Introduction

Professionalism and Ethics must be the center of every business. Every business

aims to be successful that others are even willing to do anything that what it takes in

order for them to stay on top and superior among others. Some people are even blinded

by money and other luxurious things to the point that they are willing to do anything just

to get what they want.

Business ethics is the written and unwritten principles and values that govern

decisions and actions within companies. Business ethics, also called corporate ethics, is a

form of applied ethics or professional ethics that examines the ethical and moral

principles and problems that arise in a business environment. It can also be defined as the

written and unwritten codes of principles and values, determined by an organization’s

culture, that govern decisions and actions within that organization. It applies to all aspects

of business conduct on behalf of both individuals and the entire company. In the most

basic terms, a definition for business ethics boils down to knowing the difference

between right and wrong and choosing to do what is right.

Ethics are of critical importance to organizations, as they can potentially have

enormous impacts on their communities. Ethics are a central concern for businesses,

organizations, and individuals alike. Behaving in a way that adds value without

inappropriate conduct or negative consequences for any other group or individual,

organizational leaders in particular must be completely aware of the consequences of

certain decisions and organizational trajectories and ensure alignment with societal

interests.

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 Banking is an industry that handles cash, credit, and other financial transactions.

Banks provide a safe place to store extra cash and credit. They offer savings accounts,

certificates of deposit, and checking accounts. Banks use these deposits to make loans.

These loans include home mortgages, business loans, and car loans. Banking is one of the

key drivers of the economy because it provides the liquidity needed for families and

businesses to invest for the future. Bank loans and credit mean families don't have to save

up before going to college or buying a house. Companies use loans to start hiring

immediately to build for future demand and expansion.

Wells Fargo is involved in banking business. Most of the people trusted this bank

with their moneys thinking that it would help them earn interest and grow their

investments. Baking business is very sensitive in economy since the money of the people

is involved and this kind of business highly contributes to the growth of the economy.

Wells Fargo has a fiduciary duty to treat its customers fairly. The bank offered

many different services to its customers. But before everything else, the corporation must

also know how to treat and compensate their employees properly in order to do their job

properly. It must always start with good corporate governance.

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 Methodology

The researchers chose a desk or secondary research design because it best served

to give the information needed by the researchers to complete or to achieve the purpose

of this case study.

Secondary research or desk research is a research method that involves using

already existing data. Existing data is summarized and collated to increase the overall

effectiveness of research. Secondary sources may be referred to as data that is not

originally gathered by the study and help in some way to arrive at a conclusion for the

study. Secondary data sources according to Sekaran (2003) are derived from data that is

already in existence. Secondary data for this study was acquired from different online

databases of journals, books, articles and news, year projects by past students and other

sources.

In this study, different relevant and reliable articles were acquired, compiled and

summarized by the researchers from different online sources and were combined to get

the final output of this study. The goal of this study is to analyze the Wells Fargo and

company as a whole. Starting from how it came into existence, its management, and

especially if how it conducts its business. The involvement of the firm from several

minor and major scandals was also discussed and evaluated. This study aims to show

how the corporate governance and social responsibility in Wells Fargo are exercised.

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 Company Profile

Company Description

Wells Fargo & Co. is a diversified, community-based

financial services company. It is engaged in the

provision of banking, insurance, investments,

mortgage, and consumer and commercial finance. The

firm operates through community banking, wholesale

banking, wealth & investment management, and other.

The Community Banking segment offers complete line of diversified financial products

and services for consumers and small businesses including checking and savings

accounts, credit and debit cards, and automobile, student, and small business lending. The

Wholesale Banking segment provides financial solutions to businesses across the United

States and globally. The Wealth and Investment Management segment includes

personalized wealth management, investment and retirement products and services to

clients across the United States based businesses. The other segment refers to the

products of WIM customers served through community banking distribution channels.

It is the world's fourth-largest bank by market capitalization and the fourth largest

bank in the US by total assets. Wells Fargo is ranked number 26 on the 2018 Fortune 500

rankings of the largest US corporations by total revenue. In July 2015, Wells Fargo

became the world's largest bank by market capitalization, edging past ICBC, before

slipping behind JPMorgan Chase in September 2016, in the wake of a scandal involving

the creation of over 2 million fake bank accounts by Wells Fargo employees. Wells Fargo

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fell behind Bank of America to third by bank deposits in 2017 and behind Citigroup to

fourth by total assets in 2018. Wells Fargo is incorporated in DE.

