Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.
Introduction
Wells Fargo, a corporation headquartered in San Francisco, California, has agreed to pay the Navajo Nation $6.5 million as restitution for what are said to be its dubious business practices. The business was charged with using aggressive banking methods to prey on the weakest Navajo residents, including the elderly and those who had difficulty understanding English. All the marketing communication has been developed to achieve a particular purpose that the management and business owners have in mind. Various tools for promoting goods and services are used to accomplish the goals. The purpose of messages is to assist a company, group, or corporation in achieving its marketing objectives. Integrated marketing communication strategies and tactics apply to the banking sector. The paper will examine the ethical frameworks around the companys management choice that caused this problem, the legal concerns and laws involved, and other legal themes that govern the companys activity.
Company Overview
In 1852, Wells Fargo was founded in San Francisco, California. It is the most well-known financial institution on the planet. With its company offices in the US, Wells Fargo Consumer is a leading global provider of financial services, residential, making investments, and government and private sector financial services and products. The companys four business divisions are consumer banking, commercial and trade, asset and private equity, and consumer lending and banking. GE Capital comprises four business divisions for people and small businesses; the Consumer Banking and Lending sector offers a wide range of financial goods and services. The company offers a vast selection of financial products and services. Additionally, it provides services for electronic payments, bank and term deposits, and loans for persons, small enterprises, houses, and automobiles.
The division of commercial bankings primary goal is to offer for privately held, family-owned, and publicly traded companies to provide financial services. For various industries and metropolises, the company offers a variety of banking and credit products. It also provides secured loan and lease products and services for managing reserves. In addition, investment management banking provides a variety of banking, finance, and banking industry products and services to clients in the manufacturing, business, regulatory, institutional, and other financial sectors.
The company offers a variety of products and services, including cash management, market making, stocks, fixed-income solutions, securities brokerage, commercial property loans and servicing, and capacity services for research and development. Aside from general wealth management services, Asset and Capital Management offers clients specialist retirement, investment, and wealth management goods and services. It also provides financial management, commercial banking, credit, and fiduciary services, among other things, to high- or ultra-high-net-worth individuals and families.
Legal Issues and Regulatory Environment
The Fair Debt Collection Practices Act, the Truth in Lending Act, and the Equal Credit Opportunity Act are the specific statutes in this case. These rules forbid lenders from using unfair or dishonest methods to recover debts, grant credit, or decide whether to grant credit. Wells Fargo is charged in this lawsuit with using predatory business tactics to target Navajo customers. According to the Navajo Nation, Wells Fargo targeted Navajo residents for high-interest loans and credit products despite knowing or having a reasonable expectation that these consumers could not afford the goods.
Prudential Regulation
There are several ways to audit and operate organizations governed by regulatory authorities. For instance, during questioning before the House Financial Services Committee on September 20, 2016, the head of the office of the comptroller of the currency (OCC) said that the banks sales activities were risky and unsound. Ineffective management risk, a procedure collapse, and an unsuitable incentive system brought them on. Furthermore, the OCC indicated that the organization would take extra enforcement measures against directors, executives, and personnel participating in risky and improper behavior, breaking laws or rules, or failing to uphold their fiduciary duties.
Consumer Compliance
On occasion, technically and operationally, the consumer financial protection bureau (CFPB) manages the clients financial markets. In addition to having regulatory authority over all consumer moneylenders, including Wells Fargo, the CFPB shares management oversight of retail sales activities with the OCC over banks with assets of more than $10 billion. For example, as part of the partnership deal with the Department of Financial Services, Wells Fargo is obligated to reserve $5 million to compensate impacted customers. As a result, they can quickly identify specific types of financial loss, such as customers charges on unauthorized accounts.
