The Ethical Analysis Georgia Lam

My Ethical Analysis on Wells Fargo’s 2016 Scandal
By: Georgia Lam
I. Introduction
In early September of 2016, Wells Fargo was publicly exposed for its underhanded fraud
practice, in which employees secretly created millions of fake and unauthorized bank and credit
card accounts that Wells Fargo customers were not aware of nor gave consent to. Wells Fargo
committed these actions for five years, between the years of 2011 to 2015, with the objective to
meet aggressive sales pressure -- resulting in enormous, inflated profits. Unlike other big
company scandals in which only a few select decision-makers participated in unethical behavior
and practice, Wells Fargo’s scandal involved widespread unethical behavior that was heavily
emphasized in its corporate culture and was present throughout the management structure. In
making a decision of whether it was ethical or not of Wells Fargo to deceive customers in order
to drive up their exorbitant profit, there has to be a discussion analyzing the ethics behind the
controversial decision. We will use the four normative theories of Utilitarianism, Rights, Justice,
and Ethics of Care, as well as Manuel G. Velasquez’s text Business Ethics as a guide to evaluate
Wells Fargo’s felonious actions.
II. Utilitarianism
The first normative theory of Utilitarianism necessitates us to take the best moral course
of action that will produce the greatest benefits and minimize the harms, to produce the greatest
net utility for society. This approach, founded by English philosophers Jeremy Bentham and
John Stuart Mill, advocates “looking at the various policies or courses of action that could be
chosen, and comparing their beneficial and harmful consequences” (Velasquez 78) is necessary
for making a publicly accepted moral judgment. Therefore, to decide whether or not Well
Fargo’s actions produced and maximized the greatest possible utility, one must reflect on the
course of actions that were available to Wells Fargo - taking into consideration its ultimate goal
overall was to increase profits. Furthermore, it’s critical to keep in mind the implications and
outcomes of all possible actions, such as how the action might affect stakeholders.
In this particular case, Wells Fargo had no logical defense nor excuse to justify why they
created millions of phony bank accounts without customers’ knowledge nor consent. It’s
imperative to note that the bank does not face any financial hardships or dilemmas that could
have prompted its employees to commit fraudulent activity. In fact, as of 2015, Wells Fargo has
the highest net income of $22.9 Billion (Wells Fargo 2015 Annual Report) and market valuation
of more than $250 billion (5,300 Wells Fargo Employees Fired) among all U.S. banks. If Wells
Fargo is the most profitable bank among all banks in the U.S., then it certainly did not pose any
need to resort to desperate, unethical behavior.
Therefore, Wells Fargo had three main, realistic options. Option 1) Since the bank has no
justified need to increase their profitability (based on their current earnings), as a result, it
shouldn’t have to employ any devious schemes and practices to increase profit. In other words:
Wells Fargo had the option to not manipulate the outcome of their generated profit. When it
comes to this option, there is minimal ethical risk involved, since Wells Fargo is not going out of
its way to implement a strategy that may or may not increase its profit. The bank’s profitability
would be based and decided upon the free market itself, and how well it performs naturally. The
only issue with this option is that Wells Fargo could not be certain how profitable it may be, nor
assure it would retain its competitiveness among the other big banks.
Yet, perhaps, the bank simply wanted to continue its upward and constant trend of
increasing its profit and market share in the banking industry. There is perhaps a lot of pressure
for the bank to carry forward another positive outlook for its upcoming year, and present another
stunning annual report that would draw in more investors and customers. Wells Fargo had the
further choice to either: Option 2) increase its profit through an ethical means, or take the
alternative course of Option 3) utilizing devious methods to influence its profitability.
Either Options 2 and 3’s way of achieving profitability would be directly affected by the
triangular relationship structure of Wells Fargo employees, Wells Fargo management, and their
customers. If Wells Fargo chose Option 2 to increase its profit through an ethical means, it would
not have ran into the problems it faced now. Through this particular option, the corporate
management could develop an ethical winning strategy, implement it effectively among
employees, while maintaining an active and open relationship with customers. This option would
most certainly increase its profit, thus satisfying shareholders, and furthermore would benefit
stakeholders. Yet Wells Fargo ignored this option, and opted to cut corners by utilizing Option
3-- most likely because it was more cost-effective in comparison to Option 2. However, it is
evident now that Wells Fargo’s choice to cut corners by utilizing fraudulent and devious
strategies in order to boost profits has backfired.
The scope of the scandal derives from the sales culture itself that employees experienced.
Wells Fargo aggressively pushed its employees to meet unrealistic sale goals and quotas, through
its "Gr-eight initiative." This initiative, created by former CEO Dick Kovacevich, expected
employees to increase the average of selling six financial products per customers to eight
(Workers tell Wells Fargo Horror Stories). Former Wells Fargo employees described the sales
culture as very cutthroat and much like a boiler room, due to the pressure they endured from
management to commit unethical behavior. Even though the official “Gr-eight initiative” called
for eight banking products, sometimes employees were held and expected to sell twenty products
on a daily basis. Therefore, former employees describe it as impossible to meet the unrealistic
sales quota without breaking rules and committing some kind of deceptive activity. Despite how
inclined employees were to fail, management "reprimanded and told [employees] to do whatever
it takes to meet individual sales quotas," (Workers tell Wells Fargo Horror Stories). Therefore,
employees were faced with the ethical dilemma of either carrying out upper management's
demands for unethical activity, or deciding not to participate in fraud activity from higher
authority. If they refused to participate in the shady criminal behavior that was expected of them,
it was most likely that they would be fired and not recommended for another job. Based on their
idea of a cost-benefit analysis, Wells Fargo employees reasoned that if they committed the
fraudulent activities that was expected of them, they keep could keep their jobs. In fact, former
employees reasoned their immoral behavior as “not done by employees trying to hit their sales
numbers, it was more [to lay off] threats from upper management," (“Workers tell Wells Fargo
Horror Stories”). Furthermore, they probably reasoned that customers were unlikely to notice all
the different and small bank fees that accumulated; thus it produced the minimum harm and
made the most sense for them to adhere by the sales culture and what management wanted-- even
if it is unethical.

