Introduction
Maintaining high ethical standards is very important for any company. It helps create a positive image of the firm among employees, customers, and partners. The consequences of unethical behavior in business might be severe ruining the firm’s reputation and the careers of people. The goal of this paper is to study steps that need to be taken to develop a well-working ethical system by using the example of the scandal involving Wells Fargo and the problems it revealed.
The culture of any company is heavily dependent on the values the leadership promotes among the employees, and the personal example they provide. In Wells Fargo, CEO John Stumpf put the expenditure of the market and sales figures above the value of ethical behavior. The management promoted cross-selling, which encouraged the subordinates to engage in aggressive sales practices (Tayan 18). The leadership of the bank deliberately ignored the controversial sales technics in the company. The CEO and senior management did not take any actions, although they had been aware for many years that this problem took place (Tayan 23). Such attitude of the leadership of the company might have given the employees the appearance that these forms of unethical behavior were accepted and even encouraged.
Main body
The structure and the business model of Wells Fargo allowed the emergence of the working environment that incited the employees to unethical behaviors. The divisions’ leaders were given a lot of autonomy, which harmed the efficiency of the ethical system. The bank used a compensation system that was primarily based on bonuses, and the supervises pushed their subordinates to make more sales. This pressure made many of them leave the company, and those who stayed had to turn to aggressive sales to hit the quotas (Tayan, 18). Stumpf did not take responsibility for the situation regarding the scandal. Instead, he decided to blame it on the fired employees of the company. Moreover, the existing ethic system did not work properly, and the attempts to use the ethics hotline of the company resulted in punishment for those who reported misconduct leading the employees to further distrust in it (Tayan, 21). Thus, although the company had some elements of an ethics system, it did not have any positive effect, because the senior management did not organize its proper work, and those who tried to use it were punished for that.
It is common to use bonuses as stimulation, especially in sales, but it is important to do so properly. Leaders should promote the value of ethical behavior among employees. It can be done by educating both salespersons and their supervisors about the ethical standards of the company and accepted methods and approaches to business. The management should take measures to create a comfortable working environment and encourage ethical behavior by explaining its importance for the image of the company and the long-term growth. The personal example of the senior authorities and the CEO also plays a big role in the promotion of ethical values and standards.
The disbelief of the people in the ethical system of the company is one of the main reasons for its ineffectiveness. To avoid these problems, the leadership should investigate all known instances of misconduct and punish the responsible accordingly. It is also crucial to encourage initiative from the employees. The people who report misconduct or come with suggestions for the improvement of the ethical system need to be protected and feel that their contribution is valued.
Conclusion
Creating an efficient ethical system and encouraging ethical conduct is one of the main priorities for the leadership of any company. It leads to respect for the firm from partners and customers and ensures that the working environment is right for the employees. Studying examples of the companies that failed to embrace ethical approaches to business helps to understand possible problems and pitfalls of the process.
Work Cited
Tayan, Brian. “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, 2019, pp 17-33.