The firm's primary operating subsidiary is national bank Wells Fargo Bank, N.A.,

which designates its main office as Sioux Falls, South Dakota. Wells Fargo in its present

form is a result of a merger between San Francisco–based Wells Fargo & Company and

Minneapolis-based Norwest Corporation in 1998 and the subsequent 2008 acquisition of

Charlotte-based Wachovia. Following the mergers, the company transferred its

headquarters to Wells Fargo's headquarters in San Francisco and merged its operating

subsidiary with Wells Fargo's operating subsidiary in Sioux Falls. Along with JPMorgan

Chase, Bank of America, and Citigroup, Wells Fargo is one of the "Big Four Banks" of

the United States. As of June 2018, it had 8,050 branches and 13,000 ATMs. In 2018 the

company had operations in 35 countries with over 70 million customers globally.

In February 2014, Wells Fargo was named the world's most valuable bank brand

for the second consecutive year in The Banker and Brand Finance study of the top 500

banking brands. In 2016, Wells Fargo ranked 7th on the Forbes Magazine Global 2000

list of largest public companies in the world and ranked 27th on the Fortune 500 list of

the largest companies in the US. In 2015, the company was ranked the 22nd most

admired company in the world, and the 7th most respected company in the world. As of

December 2018, the company had a Standard &Poors credit rating of A−. However, for a

brief period in 2007, the company was the only AAA‑rated bank, reflecting the highest

credit rating from two firms.

On February 2, 2018, the US Federal Reserve Bank barred Wells Fargo from

growing its nearly US$2 trillion-asset base any further, based upon years of misconduct,

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until Wells Fargo fixes its internal problems to the satisfaction of the Federal Reserve. In

April 2018, The Wall Street Journal reported that the US Department of Labor had

launched a probe into whether Wells Fargo was pushing its customers into more

expensive retirement plans as well as into retirement funds managed by Wells Fargo

itself. Subsequently in May 2018, The Wall Street Journal reported that Wells Fargo's

business banking group had improperly altered documents about business clients in 2017

and early 2018. In June 2018, Wells Fargo began retreating from retail banking in the

Midwestern United States by announcing the sale of all its physical bank branch locations

in Indiana, Michigan, and Ohio to Flagstar Bank.

The company operates 12 museums, most known as a Wells Fargo History

Museum, in its corporate buildings in Charlotte, North Carolina, Denver, Colorado, Des

Moines, Iowa, Los Angeles, California, Minneapolis, Minnesota, Philadelphia,

Pennsylvania, Phoenix, Arizona, Portland, Oregon, Sacramento, California and San

Francisco, California. Displays include original stagecoaches, photographs, gold nuggets

and mining artifacts, the Pony Express, telegraph equipment and historic bank artifacts.

The company also operates a museum about company history in the Pony Express

Terminal in Old Sacramento State Historic Park in Sacramento, California, which was the

company's second office, and the Wells Fargo History Museum in Old Town San Diego

State Historic Park in San Diego, California.

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Historical Background

Wells Fargo, multinational financial services company with headquarters in San

Francisco, California. The founders of the original company were Henry Wells (1805–

78) and William George Fargo (1818–81), who had earlier helped establish the American

Express Company. They and other investors established Wells, Fargo & Company in

March 1852 to handle the banking and express business prompted by the California Gold

Rush. In California the company handled the purchase, sale, and transport of gold dust,

bullion, and specie and other goods that moved from the West to the East Coast by ship,

crossing overland via the Isthmus of Panama.

In the decade following 1855, Wells Fargo expanded into the staging business

with overland routes from Missouri and the Midwest to the Rockies and the Far West. It

operated the western portion of the Pony Express route, from Salt Lake City to San

Francisco, during the last six months of that venture’s operation, in 1861. In 1866 a grand

consolidation brought almost all Western stagecoach lines under the Wells Fargo name,

leaving the company with the largest empire of stagecoaches in the world. Although the

days of stage coaching gradually declined after completion of the first transcontinental

railroad in 1869, Wells Fargo coaches continued to serve areas where the railroads did

not operate, in some places even into the early 20th century.

