Question

What values did Stumpf model to Wells Fargo employees? What impact might that have on the culture of Wells Fargo? What behaviors can leaders model in order to encourage ethical behavior in their organization?
Wells Fargo was the darling of the banking industry, with some of the highest returns on equity in the sector and a soaring stock price. Top management touted the company’s lead in "cross-selling": the sale of additional products to existing customers. "Eight is great," as in eight Wells Fargo products for every customer, was CEO John Stumpf’s mantra.
In September 2016, Wells Fargo announced that it was paying $185 million in fines for the creation of over 2 million unauthorized customer accounts. It soon came to light that the pressure on employees to hit sales quotas was immense: hourly tracking, pressure from supervisors to engage in unethical behavior, and a compensation system based heavily on bonuses.
Wells Fargo also confirmed that it had fired over 5,300 employees over the past few years related to shady sales practices. CEO John Stumpf claimed that the scandal was the result of a few bad apples who did not honor the company’s values and that there were no incentives to commit unethical behavior. The board initially stood behind the CEO but soon after received his resignation and "clawed back" millions of dollars in his compensation.
Further reporting found more troubling information. Many employees had quit under the immense pressure to engage in unethical sales practices, and some were even fired for reporting misconduct through the company’s ethics hotline. Senior leadership was aware of these aggressive sales practices as far back as 2004, with incidents as far back as 2002 identified.The Board of Directors commissioned an independent investigation that identified cultural, structural, and leadership issues as root causes of the improper sales practices. The report cites: the wayward sales culture and performance management system; the decentralized corporate structure that gave too much autonomy to the division’s leaders; and the unwillingness of leadership to evaluate the sales model, given its longtime success for the company.

Answer 1

Answer:

Ethics at Fargo

1) Stumpf modelled unethical sales practices and encouraged ethical misconducts.

2) The impact of unethical sales practices is that some employees were rewarded for acting unethically while others were punished for reporting unethical ee.  Some employees left the company because they were "under the immense pressure to engage in unethical sales practices."  "Some were even fired for reporting misconduct through the company's ethics hotline," thereby, l the rationality for establishing the hotline in the first place.  This shows that management was not matching its words with its actions, but was negating itself ethically.

3) Behaviors that leaders can model to encourage ethical behavior in their organization are:

a) Leaders should act ethically themselves and let themselves be seen to be acting ethically.  "Follow my words and not my actions" is an ethically hazardous practice which cannot be sustained for long-term success.

b) Leaders should be active in setting the ethics program for their organization and ensuring that others key in.

c) Leaders should encourage employees to raise ethical issues when they occur.  And when they do, this should be properly investigated and appropriate sanctions administered based on well-documented procedures and findings.

d) Leaders should address ethics issues before (through an ethics program) and when they arise (proper investigations and rewards) in their organization.  Sweeping such issues under the carpet and concentrating on the bottom line does not augur well for long-term organizational success.

e) Once an ethics program has been established, it should be enforced to gain traction, show examples, and ensure future-continued acceptance.  An ethics program is not an ad hoc business.  You can only deter misconduct by rewarding good conduct and punishing bad behavior.

Explanion:

Ethics deal with right and wrong behaviors.  They are concerned with matters of value, which produce long-term benefits to those who engage in right behaviors.