Corporate Ethics and Governance Failure: An Analysis of the Wells Fargo Scandal
Overview
This essay analyzes the 2016 Wells Fargo scandal in which bank employees fraudulently opened over 3 million unauthorized accounts for customers. The paper examines the scandal through the lens of corporate ethics and corporate social responsibility, arguing that failures in corporate governance and ethical conduct led to loss of customer trust and significant financial and reputational damage.
What this essay covers
- Summary of the Event: Overview of the 2016 Wells Fargo scandal involving unauthorized account creation and unauthorized fees and charges
- Ethics and Corporate Governance: Analysis of how failure to maintain ethical standards and proper oversight contributed to the scandal
- Corporate Social Responsibility: Examination of how lack of CSR contributed to customer loss and declining shareholder value
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Wells Fargo scandal
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Wells Fargo scandal
Summary of the Event
The recent event that will be analyzed in this essay is the Wells Fargo scandal discovered in 2016 and is still affecting the financial institution. In 2016, Wells Fargo's clients started to notice a trend of getting unexpected credit cards and, at times, charged fees they did not anticipate (Tayan, 2019). The complaints prompted several agencies, such as the Consumer Financial Protection Bureau, to investigate the matter. By the end of 2016, the investigators found that the bank employees had opened more than 2 million fake accounts without their customers' authorization. In the preceding years, the scandal became more extensive as the investigative agencies discovered an additional 1 million accounts had been opened and clients had been charged loans and insurances that they did not need. At the beginning of the investigation, only the junior employees were punished over the scandal. However, over the years, the top management has had to pay fines while other people have been fired for their involvement in the scandal. The company has been charged $185 million for this scandal (Tayan, 2019). Their asset growth has also been limited, and they are expected to corporate with the authorities fully in the future in case of any investigations.
Two Key take Aways
Ethics is a significant concept in corporate finance that can be used to analyze the scandal in Wells Fargo.