However, specific harms could be more challenging to recognize and quantify than others. By using an illegitimate credit card, for instance, a customers creditworthiness might be damaged. This may impact the clients future loan qualification and credit cost. The CFPBs decision does not bar anybody from pursuing Wells or actively participating in class actions. Even so, a solution of this sort can be constrained by clauses requiring settlement that bar clients from filing or taking part in class action lawsuits. And according to the Department of Financial Services (CFPB), the use of engineered cementitious mediation contracts for various essential credit products and services will be restricted by this proposed legislation, published on May 5, 2016. The community still needs access to the regulations final text.
Corporate Governance
The Securities and Exchange Commissions corporate governance rules and securities laws apply to Fargo because it is a publicly listed company (SEC). In addition, the panel of directors and executive management create the business environment, an essential element of sound corporate governance. First, it has been questioned whether Wells Fargos senior management encouraged lower-level employees to participate in illegal activities by prioritizing cross-selling products and meeting predetermined sales targets. Second, businesses are interested in the timing of the companys public disclosure of potential losses because securities laws specify when such revelations must be made. Third, despite Wells Fargos assertion that the agreement cost little, some argue that the harm to the banks reputation far outweighed the penalties it had to pay. Furthermore, some investors have questioned whether the bank should be broken up due to its size and complexity.
The third issue with company law is whether Wells Fargo should compensate the executives that directed the employees or managers who engaged in criminal activity. Two executives have agreed to forgo their salaries. The CEO will forfeit his salary, his bonus for 2016, and $41 million in stock as the company investigates possible accounting fraud. Other executives quit the company, costing the company $19 million in shares and any compensation or performance bonuses that would have been due the following year (Roy, 2018). Finally, concerns regarding returns payments have been expressed in response to the latest budget authority reducing threat incentives and providing for payment refunds in specific misbehavior-related scenarios.
Congressional Oversight
The Wells Fargo report brought up several concerns that Congress needs to address if it wants to increase the efficiency of federal regulators. Several organizations oversee Wells Fargo, including the OCC and the Financial Conduct Authority. Yet, they could not halt extensive fraud over a lengthy period. The court, however, upheld the OCC and CFPBs consent order that fined Wells Fargo and demanded reparations (in conjunction with LACA). In addition, the Wells Fargo account issue includes many watchdogs with overlapping authority, which the Financial Services Oversight Council (FSOC) is meant to enable. This is true of many essential bank incidents.
Ethical Dilemma and Two Ethical Frameworks
Poor decision-making by the senior management of Wells Fargo was the primary cause of the unethical behavior. Employees at Wells Fargo constructed bogus profiles without the consumers consent to meet their sales goals. Due to the demand to meet the sales goals, they were forced to engage in these fraudulent schemes. The Navajo were offered different benefits when they hit the sales objectives and were lulled into thinking they could not deposit checks until they created a savings account with the bank (Antonacopoulou et al., 2019). To give the fake accounts a convincing appearance, the staff may add a small amount of money once they are opened. One of the branch managers, Dennis Hambek, claimed they had many loyal clients and an excellent team, but the sales pressure kept increasing, building, and mounting.
The managers had a teleconference every morning, and each boss was forced to explain how they intended to meet their daily sales objectives. Administrators were obligated to explain why they fell short of their everyday sales goals and how they planned to make things right. This was so stressful that it caused most managers to act unethically and make wrong judgments to hit their daily sales target. Due to this tension, the staff members began to play games with each other and primarily non-English speaking Navajo customers.
The Wells Fargo Code of Ethics defines gaming as manipulating or falsely declaring sales to obtain payment or fulfill sales targets. In addition, to being clueless, the management gave the impression that it didnt care what was occurring within the company. For instance, a client complained to Hambek in 2005 that savings and deposit accounts had been opened for him without his permission. Hambek learned that a fake national identification number had been used to open the account. However, he found that no one seemed to care when he phoned the business ethics line to discuss the issue. When this behavior was uncovered, nearly 2 million fraudulent accounts were already formed, yet the administration did nothing to stop it.
