since management and decision-makers can be required to make educated guesses about how their views would turn out. The decision-makers in question were likewise unable to foresee the effects of their choices, and there need not be a connection between them in order for a minority to be pleased and the majority to profit.


Additionally, Immanuel Kant, who is recognised as the founder of contemporary deontology, is related with deontological ethics, which are relevant to the organisation. Because they have rights, people should be treated with honor and dignity, according to this point of view (Wang et al., 2020). Additionally, it has been asserted that each employee has a responsibility to uphold the moral standards required of them, including treating others with respect and decency. The Wells Fargo crisis required the use of deontological ethics, where staff might be caring for the clients by protecting their confidentiality rather than engaging in dishonest behavior. The Wells Fargo unethical act shows that workers attempted to steal away from them while performing their duties, which is not appropriate behaviour for anyone. By exploiting the customers’ information to create new bank accounts and offer new credit cards, the staff also violated their confidentially. Deontological ethics are also crucial since they may be used by the Company to clarify each person’s responsibilities and actions in order to improve the accountability of the business’s activities. Deontological ethics is constrained despite being a convincing ethical viewpoint for the Wells Fargo case since there are substantial differences regarding the principles that they base their decisions on (Savulescu et al., 2020).


According to Burton (et al, 2017), the ethical misconduct had left negative impacts of Wells Fargo among customers and other stakeholders. There are many parties with an interest in the Wells Fargo controversy; nevertheless, the key parties are the consumers, the employees and their families, and the company’s investors. These stakeholders’ experiences with the issue vary, but ultimately, Wells Fargo and its management have betrayed their confidence. In this case, the consumers who were the victims of the scam and had their privacy invaded by a company they trusted were the major stakeholders who experienced the biggest impact from the incident. Trevino and Nelson discussed the value of trust and its role in the service economy in the course content. Wells Fargo’s breach of consumer trust has eventually increased… additional material



The intention to have more profit was the main reason behind the unethical act of Wells Fargo Company. Employees were encouraged to open comparatively more accounts in order to qualify for the company bonus because of the organization’s culture of rewarding customers who created new accounts. The demands and concerns of the employee attempting to achieve new versions to obtain money unethically started with the culture. The huge earnings enticed the staff, prompting them to take more money from the clients in a way that would go undiscovered. The workers at Wells Fargo also experienced unethical leadership, which includes experiencing interpersonal conflicts with their managers and leaders. The issue grew to include the Company’s management, which is crucial since the organization’s dishonest leadership encouraged the firm’s dishonest business practises and fraud (Wa and Gupta, 2020).

Unethical act of organization

Sales volume was the only way to measure the performance by employees at that time that’s why managers used to encourage their employees to boost their daily sales. Sales targets were assigned to the branch personals which kept on increasing over the years. The employees were bound to report the daily sales and progress to the managers and other executives. The pressure was put on the low performing employees to increase their sales and the CEO himself contacts the high performing employees to congratulate them on achieving their goals.

The CEO himself encouraged the employees to increase the sales by using misleading sales pitches, such as telling their costumers that the credit card was bundled with your existing checking account whereas a new fraud account was opened for that purpose (Duffy,2017).

Leadership’s response to Issue

In 2016, the issue got the attention of local Prosecutor’s office and two federal regulators. After that the bank also showed acknowledgement about the problem with unauthorized accounts and started the internal investigation. But it was too late now. The local prosecutor and the federal regulators issued a consent decree and fined the bank an amount of $185 million.(Flittler, 2018)

The management was criticized for failing to see “the connection between the goals and poor conduct [even though] that relationship is plainly visible in the statistics,” according to the report. The prevalence of misbehavior increased as sales objectives grew increasingly challenging to meet. It’s interesting to note that the research discovered that “workers who engaged in misconduct most commonly identified their behaviour with sales pressure, rather than monetary incentives (Simola,2003).

Wells Fargo senior leadership took this fraud as serious as CEO fired many directors and employees from institution. It is difficult to assess that overall mistake was from managers and employees side. As per the orgnisation culture, there was an extreme aggressive policy to increase sales and it diverted a pressure towards employees. In order to increase its revenue the employees asked to create new accounts and issue credits or debits cards.

It is observed that Wells Fargo did not have an integrative framework to reduce employees’ experience to conditions that caused to malpractice. This is one step that Wells Fargo missed in avoiding unethical behavior. High-pressure performance requirements that fail to account for the impossibility of the predetermined goals, for instance, should be abolished by adjustments to policies and objectives. The organisation should shift to a service-oriented business model, rather than one that relies on criterion just like number of accounts opened by an employee, in order to make decisions about how to assess success. Dishonesty was actively promoted inside the incentive scheme, thus it too should be terminated (Dust et al,2018).

Measures taken to Correct Unethical behavior

Wells Fargo, a well-known banking firm in the United States was involved in ethical misconduct in which superior management and strong leadership were found guilty. The Company, however, has lately become involved in a decade-long unethical conduct and has been labeled as an establishment with a culture of dishonesty and deception. An extensive examination of the Company discovered that managers established accounts for millions of clients using their information without their knowledge or consent, occasionally faking their signatures.

In September 2016, the government based panels which were investigating the bank’s handling of the developing scandal testified the CEO of the bank. In this time period it was suspended by the State of California for at least one year period from under writing some of its municipal bonds offering. California was one of the most important costumers of the bank. This was the attribution by the state to the bank’s going on accounts fraudulent.

