Ethical Reasoning Analysis Of Wells Fargo Bank Debacle

This essay is an ethical reasoning analysis from a deontology normative theory prospective on what went wrong at Wells Fargo Bank in the years leading up to the debacle in September of 2016, and what they could have done to stop it from happening in the first place and into the future.

On September 8, 2016, Wells Fargo came under vast scrutiny, by many an entity such as the Consumer Financial Protection Bureau (CFPB), the Los Angeles City Attorney, and the Office of the Comptroller of Currency uncovering a companywide scandal.

At the time of this scandal, Wells Fargo’s vision statements and values, they claimed to abide by, were based in an ethical theory called Deontology. Their motto statements, which were the linchpin of their entire company, were Wells Fargo “…strives to set the standard among the world’s great companies for integrity and principled performance.” Their second motto was, “We value what’s right for our customers in everything we do.” Turned out that these statements were just another tag line rather than a motto, or ethos, considering it soon came to light that their employees had been fraudulently opening accounts, approximately two million accounts, on behalf of unwitting customers and going so far as to faking customer signatures, all to obtain their strict sales goals, sales goals which were set by higher management, the official decision makers and enforcers.

To understand what makes Wells Fargo’s mission statements hypocritical, their ethical perspective, deontology, must first be explained. The normative theory of deontology, deontology being the Greek word for duty, is a rule-based theory of right from wrong. Its main principle is that individuals must act in accordance to a certain set of rules and principles, regardless of the consequences in order to be considered ethical. In other words, people must simply follow rules and do their duty.

Another way of saying this is that deontology does not judge the act upon the result, or consequence. This philosophy essentially makes decision making easier because by simply following a set of moral, ethical rules, subjectivity and/or doubt from any decision are removed. An example of this would be killing someone in self-defense. Even though it may save your life, the act itself is wrong, thus unethical and goes against the ethical code of deontology, therefore one should not kill a person in self-defense, even if it means they possibility of being killed themselves. Obviously, deontology followed to the tee, may not be such a good moral stance for all situations, but in Wells Fargo’s case it would have been beneficial in most to all instances, keeping the company from committing a multitude of fraudulent acts. To further explain deontology from another perspective, we must discuss Immanuel Kant, a German philosopher, who in layman terms, believed that if you would feel ok having an audience see your actions, and those actions becoming a standard for society, then the activity you are performing is ethical. A great analogy for this from Business Ethics by Ferrell, Fraedrich, and Ferrell, was to imagine people borrowing money, promising to pay it back, but never doing so. Lending facilities would stop lending money because no one would keep their word to pay the money back. Society would most likely reject this unethical norm because society requires lending. To put it more simply, Kant believed ethics are structured around universal moral laws such as: “Don’t lie, don’t steal, don’t cheat.”. In a way, deontology is similar to the Golden Rule, “Do on to other’s as you would have done on to you.”

Additionally, Deontologists believe all people should be given the same level of respect. They also believe that there are limits to what should be done to reach a goal, as discussed in the self-defense scenario in the previous paragraph. Reviewing the Wells Fargo case with demonology defined will make the deontologist view point on Wells Fargo’s case clearer by exposing how a deontologist may perceive, approach, and determine what Wells Fargo should have done differently, and what they should do into the future.

Analyzing Wells Fargo’s fraudulent activity starts with revisiting what exactly went wrong from a deontologist’s position. As stated before, in short, the reason someone acts a certain way is ultimately the determinant of right or wrong for a deontologist, not the outcome of that action. Therefore, the actions of the Wells Fargo employees fraudulently opening accounts for customers without their permission would be considered unethical, no matter the consequences they were to face if they had failed to obtain their sales goals. The potential negative consequences for the employees would have been the denial of a pay raise and/or termination. The threat of being fired or not receiving a pay raise is not reason enough to commit fraud; regardless of the positive effects for everyone, particularly those who stood a chance of retaliation, the act of fraud was not a justifiable from a deontologists’ point of view. Utilitarianists, another normative ethical theory, may believe differently. Utilitarian’s believe, in short, that some greater benefit for the greater number of people, such as keeping thousands of people at Wells Fargo employed, may justify the means, fraudulent activity. A Utilitarianists’ justification may be that the employees didn’t have a choice because they were only following the orders of their superiors who threatened termination if goals weren’t reached; thus, the means justify the ends, keeping 5300 jobs. However, this Utilitarianist’s argument may not bode well for the higher management who set the sales goals, and or enforced them. As mentioned in the previous paragraph, the Utilitarian’s view point may be sufficient to justify the subordinate’s actions, but it certainly would not justify the managements actions, such as the managers who enforced the sale goal requirements, and regional managers who set the goals to begin with. Deontology doesn’t justify upper managements actions either. This is because the regional managers had to have known they were setting unattainable sales goals, and the branch managers had to have known the goals were unattainable as well. Therefore, their actions were also most definitely unethical. Not only that, but their intent may have been unethical as well, and may have gone beyond just working towards more product and service sales. Management, both branch and executive, may have been trying to create an atmosphere where, if goals were not obtained, subordinates would be denied a raise, or worse terminated. The denial of raises is good business for management who are working to save money for the investors / stockholders, and the tentative termination could be used to lower payroll obligations by eliminating senior employees who get paid more than new employees. All of these possibilities show that there was at least an obvious, deliberate lack of ethical awareness by the branch managers, and the regional executive managers, and most possibly the upper executives all the way up to the CEO. To define ethical awareness, it is having the willingness and ability to identify unethical situations. Even if the management didn’t have the sinister reasons for creating unattainable sales goals, they still had to have been very much aware that they were setting unattainable goals, therefore there is no question that they ignored any ethical awareness they might have had. However, the upper management weren’t the only one’s lacking ethical awareness; the same goes for the subordinates as well, as they knew what they were doing was wrong. The subordinates justified their actions because they felt the means justified the ends, keeping their jobs.

