A Case Study of Wells Fargo

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Wells Fargo found itself in fierce competition with other financial players in the American market.
Senior management pushed for quick growth to counter their competitors, which they feared would overtake them or enter their market segment (Hurley and Richard 82).
The competition led to the management setting very high targets for low-level employees. Some of the targets, for instance, sales targets, were found to be unrealistic, but employees were required to achieve them (Tayan).
Employees who could not meet their targets were threatened with job losses or worked extra hours without pay.
Consequently, employees created unauthorized credit accounts in customers’ names to meet the unrealistic quotas. Customers then incurred charges in credit cards, savings and checking accounts.
Such actions breached the trust, caused losses to customers, led to fines to the bank and eroded the company’s reputation.

Problem

The problems in the above case study touched mainly on leadership and bad business culture. The leadership prioritized profits over good business practices.
Many customers closed their accounts and moved to other banks. The behavior had eroded the trust between them and the financial institution.
There was also the problem of investor confidence. Many investors viewed the bank as unethical and lost faith in it.
More importantly, the malpractice left the business name with a bad reputation, affecting its corporate and business position. Profits plummeted as some customers closed their accounts and walked away.

Solutions

The case study suggests that businesses should balance between profits and customer interest. After learning from Wells Fargo, other companies faced with the same circumstances should consider the following creative solutions:

Improving customer service: Banks should improve customer service to handle customer complaints. They should commit to delving deeply into every issue that customers raise.
Improving communications: For an effective response, Wells Fargo and other banks should strengthen their horizontal and vertical communications. Effective communication channels can help prevent problems before they blow out of proportion.
Transparency and accountability: Wells Fargo should conduct its business transparently and be accountable. Customers should get a report indicating the reason for various charges incurred.
Reviewing code of ethics: Every business needs to review its code of ethics to assess the extent of compliance (Srivastav 104). That allows the early institution of corrective measures to avoid tarnishing the company’s image.
Have a compliance officer: Banks should have an internal compliance officer who assesses the extent to which every department conforms with the applicable best practices and laws.
Improving internal controls: Given that Wells Fargo employees committed corporate malpractice, banks should strive to protect customer data. The bank’s junior-level employees created millions of fake accounts because they had access to customer data. Therefore, banks should tighten internal controls so that access to customer data must be authorized by a code sent to customers’ phones.
Periodic reviews by an independent audit firm: Allowing an independent audit firm to audit business and conduct risk analysis can help identify practices likely to expose a business to unforeseen consequences. Audit firms may also uncover permissible patterns that might seem harmless but can harm a company’s reputation.
Leadership: The leadership should carefully set the organizational culture (Srivastav 102). Such a cut-throat competition with unrealistic targets was responsible for the malpractice. Therefore, the management should set realistic targets.

Conclusion

The Wells Fargo case involved poor leadership and wrong corporate values. The bank had prioritized profits and growth over good business practices. It also ignored employee motivation and instead put unrealistic performance expectations on them. It remains a lesson for any institution that leadership plays a pivotal role in the success of any organization.

Works Cited

Hurley, Pamela R., and Richard E. Hurley. “Lessons from Wells Fargo Banking Scandal.” Academy of Business Research Journal, vol. 2, 2020, pp. 78-91. ProQuest, https://www.proquest.com/scholarly-journals/lessons-wells-fargo-banking-scandal/docview/2472181117/se-2

Srivastava, Ashish. “Strengthening Compliance through Leadership, Ethics, Transparency, and Cultural Capital.” IUP Journal of Bank Management, vol. 21, no. 4, 2022, pp. 98-109. ProQuest, https://www.proquest.com/scholarly-journals/strengthening-compliance-through-leadership/docview/2825882907/se-2

Tayan, Brian. “The Wells Fargo Cross-Selling Scandal.” Harvard Law School Forum on Corporate Governance, 2019. https://corpgov.law.harvard.edu/2019/02/06/the-wells-fargo-cross-selling-scandal-2/ . accessed 13 Sep 2023.