As for the company as a whole, there is a lot of pressure to showcase to the public (of
Wall Street and potential customers) another year of increased high profits, especially as the
most profitable bank in all of the U.S. It is most likely, as reiterated, that Wells Fargo kept the
toxic sales culture and committed the fraud practice that went on for five years because it was the
most cost-effective method in producing the greatest amount of profit. In fact, Wells Fargo’s
unethical methods helped, as “Wells Fargo stock doubled from 2011 to mid-August 2015, the
period described in the fraud complaint” (Wells Fargo's Phony-account Scandal). On a more
expansive overlook, “Over the past 13 years, the bank increased the average number of products
per customer from four to more than six. At a bank with 70 million customers, that translates into
tens of billions of dollars” (“The Real Scandal at Wells Fargo”).
As for its brand, Wells Fargo has tried to maintain a reputation free of the typical,
notorious big Wall Street bank image. For starters, its headquarters is in San Francisco, rather
than the typical Wall Street location. Wells Fargo has built its image based on trust and
reliability among customers, and focuses its business mainly through retail and small businesses.
In fact, CEO (now former) John Stumpf proudly and ironically once said, “I don’t want anyone
ever offering a product to someone when they don’t know what the benefit is, or the customer
doesn’t understand it, or doesn’t want it, or doesn’t need it” (Pervasive Sham Deals at Wells
Fargo). The reputable and respected CEO helped to maintain Wells Fargo’s untarnished image
as the trustworthy bank for America, while helping it emerge out of The 2008 Financial Crisis
stronger and bigger than before (Wells Fargo CEO John Stumpf). Thus, Wells Fargo wants to
present itself as a trustworthy bank for customers, and maintain its brand as a profitable,
lucrative, viable bank for Wall Street among its competitors (the other big four banks of America
that are considered “too big to fail”). Ultimately, there is a lot at stake-- all of which Wells Fargo
was willing to risk, and lost from an utilitarian perspective as they were busted in early
September 2016.
From this Wells Fargo fraud scandal, the costs ended up outweighing all the benefits
gained from the unethical practice, as demonstrated by the impact of the scandal and how it has
severely damaged the bank’s business and all stakeholders involved. Just based on the business
aspect, Wells Fargo severely dropped in accounts held and sales in general following the scandal,
and “could lose as much as $212 billion in deposits and $8 billion in revenue over the next year
and a half... the full financial impact of the scandal is yet to be felt. . .the fallout from the scandal
will impact the bank’s bottom line for years to come” (Scandal Could Cost Bank $8 Billion). Not
to mention, Wells Fargo’s employees from all levels of the authority pyramid are impacted.
Their reputations are tarnished, as a result of being associated with a big Wall Street bank that
committed fraud and corruption on such a wide scale. In particular, the former CEO, John
Stumpf, has completely tarnished his 30-year career as a respected and top banker in the banking
industry. Not only did Wells Fargo ruined its current and future earnings, but the bank also
severely damaged its reputation that had remained mostly untarnished for decades. Not only has
Wells Fargo had to deal with the publicity as well as the costs that comes along with controlling
its public image through the scandal breakout, but the bank has also been served with
punishment. The CFPB (Consumer Financial Protection Bureau), has fined Wells Fargo a sum of
$185 million- an unprecedented amount set by the regulatory agency (5,300 Wells Fargo
Employees Fired). However, more concerning is how Wells Fargo has lost its distinctiveness, as
a bank free of the typical “too-big-to-fail, corrupted, Wall Street bank” ideal. Wells Fargo has
lost its trustworthy portrayal that it has tried so hard to maintain for decades based on its decision
to cut corners, and use fraud as a means to increase enormous profits. Customers, the biggest
component of Wells Fargo’s business, are perhaps one of the most affected and impacted
stakeholders from this scandal. Although only a small percent of customers are affected, existing
and future customers are deterred from doing business with Wells Fargo because of its tarnished
reputation. What is interesting to emphasize (as well as ironic) is how it is bolded in the 2015
Annual Report that “Relationships are at the core of our culture” and “We never take for granted
the trust our customers have placed in us”. Yet clearly, Wells Fargo did not consider the value of
customers and how the scandal would cost the trust and relations aspect with customers. Now,
not only do customers have a distaste for Wells Fargo, but Wells Fargo has -- without realizing