In October 2016, an early retirement was announced by the CEO after 34 years long career under the influence of public outcry which was a result of the account scandal. The retirement package taken by him was approximately $134 million including cash, stocks and other compensations he gained in his tenure.

In April 2017, an independent review report was issued by the board in which the scandal was told to be a result of bank’s decentralized structure. The board of directors was also declared innocent including risk management director. This report include that the information was falsely delivered to the directors by the various directors during the meetings. It was also mentioned in the report that the risk management officer had limited authorities over the CBD (community bank devision) . He played his role properly but the information was not properly delivered to the oversight authorities. In 2017, the CEO and CBD director were fined an amount of $69 and $66 million respectively. 4 mid level managers were also terminated and fined by the authorities (Garcia, 2020).

Lessons to be learned

The CEO of the Company and the whole management have been held accountable for the ethical problem at Wells Fargo, not the employees. To move forward, employees in this Company are obliged to work within certain guidelines and to abide by them. Wells Fargo’s attitude in this case was consistent with Milton Friedman’s individualistic theory that “all companies have the duty to do is generate a profit within the framework of the legal system, nothing more” (Machman, 1994, p. 57). This hypothesis contends that Wells Fargo executives acted morally since their objective was financial success, which they achieved, and that the fraud was carried out by “bad workers.” According to John Stuart Mill’s utilitarianism theory, doing the most benefit for the most people is the goal of utilitarianism. 2016; Johnson, C., p. 4. This idea leads me to feel that Wells Fargo would be immoral since they didn’t provide the most good for the most affected individuals.

There will be clients who pledge never do business with Wells Fargo again and who cannot or would not get the idea of a bank pushing unnecessary items on its customers while engaging in dishonest business practises out of their heads. Other stakeholders be more accommodating, but analysts argued that the bank must be prepared and able to make significant changes to the way it conducts business, including providing goods and services with rewards and pricing that are better than “middle-of-the-road” and competitive with competitors’ checking account and credit card offerings. The large home loan portfolio that Wells Fargo manages has to be properly tracked, and the bank needs to engage with customers more actively to make sure they comprehend the conditions of their mortgage and stay on schedule to pay it off.

The firm’s decision-making needs utilitarianism, deontological ethics, and virtue theories, as well as an honest point of view. The term “consequentialism” was initially used to refer to the belief that moral judgments should be based on the results of one’s acts and deeds in utilitarian ethics. The leadership viewpoint is crucial because it may assist in achieving the greatest benefit for the largest possible number of people. The approach known as deontological ethics promotes the notion that “human should be given respect and dignity because they have responsibilities. The Company developed solutions to prevent unethical behavior in the future, but additional procedures are required (Wang and Gupta,2020).


Due to unethical conduct of the Wells Fargo the Company’s CEO and the whole administration should follow ethical practices with in company. Thus, now employees are required to work within certain guidelines and to abide by them. The frequency with which the employees committed fraud indicates that they are forced into participating in the activity should not obedient to business policies. Wells Fargro needs are expected to abide by all policies established by the companies they work for and complete all jobs as directed by assuming accountability. Firm policies and procedures may encourage unethical behavior by workers, such as fraud.

In addition, according to (Cosans et al,.2018) managers must show a duty to represent and communicate on behalf of the workers in a company. The management required to handle the situation in accordance with the Company’s policies after becoming aware of the fraud operations at Wells Fargo. The managers must have a plan since they profit from preserving the culture and the business as a whole by cleaning up any messes before problems arise. The managers are the driving force behind an organisation, ensuring that everyone performs fairly well by preventing disagreements and unethical situations from arising. The front-line staff is should engage with the Company’s customers in interactions only where they can listen and assist in resolving their concerns as they grow satisfied (Mo et al. 2017). Unlike managers, who oversee all employees, even those on the front lines, at Wells Fargo should not indulge themselves in unethical activities. Therefore, the controversy involving the front-line workers must be blamed on the management.

Additionally, Wells Fargo must have the power to have a penalty and fine to minimize the negative effects of unethical employee activity, like as fraud and money laundering. Each employee who makes a fraud or influences other employees in a dishonest manner must be punishable by the Company’s shareholders and owners. Strict rules, and regulations about business ethics should be adopted be by Wells Fargo in the workplace for their new employees and managers at orientation sessions. The repercussions of violating the Company’s policies are also explained to the new employees, who are crucial in monitoring and upholding the Company’s ethical standards (Belle et al., 2017).

Lastly, Wells Fargo can create checks and balances by hiring a both internal and external auditor to constantly monitor employees’ activities by following employment practises. The business may design a system with checks and a balance that allows for the fewest possible faults and stays away from issuing clients debit and credit cards without feeding their forensic and biometric equipment. The process of authorising credit cards and creating new accounts can be sped up by technology. The technology is important since it is used to reduce the likelihood of unethical conduct occurring in the Company.


To be concluded, Wells Fargo was faced an unethical issue of opening new fake accounts by new customers. Wells Fargo had an unethical conduct by using fake sales technique that put a lot of pressure on employees to open new accounts and make credits or debits in order to increase the profitability of the business. The Company has damaged its reputation by following increasing sales policy in any case either by having fraudulent accounts. However, Company had taken serious actions for providing an organizational environment that restricts employees’ exposure to situations that might result in malpractice. In this perspective, Company should follow ethical leadership theories of virtue and utilitarianism that could address unethical behavior. For instance, by implementing policy and goal modifications, the excellent performance perceptions should be eliminated that ignore the incoherence of the established targets.





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