The driving forces in this scenario are employee incentives to create accounts utilizing consumer data. Employees are always aware of the threat of harassment if they dont meet the quotas associated with new presentations that their managers set. In addition, the Fargo took activities that put massive pressure on low-wage workers to meet unsustainable sales objectives. Due to this component, customers were compelled to pay high prices, negatively impacting their credit ratings. There were a few layoffs and a punishment for the company, but no high-ranking official was fired or forced to refund the money they stole via the scam. The answer suggests that corporate accountability has stayed the same.
Legal Topics That Relate to the Companys Business
Contract
Wells Fargo promised to pay a total of $3 billion to settle claims that the bank used dishonest sales practices for over ten years in the US. According to reports, the business made millions of dollars in fees from extras like card payments, banking income statements, and other bonuses that customers neither requested nor required. In addition, several Wells Fargo employees used illegal business practices to surpass inflated sales targets (Roy, 2018). The lawsuit is the firms most recent setback after five years of being suspected of creating millions of false banking information accounts. As a result, the bank inflated its sales statistics while simultaneously extorting extra fees from unwary clients via fictional accounts.
The complaint asserts that Wells Fargos market dominance has cost the broader public dearly. It has been chiefly accomplished due to a zealous and strictly enforced sales quota system. According to the claim, Wells Fargo executives and bankers utilized dishonest sales techniques to boost sales figures. For example, although there are typically six accounts per client, the bank reportedly tried to increase that number to eight (Wang & Guarino, 2021). In addition, as stated in the lawsuit, the bank is accused of using quotas and continual supervision to coerce bankers into committing fraud.
Product Liability
In a recent earnings call, Wells Fargo praised the cross-sell approach used by Public Bank for its effectiveness, which comprises presenting current clients with other investment instruments. The company credited this tactic as a critical factor in its economic success. However, the court determined that even if accounts and products that were neither used nor needed increased the cross-sell total or were not allowed, shareholders were urged to keep their faith in Wells Fargo by the bank. Following the ruling, Wells Fargo created millions of accounts for money obtained between 2002 and 2016, either unlawfully or unlawfully (Sison, 2018). Additionally, the Financial Institution of Wells Fargo customers were advised to spend money inefficiently and needlessly.
The decision found that the sales used to construct these entities tactics were in contravention of the details Wells Fargo provided to investors regarding the banks allegedly needs-based selling procedure. In addition, according to a statement from the founder of the Department of Compliance of the Securities and Exchange Commission (SEC), Wells Fargo frequently deceived investors (Strout et al., 2018). About what it represented as the basis of its Community Bank business strategy and its ability to boost revenue and profitability, among other things, using a dishonest performance statistic. The SECs objective of repaying shareholders injured by Wells Fargo is furthered by this deal, which makes the business responsible for its wrongdoing.
Defamation
When he delivered a summons to the bank as a part of a harassment legal dispute, a bank employee, former Wells Fargo employee Mr. Sinderbrand had every right to anticipate receiving a ton of emails and documents about the incident. However, Mr. Sinderbrands products were far more than what his attorneys had requested on July 8. According to the companys defense advisers, Wells Fargo mistakenly revealed a significant quantity of private information about tens of thousands of its wealthiest customers (United States Congress. House of Representatives. Committee on the Judiciary, 2020). In addition to information on the size of their stock holdings and the charges the bank assessed, the clients names, Personally Identifiable information, and financial information were documented on several spreadsheets in the 1.4 gigabytes of information that the lawyer for Wells Fargo gave. Wells Fargo Advisors, the banks division serving high-net-worth investors, provides services to most individuals and families.
General Recommendations for Business Leaders and Managers
The company needs to exercise caution, pinpoint the underlying causes of the current issue, and decide on the best course of action. For any business to succeed, managements efforts must produce executive responsibility and honesty. I suggested the company start by replacing the uninformed top management because they were aware of the problem but wanted assistance in coming up with a solution. First, they should replace the top management and reorganize the organizations leadership to guarantee effective operation and responsibility in the supply of services. Second, to keep up a good connection with the clients, the company must shut down any phony accounts and make reparations to those who have been wronged. Third, there should be a solid corporate culture that appreciates and prioritizes the demands of the consumers when executing all operations. Finally, the company should look into any pending scams and find a solution to stop further harm to the organizations reputation.