it-- created an astronomic ripple effect on an international scale.
On an external perspective, Wells Fargo has produced an overwhelming amount of harm
on an international scale. This scandal has not only tarnished Wells Fargo alone, but has only
reinforced the stereotypical bad and corrupt bank image for the bank industry (the corrupt image
was heavily emphasized during the 2008 Financial Crisis). Furthermore, bank regulators, such as
The Office of the Comptroller of the Currency (the principal banking regulating agency), may
impose harsher sanctions and more strict scrutiny in the industry based on the severity of how
widespread the Wells Fargo fraud scandal was (How Bank Regulators May Harden Sanctions).
Therefore, Wells Fargo has severely damaged all its direct relationships- with existing
customers, potential customers, small and large businesses that depended heavily on the bank,
stockholders, potential investors, bank regulators, its ties with other big and small banks, as well
as the government. Given all the money poured into regulation and compliance checking in the
banking industry, it is astonishing and abhorrent that such a widespread, illegal fraud could
happen. Therefore, the fact that Wells Fargo's fraudulent practice went unchecked for so long
reflects gravely and poorly on the government's main job-- which is to protect the interest of the
people. As a result, this only fortifies a great number of Americans' distrust for the banking
industry as well as the government. As House Financial Services Committee member Mick
Mulvaney puts it, "The damage you have done to the market and your industry far exceeds the
damage you have done to your business," (Lawmakers to Wells Fargo CEO: ‘Why shouldn’t you
be in jail?). Not to mention, Wells Fargo is one of the most valuable companies in the world -- in
fact, it is 10th on the Fortune 500 List (10 Most Valuable Companies in the Fortune 500).
Therefore, it has significant influence in the stock market as well as playing a vital role in the
American economy, and spanning into the international economy.
The new Wells Fargo CEO Tim Sloan has admitted, "We simply failed to fulfill our
responsibility to all our stakeholders” (Workers Say Wells Fargo Unfairly Scarred Their
Careers), and the company has said it would take action. However, it is too late; the harm that
has impacted Wells Fargo’s stakeholders is practically irreversible and impossible to recover
from. In essence, the benefits that results from Wells Fargo’s decision to conduct unethical
behavior and fraud activity amounts to nothing, and is completely insignificant to all the harm it
has produced for society. If anything, Wells Fargo --from an utilitarian perspective-- has chosen
the course of action that minimizes utility, and resulted in net negative utility. Therefore, it is
clear that from an utilitarian approach, Wells Fargo’s decision to deceive customers, by creating
millions of unauthorized bank accounts to increase profit, was undeniably unethical.
III. Rights
The second normative theory of Rights upholds the ideal that as human beings, we are all
entitled to basic and universally upheld moral rights-- regardless of the legal systems that
oversees us. German philosopher Immanuel Kant has defined why humans are entitled to basic
moral rights through his Categorical Imperative, in which the moral principle “requires that
everyone should be treated as free person equal to everyone else” (Velasquez 98). In essence,
rights are an imperative mechanism that empowers us and protects our ability to choose and
pursue as we desire in life. Thus, an course of action is considered unethical if it unreasonably
violates our rights in which enables us to be free and equal human beings. In the case of the
Wells Fargo scandal, it is critical to recognize the two main groups of stakeholders whose rights
should’ve been protected by Wells Fargo-- but instead, their rights were violated by the
company. The two groups are Wells Fargo’s customers and employees.
The second version of Kant’s Categorical Imperative underscores the idea that people
should never be used “as a means to your ends” and one should instead “always treat them as
them as they freely and rationally consent to be treated and help them pursue their freely and
rationally chosen ends” (Velasquez 102). This moral principle is crucial in understanding how
Wells Fargo’s customers’ rights were violated. But it’s also insightful to understand what Wells
Fargo employees did in which violated customers’ rights. Wells Fargo employees utilized
deceitful methods such as pinning (in which they created fake pin numbers and emails to register
customers for banking products and services), sandbagging (bankers would deny a customer the
right to open a bank account, delaying the request to next quarter in order to boost next reporting
