Wells Fargo’s Strategy in the Wake of a Fraud Scandal Essay

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Introduction

Business executives must always be concerned with the ethics behind their decisions since it directly affects the public perception of their company and provides an opportunity to attract new customers. Businesses which do not consider ethical conduct as an essential asset for their operations tend to lose in the long run because clients may gradually become dissatisfied with certain actions of such companies. Wells Fargo is one of them, which, despite being a company with a century-old history and large experience in surviving challenging moments, still managed to become involved in a scandal concerning immoral behavior. By implementing a program for its employees to sell additional services to customers and establishing almost unreachable targets, the company created an incentive to abuse the system by creating fraudulent retail accounts. These practices were reported by whistleblowers, but the company’s management, despite paying fines, largely blamed the low-level employees for the fraud activity. Nevertheless, the overall strategy of the company to restore its brand’s reputation was appropriate, and the ethical dilemma the bank faces right now can be resolved with the utilitarian approach.

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Restoring Trust

As it was mentioned earlier, the resulting scandal prompted Wells Fargo to change their approach and pay penalties for their illegal activity. The bank’s subsequent promise to focus on serving the client rather than selling products to them was an appropriate strategy and could potentially be effective. After scandals, people lose trust in companies, but if next time they come to the bank, they will not be asked to buy extra products, they will be less suspicious. Moreover, many want to see instantly observable changes, and the decision of one of the company’s executives to step down from their position is the right move for the brand’s image (Flitter & Cowley, 2019). It allowed Wells Fargo to demonstrate they were committed to rectifying their mistakes and starting anew. Additionally, the company directly paid certain sums of money to its clients and especially to those who were victims of the fraud (WatchMojo.com, 2016). This is also a reliable method for restoring people’s trust since it shows that the bank is ready to acknowledge their failures and suffer financial losses for it.

The Top Management’s Responsibility

Scandals such as Wells Fargo’s one demonstrate one simple business ethics rule that companies always have to control every aspect of their operations to ensure that employees do not engage in illegal actions. Therefore, it is a top priority for businesses not to create an environment which would be conducive to unethical conduct on the part of workers. Top management must be held accountable for every instance of employees’ fraudulent activity because it would not be possible without the executives’ implicit or sometimes explicit approval. In the case of Wells Fargo, the management team designed a potentially effective system but did not think of negative consequences, namely, employees’ false impression that creating fake accounts was acceptable. Thus, by virtue of being at the helm of their company and in charge of the master-plan, members of the top management team have to bear responsibility for the actions of the customer-facing workers.

Wells Fargo’s Ethical Dilemma

Every business has to focus on constantly increasing the annual revenue using different strategies, and one of them is expanding the number of services provided to the existing customers. Yet, sometimes this may lead to ethical dilemmas such as the one currently faced by Wells Fargo. The company has a choice either to return to actively persuading customers to buy additional products risking its reputation, or cease violent advertising at the expense of the revenue. The right approach would be opting for the utilitarian philosophy and determining which option benefits the majority of the people involved in the process (Byars & Stanberry, 2018). Here, the answer would be to abandon old practices and focus on serving the customer instead, since this approach brings value not only to the clients but also to employees. The company’s shareholders will be on the losing side, yet the fact that moderate conduct will help the bank restore people’s trust must convince them that it is a necessity.

Conclusion

The scandal involving Wells Fargo has been one of the main ones in the banking industry since the Great Recession of 2008. Yet the company’s strategy to repair their brand’s reputation was right and properly executed since the bank decided to openly acknowledge their failures and agreed to pay large penalties. Moreover, the company promised to change their attitude towards customer service and forced one of the executives to vacate his position. These strategic decisions showed their determination to learn from their mistakes and correctly recognized the top management’s responsibility to be accountable for the conduct of the customer-facing employees. The executives have to be in control of what happens in their company at all levels, and their inability to do so must serve as a testament to their incompetence and unprofessional behavior. Currently, Wells Fargo has to decide whether to increase its revenue by switching to old practices at the expense of losing reputation or focus strictly on customer service but potentially limit its financial gain. In this situation, the utilitarian approach is an appropriate solution since it clearly shows that choosing the second option would be best.

References

Byars, S., & Stanberry, K. (2018). Business Ethics. OpenStax.

WatchMojo.com. (2016). [Video]. YouTube.

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Flitter, E., & Cowley, S. (2019). . The New York Times.

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IvyPanda. (2022, June 16). Wells Fargo’s Strategy in the Wake of a Fraud Scandal. https://ivypanda.com/essays/wells-fargos-strategy-in-the-wake-of-a-fraud-scandal/

Work Cited

"Wells Fargo’s Strategy in the Wake of a Fraud Scandal." IvyPanda, 16 June 2022, ivypanda.com/essays/wells-fargos-strategy-in-the-wake-of-a-fraud-scandal/.

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IvyPanda. (2022) 'Wells Fargo’s Strategy in the Wake of a Fraud Scandal'. 16 June.

References

IvyPanda. 2022. "Wells Fargo’s Strategy in the Wake of a Fraud Scandal." June 16, 2022. https://ivypanda.com/essays/wells-fargos-strategy-in-the-wake-of-a-fraud-scandal/.

1. IvyPanda. "Wells Fargo’s Strategy in the Wake of a Fraud Scandal." June 16, 2022. https://ivypanda.com/essays/wells-fargos-strategy-in-the-wake-of-a-fraud-scandal/.


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IvyPanda. "Wells Fargo’s Strategy in the Wake of a Fraud Scandal." June 16, 2022. https://ivypanda.com/essays/wells-fargos-strategy-in-the-wake-of-a-fraud-scandal/.

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