Thirdly, the company should eliminate its sales goals, which significantly contributed to unethical behavior. The two million fake accounts were created due to the employees efforts to reach sales goals to get different incentives. Therefore, eliminating the sales objectives will deter personnel from using unethical practices to achieve the goals and get compensation (Mason, 2021). A new monitoring, ethics, and integrity office should also be set up to oversee organizational ethics and deal with any wrongdoing or fraud. Finally, the organization should also get ready to centralize the control function, which will oversee all of its operations and make it easier to detect any unethical or improper behavior on the part of employees.
Corporate executives and managers should also ensure that successful workers receive public recognition for their achievements and make a big deal out of it if an individual can. Expressing gratitude for your coworkers successes could motivate them to maintain their high-performance levels for extended periods. A study suggests that vocal compliments and acknowledgment of your staffs efforts may be more motivating than monetary compensation. Gain confidence in your team (Erbas, 2019). Bosses who value their employees talents and responsibility build a strong sense of belonging while encouraging employee autonomy. Fostering trust requires creating a welcoming, safe work environment with open, direct, and two-way communication.
However, management and supervisors in any organization should hold all employees to exacting standards for behavior, productivity, and communication. It is crucial to avoid placing blame and condemning subpar performance when these standards are not met since these responses help to accentuate the issues. Instead, set the tone for your organization. Instead of cutting back on expenses, collaborate with your staff to identify solutions to issues. Hold roundtable discussions with your team to identify problems, concentrate on potential solutions, and work to rise to the occasion.
Conclusion
In conclusion, Wells Fargo must be highly diligent in addressing any ethical issues within the organization to stop this fraud from happening again. Because of the employees unethical behavior, the company has suffered significant losses, including multiple fines from regulatory bodies and a $6.5 million payment to the Navajo Nation for alleged predatory business practices. If decisions were made quickly and the executive was eager to take action, this issue would not have arisen in the organization. Because of this, the company should work to restructure its management and eliminate the incentives and sales targets used to motivate employees to reach their targets.
Minorities in several locations, including Miami, Sacramento, Baltimore, Philadelphia, and the Navajo Nation, were singled out for discrimination because they struggled with English. Moreover, Wells Fargos incentive scheme, which allowed minorities to obtain more costly loans with complex stipulations, was immoral. The company must thus assess its rules and procedures to ensure that clients get the services they need without being tricked or forced to do something against their choice
References
Antonacopoulou, E. P., Bento, R. F., & White, L. (2019). Why Didnt the Watchdogs Bark? Internal Auditing and the Wells Fargo Scandal. Academy of Management Proceedings, 2019(1), 12966. Web.
Erbas, D. G. (2019). Identification of Wells Fargo Banks organizational culture and ethics issues. Global Journal of Management and Business Research, 19(12), 912. Web.
Mason, R. (2021). Ethical Leadership and the Code of Ethics in American Corporate Firms: Wells Fargo & Company. Journal of Human Resource &Leadership, 2431. Web.
Roy, R. (2018). The cutting edge of performance? A look at Wells Fargo. Performance Improvement, 57(2), 4344. Web.
Sison, J. G. (2018). Business Ethics. Routledge.
Strout, E. K. H., Landrey, A. R., MacLean, C. D., & Sobel, H. G. (2018). Internal medicine resident experiences with a 5-month ambulatory panel management curriculum. Journal of Graduate Medical Education, 10(5), 559565. Web.
United States Congress (2020). House of Representatives. Committee on the judiciary. Investigation of Competition in Digital Markets: majority staff report and recommendations. Nimble Books.
Wang, W., & Guarino, A. S. (2021). A Case Study in Crisis Management in the Digital Transformation Era: Wells Fargo & Company. European Journal of Business and Management Research, 6(4), 127130. Web.
Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.