period’s sale quotas), and they would charge customers to fees they weren’t aware of nor gave
consent to-- in fact, “roughly 14,000 of those accounts incurred over $400,000 in fees, including
annual fees, interest charges and overdraft-protection fees” (5,300 Wells Fargo Employees
Fired).
These fraudulent practices violates customers’ rights on several different levels. To
begin, Wells Fargo has imposed banking guidelines, which includes: “employees must obtain a
customer's "express consent and agreement" -- those words were underlined and in bold -- for
each and every line of credit opened”, and the bank “also warned that splitting a customer
deposit into multiple accounts to boost incentive metrics is a "sales integrity violation" (Fake
Accounts Began Years Ago). Just on the grounds of abiding by bank decrees alone, Wells Fargo
has violated their customers’ right to consumer protection. One of the most several aspects in
which the bank breached consumer protection is charging ghost bank fees without its customers’
knowledge nor consent. This deceitful and shady practice, in a way, is identify theft. Wells Fargo
has infringed upon their customers’ right to privacy, in order to use the information for financial
and personal gain. Customers are then no longer treated as free and rational beings, since they
have no desire to be cheated and disregarded of their free choice. By committing identity theft,
philosopher Kant would declare Wells Fargo’s actions as unethical, since the bank has used their
customers as a means to an end (for boosting its profit). Thus, Consumer protection is an
absolutely essential aspect to consider in the Wells Fargo scandal, as banking is a service that is
provided for consumers. In other words, most Americans give banks the task of managing their
finances, as banking and finance are very complex and technical businesses that are better off left
to the professionals to handle. Essentially, consumer protection is important since consumers are
usually not rational utility maximizers when it comes to banking.
Equally important to distinguish is that Wells Fargo employees are bound to the contract
view theory (of business firm’s duties to its customers) as both parties have freely entered a
contract. Yet through Wells Fargo’s fraud activities, the bank has violated one of the moral
constraints that it is bound to by the contract view theory, which is that “neither party to a
contract must intentionally misrepresent the facts of the contractual situation to the other party”
(Velasquez 308). By not disclosing the fact that their customers were being charged with fees
(without knowledge nor consent) -- which could’ve potentially affected their customers’ choice
to do business with Wells Fargo -- the contract agreement is no longer voluntary on the buyer
side of the two parties. As one former employee admits, “managers told him to open
unauthorized accounts and, when customers called, to apologize and say it was a mistake”
(Workers tell Wells Fargo Horror Stories). Employees were instructed to directly lie and
misinform customers in face of their faces. Wells Fargo customers lost the moral right of free
will; their agreement weren’t voluntary as customers weren’t aware of the alternatives that were
available for them. Customers have a right to truth, as the truth changes how we perceive our
choices and the actions we take proceeding what we know. Also, because a contract between the
buyer (the customers) and seller (Wells Fargo) is voluntary, there should be a free exchange of
information. But in this scandal, Wells Fargo customers only found out about the fraud activity
after Wells Fargo was busted, and therefore they were basically bargaining for this information.
In other words, Wells Fargo violated the contract view principle-- and thus its actions was
unethical. By misrepresenting and not disclosing its underhanded practices to customers, Wells
Fargo violated customers’ ability as free individuals whom may act differently otherwise (based
on free choice, had they known what was going on behind the business). One can further argue
that because the buyers (Wells Fargo customers) face a great degree of vulnerability due to the
lack of expertise they hold in comparison to the seller (Wells Fargo Bank), then under the Due
Care Theory -- Wells Fargo technically has a positive duty to “take special care to ensure that
consumers’ interests are not harmed by the products that they offer them” (Velasquez 314).
Of course, it is absolutely necessary to consider the employees as well, and how Wells
Fargo violated their rights. Employees who were forced or coerced into committing the fraud
practice under upper management's demands were also severely affected. Due to the intensive,
“boiler-room” like sales and corporate culture, and in the face of pressure, employees resorted to
committing the fraud practices (as a self-protection technique in keeping their job). Employees