Now, the question remains, knowing know what happened, and the potential reasoning behind it all, what could have been done differently to avoid these fraudulent actions by all employees, from bottom to top? The company already had two deontology mottos in place that were to be followed as employees of Wells Fargo, but obviously some words on a webpage or stationary aren’t enough. The culture itself must be defined to mimic those words. Maybe the regular reminder of Wells Fargo’s ethical statements would have helped, such as having it posted on the top of every intranet page, or stationary, or recited at beginning of each day as a reminder of their ethical expectations and values. Honestly though, these wouldn’t be enough, as stated before the culture itself must change, and ingrained in every new and existing employee. The best way is for the highest ranks of a company to follow their set ethical code. Only by leading by example will things change, and it must start at the top because they are who set the ground rules for the rest. These ground rules, or ethics and values to abide by could be implemented in to Wells Fargo training programs as well. Furthermore, as a preventative measure, because no system of rules is perfect, a good recommendation might be to implement a whistleblower’s hotline, a phone number that employees can call to inform government entities, such as the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of Currency, of possible fraudulent activities that are taking place. This won’t solve the issue of executives setting too high of sales goals, but it will at least catch the fraudulent activity of the employee’s opening fraudulent accounts to meet those goals. Moving to the matter of the executives, hotlines won’t necessarily help these individuals set more ethical, reasonable sales goals. The problem here is the U.S.’s culture itself; it’s not just Wells Fargo’s corporate culture, it’s many companies in the U.S. The economic culture of the United States will have to change as a whole in order to fix the need corporations have to be the best at any cost. The United States’ ethics, in regard to corporate responsibility, are imbalanced, which is what caused Wells Fargo’s need to be the leader in the banking industry in the first place instead of just being happy with being a good and ethical bank in all they do. The sad truth is, companies who fall behind are often unable to compete economically due to the lack of financial means to obtain new technological products and services that may advance their customer base, and grow their shareholder equity.

In other words, the more purchasing power a company has, the better deals they get. Before descending down the rabbit whole too far, and refocusing on what a deontologist’s analysis of the Wells Fargo fraud case would most likely recommend, their perspective would suggest modifying its sales goal attainment strategy to focusing more on educating the customer on what products and services they can provide to them, rather than force selling specific products and services that customers don’t need or want. This in a nutshell would eliminate the employee’s desperation to succeed at obtaining their unrealistic sales goals, and set a positive, ethical, and customer focused sales program. It may not make Wells Fargo the best in the world, but it will keep their customer base happy, and most likely promote new customers. Furthermore, the lack of legal enforcement with regard to corporate malfeasance in the United States can be traced directly back to political corruption, such as the lack of corporate accountability following the 2008 Great Recession. All that being said, Wells Fargo’s executive leadership needs to remember just that, that they are leading their people and whatever they accept or expect, their subordinates will follow. The executive leadership badly needs to re-examine their ultimate goals along with the sales goals they have set, and reconfirm what will achieve those goals in a positive ethical matter by returning to their deontological ethical premise.

All in all, a multitude of Wells Fargo employees, from the entry level to most possibly the top level, made unethical decisions that went against Wells Fargo’s overall deontology philosophy. By doing so, they came to face many employee losses, a huge financial fine, and the loss of respect and trust of the people, not just here in the United States, but abroad as well. The only next step is to step back and re-evaluate their lofty goals, and set a more realistic, and ethical corporate strategy that takes Wells Fargo and its people back to its original ethos of valuing…” what’s right for our customers in everything we do.”