Wells Fargo: The Story and Consequences

How Wells Fargo interpreted market competition pressure to justify unethical acts

A scandal emerges out of the US banking industry, and this time it is Wells Fargo – one of America’s four big banks. The story surfaced when the Consumer Financial Protection Bureau (CFPB) slapped a heavy fine of $185 million with allegation that the bank between 2011 and 2015 opened or applied for about 2 million bogus bank or credit card accounts without any permission and knowledge of the customers whose names were used for these accounts. Soon after this charge, the bank announced removing about 1% of its workforce, 5300 employees. John Stumpf, Wells Fargo CEO, is at the receiving end of all questioning, even being asked to resign immediately. The allegations reveal that such acts emerged from an excessively goal oriented culture, to the extent that the sales employees’ were forced to enter unethical acts not knowing their elongated consequences. Banking industry competition forcing the management to enter such forbidden practice can be dangerous as the product itself involves investing money, something which Wells Fargo did not seriously contemplate. In its blind drive to sustain its external image, the bank probably thought of such a stunt as having negligible ‘negative’ value for itself, provided it fulfils all employees’ sales rewards.

Stumpf uprightly denies that the management was aware of such practices, something which is simply silly, for him being the CEO and Chairman of the bank.  Stumpf admits that what has happened is wrong and apologises to all customers. Stumpf announced to forgo his $41 million compensation for the year and his salary to show his sincerity. Meanwhile, a class-action lawsuit has been filed by two former employees who were removed for not meeting their sales quota. The bank got a bigger jolt, when Illinois suspended a $30 billion investment activity with the bank, and California put a one year sanction. Announcing such strict countermeasures makes public anger loud that unethical actions will not be tolerated and unethical corporation may die its own death.

 

Such events raise questions about the way competition pressure is interpreted by corporations, the need to use immoral acts to fulfil their ends, and hence the question about a bank’s internal management is legendary here. The immoral act infers violation of law, misuse of law, and non-adherence to the law. It is additionally alleged that the act has clearly violated the Fair Labor Standards Act (FLSA) by encouraging employees to open bogus accounts to meet sales quota, in short to commit fraud. More legal violations will soon be stated about leaking confidential customer information. The bank did not realise the extent of the consequences under its ignorant drive to sustain its market value. Hillary Clinton, too, charged the bank with bullying its employees into committing such fraud, and alleged banks’ of playing with the law even after the 2008 financial crisis. She forgets that her own Democratic party has been in power since last 10 years, and their lack of law enforcement is also to be questioned by American citizens. Wells Fargo will continue to defend and accept alleged charges, and do all it can to win back customer confidence, but this may take years or even a decade or more.

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