who normally wouldn’t have disregarded their morals succumbed to fraud because Wells Fargo
did not provide a healthy and nontoxic environment in which they could flourish and work
efficiently as free and rational individuals. Employees faced degrading and humiliating
repercussions as a result of failing to meet high, cutthroat expectations: They endured
non-constructive, threatening “coaching sessions”, and resorted to vomiting in order to deal with
the negative corporate culture at Wells Fargo (Wells Fargo’s Work Culture). Wells Fargo
breached employees’ right to freedom, in the sense that they were forced against their free will
and moral standards to succumb to management's threatening demands in the face of pressure.
Furthermore, employees “were fired or pushed to resign after resisting the pressure to
push products on customers that they didn't want and for reporting unethical practices in their
branches to managers or the company's ethics line" (“Workers Say Wells Fargo Unfairly
Scarred Their Careers”). Wells Fargo recorded what would be considered red flags on the fired
employees’ U5 records (considered the report card of the banking industry), and thus had a direct
impact on their career opportunities in the banking industry after working at Wells fargo.
Therefore, not only were they fired, but they were also blacklisted, and prevented from another
banking career. This is due to the fact that their reputations are tarnished by Wells Fargo. This is
especially problematic for those early in their finance careers, since the banking industry
generally has a very clear, zero tolerance for potential employees who breach ethical standards.
Again, this is a clear violation of the employee's’ moral rights, as Wells Fargo has neglected their
freedom and didn’t contribute to help them pursue as they choose. Instead, Wells Fargo
blacklisted the employees who resisted unethical behavior, and for this reason- has essentially
manipulated and exploited the employees as if they were objects to be used.
On a further and serious matter, it’s imperative to discuss how Wells Fargo has infringed
upon employee's’ right to freedom of conscience. Velasquez’s text states, “The right to freedom
of conscience protects this interest [individuals being able to adhere to their religious or moral
convictions] by requiring that individuals not be forced to cooperate in activities that they
conscientiously believe are wrong” (Velasquez 428). In other words, if Wells Fargo punishes its
employees for not adhering to what the employees consider as the company carrying out
unethical practice, then Wells Fargo has breached their right to freedom of conscience. Many of
the employees were forced to cooperate, or punished for not cooperating with management's
aggressive demands for fraud activity-- despite that the shady fraud activity went against the
employee's’ personal moral beliefs. On an extended note, Wells Fargo punished former
employees who chose to internally whistleblow, after reporting to the company’s ethics hotline.
In this circumstance, Wells Fargo shouldn’t have punished those who bravely chose to
whistleblow, because whistleblowing was technically a moral obligation that all Wells Fargo
employees were compelled to. Wells Fargo employees are held morally responsible in this
scandal, as they meet the requirements of causality and knowledge of the fraudulent “Gr-eight
initiative” to increase profits. In Velasquez’s text, it notes that whistleblowing is a moral
obligation if “the wrong involves an extremely serious harm to society’s welfare, or extremely
serious injustice, or extremely serious violation of rights” (Velasquez 427). As discussed earlier
in the utilitarian analysis of the case, Wells Fargo’s scandal severely affected and damaged all
stakeholders’ welfare, and even has a ripple effect that encompasses the international economy.
From a Rights approach, we can come to understand the degree of severity in which
Wells Fargo violated the rights of both customers and employees. The bank exploited both
groups of stakeholders, manipulating and obstructing their rights in a way of using them as a
means to unfairly and shamefully gain excessive profit -- which therefore, is unethical.
IV. Justice
Justice, the third normative theory, concerns how fair an action is, based on the benefits
and burdens distributed in the situation. There are three kinds of justice: distributive justice,
retributive justice and compensatory justice. All three kinds of justice can be applied to the Wells
Fargo scandal, in determining how ethical and fair the bank’s actions were in response to the
scandal. Before discussing who is accountable and responsible for carrying the burdens or who
deserves the benefits of the outcome, it is important to establish the value and worth of each key
group of stakeholders. Wells Fargo, in an ideal circumstance, would value their customers and
employees as much as they value their stockholders.

