Question

companies face a myriad of stakeholders that often have conflicting interests. Briefly describe a company or an incident that demonstrates how stakeholders conflicting interests can lead to unethical behavior.

Answer 1

Unethical acts at Wells Fargo Bank leadership leading to fraud:

In terms of business effects. Wells Fargo Bank suffered leadership trouble, leading to unethical acts, due to the lack of accountability of the higher management in the system that resulted into overlooking of the fraudulent activities that was being taking place in the Organization. The leadership activity at Wells Fargo Bank did not shape the Organization in a positive way and the ethics were highly compromised. The employees were not motivated to perform in a direction that regards for the Business ethics as well while achieving the Organizational goals. The concept of Ethical values were failed to be inculcated by the leaders effectively, owing to the lack of accountability that would make the leaders accountable for the unethical activities of their employees and as a result, in the bargain of availing the sales quotas or other compensations and to delight the leaders, the employees started forging the bank records, customer signatures, opening of unauthorized savings accounts, levying fees which were inappropriate to the bank customers and transferring of customer’s funds without their knowledge. The leadership clearly lacked the ambition to grow which is one of the intrinsic features of an ideal leadership. In spite of regular warnings that were available within the internal working of the Organization, the leaders failed to undertake any actions and paid no heed to the dire consequences that they would have had to face in future due to lack of accountability towards the scenario. The leaders lacked energy to exercise a genuine control over the working of the Bank. This clearly proved that the desire to lead itself lacked in the Management’s leadership skill. Honesty and Integrity are the next two characteristics to build up a good leadership foundation in the Organization. This in fact molds the accountability in an individual. To this criteria as well, Well Fargo Bank were unsuccessful to prove their stance. They lacked both integrity as well as the sound risk management practice in place. The decentralized system of management made it more inevitable for the fraudulent activities to occur as the management was not aware of such ill-practices due to the dilution in authority, responsibility and the leader’s reluctance to assume the accountability . Further, due to more autonomy given to the lower managements along with dilution of accountability which otherwise should not have happened, the senior leaders in the Organization failed to even acknowledge the fact that the resistance to change the sales model in the system was itself the cause for all the unethical activities taking place in the bank. The intelligence of the senior leaders therefore lacked which was again an essential for a good leadership. The leaders also did not self-monitor themselves thereby setting wrong examples to the subordinates which contributed in building an overall atmosphere of dishonesty and frauds. The leaders also did not critically analyze the issues which led to Government enforcements of law and bad public reputation owing to the exposure of fraud in the banking process. It further revoked the faith of the Public into the system. The bank did not regard the customer service in high regards and therefore in the process of earning money in shortcut ways, the employees ended up tarnishing the entire Corporate image of Wells Fargo Banks.

In the community, the Shareholders and other investors have strongly protested the Bank’s unethical acts such as creation of fake accounts, exceptionally unfair fees of the mortgages or unnecessarily charging car insurance fees from the customers even though the customers weren’t supposed to be charged with. In terms of business, the CEO has to step down while the Federal regulators punished the bank for creation of fake accounts by the Bank. The overall community lender’s rating of the Bank is down-rated by the of regulator of the Federal banking. Hence the legal consequences are already in place.

To curb with all this, the Code of Ethics should have been definite in this Organization. Further, their commitment towards the Corporate Governance for ensuring legalities obligation in the business and Corporate Social Responsibility to ensure better services to the society, should have been in place, in general.