However, this is not case, in terms of distributive justice. Wells Fargo’s main objective
was to create more sales and profit through its aggressive, schemeful “Gr-eight initiative”. Was it
fair for Wells Fargo to force their burden of the fraud strategies of the “Gr-eight initiative” -- by
deceiving customers and forcing them into paying fines they were not informed about -- in order
to look lucrative for current stockholders and potential investors? Evidently, only Wells Fargo
gained and reaped the benefits of retaining its profit, while customers and employees suffered in
order to help Wells Fargo to remain lucrative in the banking industry. As the California lawsuit
regarding the Wells Fargo scandal states, “Wells Fargo has engineered a virtual fee-generating
machine, through which its customers are harmed, its employees take the blame, and Wells
Fargo reaps the profits” (“Workers tell Wells Fargo Horror Stories”). The customers, who Wells
Fargo should’ve been serving, were instead paying fees they did not give consent to so Wells
Fargo could boost sales. In other words, the roles have been reversed without the customers even
realizing it; Wells Fargo customers didn’t even know they were serving the bank and looking
after the company’s self-interest.
After the Wells Fargo scandal, it is necessary to dictate from the retributive justice
principle whether or not the big bank received a justified punishment for its wrongdoing.
Although it has admitted to the public its wrongdoing and already fired the 5,300 employees for
“sales-integrity violations” (Wells Fargo Offers Breakdown), it still doesn’t eliminate and acquit
them of all the damage that has been done due to to the scandal fallout. As emphasized in the
Utilitarian part of the ethical analysis, Wells Fargo did not just damage their potential future
earnings as well as severely tarnish their brand image, but also brought down the banking
industry (for reinforcing the “corrupt, too-big-to-fail Wall Street bank” stereotype and
influencing stricter regulations and sanctions) as well as other businesses (that were associated to
Wells Fargo). The catastrophic amount of money that was lost (as well as in the future) as a
result of the bank scandal is astronomical compared to the fine the Consumer Financial
Protection Bureau has charged the company, which amounts to a mere $185 million. Although
$185 million is an unprecedented amount for CFPB to penalize a company, one must question
whether or not it is a fair quantitative value that reflects the scale of damage Wells Fargo
produced. Many have criticized how the punishment, of paying such a small fine, doesn’t
accurately reflect a fair punishment for Wells Fargo. David Vladeck, a Georgetown University
law professor, speculates, "It sounds like a big number, but for a bank the size of Wells Fargo, it
isn't really” (5,300 Wells Fargo Employees Fired). Vladeck alludes the idea that such a
miniscule fine for a bank that is considered too-big-to-fail is dangerous. Therefore, Wells
Fargo’s punishment reflects poorly on the brand image. Because its punishment of a small fine is
nothing in comparison to the billions of dollars of revenue the bank generates annually, thus
there is no incentive for big banks/other big companies to follow by the rules. It also doesn’t
incentivize banks or other enormous companies that are considered too-big-to-fail to be held
accountable for their actions.
Although Wells Fargo has said admitted its wrongdoing, the company has not seemed to
hold itself fully accountable and take 100% of the blame. A primary example is that lawmakers
have found that Wells Fargo has intently inserted small arbitration clauses in contracts when
customers agree to doing business with the bank. These arbitration clauses, has given Wells
Fargo an unfair upper-hand in the outbreak of the scandal, as it prevents customers from suing
the bank for the unauthorized bank accounts created under their names and other personal
information. Senator Elizabeth Warren, who is on the Senate Banking Committee, pointed out
how “these forced arbitration clauses make it easier for Wells to get away with scamming their
customers” during the Wells Fargo hearing (Why Wells Fargo customers can’t sue). Therefore,
the retributive justice principle has only reinforced how there is no fairness in the way Wells
Fargo has taken the blame and punishment for all its wrongdoing.
Perhaps the most crucial aspect of justice in the Wells Fargo scandal is concerning
compensatory justice, which necessitates “restoring to a person what the person lost when he or
she was wronged by someone” (Velasquez 107). If Wells Fargo can control one crucial aspect in
recovering the public brand image, it is the way the bank redeems itself through compensatory
justice. Wells Fargo therefore must restore to customers and employees what they lost as victims
of Wells Fargo’s dirty and unethical fraud practice. Although Wells Fargo can refund customers
the unauthorized fees they were charged with without knowledge or gave consent to, the bank
still has permanently damaged customer relations and reliability that customers expect of from a
business. Not to mention, customers’ credit scores were also ruined in the process of the fraud
activity. Wells Fargo, unfortunately, cannot restore for customers the reliance that the company
is a completely trustworthy bank.
Although only about 1% of the company’s workforce was fired for violating sales
integrity, those former employees are perhaps the most deserving of receiving compensation
from the company. Most of the 5,300 employees that were fired were done so without a proper
explanation or send off by the company. Those who chose to resist or internally whistle-blew the
secret fraud practice were fired, and some were even blackmailed and prevented from getting
hired for other banking employment opportunities. Even if those employees made the right
decision to report and go against the company’s unethical practices, Wells Fargo still unfairly
placed red flags on their employment records. As the banking industry has very strict
expectations and basically a zero-tolerance policy for mistakes, having red flags on the former
Wells Fargo employees’ U5 records (considered the report card of the banking industry)
tarnished employee's’ reputation and ability to pursue career opportunities. Not to mention,
having red flags on the U5 record is practically impossible to remove-- no matter how
unreasonable the red flags are. Despite all the money or other tangible alternatives that Wells
Fargo could try to “pay off” employees for its wrongdoing, it will never be enough to clear the
former employees’ ruined reputations. In fact, if anything, Wells Fargo at the very least should
clear the former employees’ U5 records of all the unreasonably placed red flags. The former
employees, despite standing up against the unethical behavior that was prevalent throughout the
company, find themselves labelled as the scapegoats in this scandal and have tarnished U5
records that could potentially end their careers. As much as House Banking Committee member
Al Green has challenged former CEO John Stumpf, “these people [the former employees]
deserve a fair day, not just an exit from your company” (Lawmakers to Wells Fargo CEO: ‘Why
shouldn’t you be in jail?’)-- it is highly doubtful Wells Fargo can ever restore all the tribulations
that employees have suffered as double-time losers in the aftermath of the Wells Fargo scandal.
In terms of compensatory justice, Wells Fargo has failed perhaps two of the most important
stakeholder groups of the scandal.
V. Ethics of Care

The fourth kind of normative theory, Ethics of Care, emphasizes the value of close
relationships and how it pertains to ethics. The idea is that as human beings, we all exist in a
web of relationships in which we have an obligation to protect and nurture those we care about,
by valuing and attending to their “needs, values, desires, and concrete well-beings” (Velasquez
121). This moral concept holds especially true and firm when it comes to those who are
dependent upon us. Some may argue that because Wells Fargo is a 500 Fortune corporation, it
may seem that the theory of Ethic of Care does not pertain to the company. However, if
anything, building and maintaining a profound relationship with customers is an indispensable
element that ensures the business is successful. As Wells Fargo is a service company, it should
cater to their clients’ financial needs and desires by extending values such as concern,
compassion, loyalty, and integrity to the clients. Wells Fargo itself theoretically acknowledges
the value of developing relationships with customers, as former CEO John Stumpf proudly noted
in company’s 2015 Annual Report: ‘‘Earning lifelong relationships, one customer at a time, is
fundamental to achieving our vision” (Wells Fargo 2015 Annual Report). Of course, it’s
reinforced and very transparent that in light of the Wells Fargo scandal, the company failed to
fulfill its vision, obligation, and commitment towards its customers. Furthermore, Wells Fargo
damaged its own web of relationships, thus cutting off the web that once extended and bonded
them to existing customers who trusted the bank, as well as potential customers and investors.
The same idea is applicable to its employees, the group in which the 2015 Annual Report
confidently regards, “We have always believed that our team members are our most valuable
resource, and we want them to be with us for the long term” (Wells Fargo 2015 Annual Report).
Of course, the scandal has exposed countless ways in which employees were exploited of their
rights and well-being, and ultimately provides all the reasons for employees not to be with the
company “for the long term”. The corporate culture is described as corrupt and malignant, which
drove employees to turn a blind eye away from integrity and morals, and instead committed
fraud in order to meet management's aggressive and unrealistic sales expectations. In fact, former
Wells Fargo employees have even gone to the brink of crying due to the “boiler-room” like
environment they were exposed to. Wells Fargo, in a Cares perspective, failed to provide a
corporate culture environment that fosters basic needs and values of compassion, kindness, love
for employees. It is evident that Wells Fargo’s web of relationships is completely broken, as
former CEO John Stumpf has denied former employees’ description of a hostile and toxic
corporate culture in the firm. There is a tremendous disconnect between what he is claiming at
the Wells Fargo congressional hearings versus what former employees have disclosed. Not only
has the Wells Fargo management distanced itself from the customers, but also those that are at
the core of its business: its “valued” employees.
If there is one essential approach in redeveloping and reforming its severely broken web
of relationships, Wells Fargo must look internally to restructure its model of the organization. As
the Velasquez text suggests, one of such organizations that Wells Fargo could benefit from in the
future, as it embodies its vision of creating relationships with customers and employees-- is the
caring model of the organization. This particular model of the organization calls for several
fundamental aspects, including: Focusing on the individuals, and not profits; “caring is
undertaken as an end in itself not as a means to productivity”, caring should be personal among
individuals, and caring should help nurture individuals’ self-growth (Velasquez 447). Not to
mention, the caring model “can also inspire and motivate employees to excel in a way that
contractual and power relations do not” (Velasquez 447). If Wells Fargo were to utilize such
model, it could incentivize employees to serve customers in an ethical manner and value them in
such a way that would give Wells Fargo a competitive edge over other banks. If Wells Fargo
wants to maximize its ability to recover from all the damage that the scandal has created, then
instituting the caring model of the organization is a step towards the right direction.
VI. Conclusion
The four normative theories of Utilitarianism, Rights, Justice, and Ethics of Care
demonstrates and reinforces how Wells Fargo severely damaged its business as a result of
committing unethical behavior and practices. Ultimately, the Wells Fargo scandal serves to
remind as a valuable lesson why business ethics is absolutely essential for all companies to
consider; it is a business mechanism in maintaining a profitable business and ensuring its
long-term success.
Works Cited
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Where Employees Opened Unauthorized Accounts to Meet Unrealistic Sales Goals --
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2016. Web. 29 Nov. 2016.
ARNOLD, Chris. "Former Wells Fargo Employees Describe Toxic Sales Culture, Even At HQ."
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Oct. 2016. Web. 29 Nov. 2016.
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2016. Web. 29 Nov. 2016.
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2016. Web. 29 Nov. 2016.
Dayen, David. "The Real Scandal at Wells Fargo: Execs Got Rich by 'Sandbagging' Clients."
The Fiscal Times. N.p., 13 Sept. 2016. Web. 29 Nov. 2016.
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Cable News Network, 9 Sept. 2016. Web. 29 Nov. 2016.
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My​ ​Ethical​ ​Analysis​ ​on​ ​Wells​ ​Fargo’s​ ​2016​ ​Scandal

By:​ ​Georgia​ ​Lam

Wells​ ​Fargo’s​ ​felonious​ ​actions.

need​ ​to​ ​resort​ ​to​ ​desperate,​ ​unethical​ ​behavior.

strategies​ ​in​ ​order​ ​to​ ​boost​ ​profits​ ​has​ ​backfired.

if​ ​it​ ​is​ ​unethical​.

American​ ​economy,​ ​and​ ​spanning​ ​into​ ​the​ ​international​ ​economy.

employees​ ​as​ ​much​ ​as​ ​they​ ​value​ ​their​ ​stockholders.

after​ ​the​ ​company’s​ ​self-interest.

accountable​ ​for​ ​their​ ​actions.

is​ ​a​ ​completely​ ​trustworthy​ ​bank.

stakeholder​ ​groups​ ​of​ ​the​ ​scandal.

V.​ ​Ethics​ ​of​ ​Care

the​ ​core​ ​of​ ​its​ ​business:​ ​its​ ​“valued”​ ​employees.

2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

NPR​.​ ​NPR,​ ​4​ ​Oct.​ ​2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

Oct.​ ​2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

Sept.​ ​2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

N.p.,​ ​03​ ​Feb.​ ​2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

Sept.​ ​2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

Chronicle​.​ ​N.p.,​ ​6​ ​Nov.​ ​2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

N.p.,​ ​08​ ​Oct.​ ​2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

Fortune​.​ ​N.p.,​ ​22​ ​Nov.​ ​2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

23​ ​Oct.​ ​2016.​ ​Web.​ ​29​ ​Nov.​ ​2016.

You might also like

My Ethical Analysis on Wells Fargo’s 2016 Scandal

By: Georgia Lam

Wells Fargo’s felonious actions.

need to resort to desperate, unethical behavior.

strategies in order to boost profits has backfired.

if it is unethical.

American economy, and spanning into the international economy.

employees as much as they value their stockholders.

after the company’s self-interest.

accountable for their actions.

is a completely trustworthy bank.

stakeholder groups of the scandal.

V. Ethics of Care

the core of its business: its “valued” employees.

2016. Web. 29 Nov. 2016.

NPR. NPR, 4 Oct. 2016. Web. 29 Nov. 2016.

Oct. 2016. Web. 29 Nov. 2016.

2016. Web. 29 Nov. 2016.

2016. Web. 29 Nov. 2016.

Sept. 2016. Web. 29 Nov. 2016.

N.p., 03 Feb. 2016. Web. 29 Nov. 2016.

Sept. 2016. Web. 29 Nov. 2016.

Chronicle. N.p., 6 Nov. 2016. Web. 29 Nov. 2016.

N.p., 08 Oct. 2016. Web. 29 Nov. 2016.

Fortune. N.p., 22 Nov. 2016. Web. 29 Nov. 2016.

23 Oct. 2016. Web. 29 Nov. 2016.