But during the heyday of stage coaching, few names were more well-known than

Wells Fargo. Its agents and messengers gained a national reputation for their derring-

do—for getting the express through regardless of obstacles—as well as for their

professionalism. Henry Wells demanded that courtesy dominate all transactions, and the

company served all, regardless of creed, color, or gender. Tales of the express, not the

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bank, made the name Wells Fargo famous, and its transcontinental delivery operations

gave rise to the company’s most-enduring symbol, the horse-drawn nine-passenger

Concord (New Hampshire) stagecoach, and a fleet of which the company operated for

public events into the 21st century. Of keen interest to highway robbers of the day was

the company’s heavy green treasure box stowed under the driver’s seat, where gold bars,

coins, financial papers, and the passengers’ valuables were stored. These boxes were

fiercely guarded by an armed company agent, as many stagecoach bandits discovered to

their detriment; the legendary gunslinger Wyatt Earp was one such guard. To showcase

this colorful past, the company later established museums in cities across the United

States.

In 1905 Wells Fargo’s banking operations (in California) were separated from its

express operations and merged with the Nevada National Bank (founded 1875) to form

the Wells Fargo Nevada National Bank. In 1923 this bank merged with the Union Trust

Company (founded 1893) to form the Wells Fargo Bank & Union Trust Co., a name that

was shortened to Wells Fargo Bank in 1954. In 1960 it merged again, this time with the

giant American Trust Company (dating to 1854), to form the Wells Fargo Bank

American Trust Company. In 1969 the holding company Wells Fargo & Company came

into being; it owned all shares of Wells Fargo Bank, NA, as the bank was renamed. By

the early 21st century, Wells Fargo Bank had thousands of retail branches in the United

States and had become one of the country’s largest banks, providing services including

banking, mortgages, insurance, and financial management. It also established a global

presence through subsidiaries, affiliates, and retail branches.

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Location and Layout

Wells Fargo and company is based in San

Francisco California with the sub quarters throughout the

United States. This industry does their business

worldwide since they offer a financial service which will

help all the business who needs an extra capital for the

continues operation in the industry. The firm's primary

operating subsidiary is national bank Wells Fargo Bank,

N.A., which designates its main office as Sioux Falls,

South Dakota. Wells Fargo in its present form is a result of a merger between San

Francisco–based Wells Fargo & Company and Minneapolis-based Norwest Corporation

in 1998 and the subsequent 2008 acquisition of Charlotte-based Wachovia. Following the

mergers, the company transferred its headquarters to Wells Fargo's headquarters in San

Francisco and merged its operating subsidiary with Wells Fargo's operating subsidiary in

Sioux Falls. Along with JPMorgan Chase, Bank of America, and Citigroup, Wells Fargo

is one of the "Big Four Banks" of the United States. As of June 2018, it had 8,050

branches and 13,000 ATMs. In 2018 the company had operations in 35 countries with

over 70 million customers globally. On February 2, 2018, the US Federal Reserve Bank

barred Wells Fargo from growing its nearly US$2 trillion-asset base any further, based

upon years of misconduct, until Wells Fargo fixes its internal problems to the satisfaction

of the Federal Reserve. In April 2018, The Wall Street Journal reported that the US

Department of Labor had launched a probe into whether Wells Fargo was pushing its

customers into more expensive retirement plans as well as into retirement funds managed

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by Wells Fargo itself. Subsequently in May 2018, The Wall Street Journal reported that

Wells Fargo's business banking group had improperly altered documents about business

clients in 2017 and early 2018. In June 2018, Wells Fargo began retreating from retail

banking in the Midwestern United States by announcing the sale of all its physical bank

branch locations in Indiana, Michigan, and Ohio to Flagstar Bank. There are several

subsidiaries the Wells Fargo Advisors, Wells Fargo Bank, N.A., Wells Fargo Rail and

Wells Fargo Securities

Office Area Consultation Area

Customer Receiving Area Front view of the bank

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Organizational Management

Wells Fargo’s reputation as one of the world’s great companies for integrity and

principled performance depends on our doing the right thing, in the right way, and

complying with the laws, rules and regulations that govern our business. We earn trust by

behaving ethically and holding all team members and directors accountable for the

decisions we make and the actions we take. The Code of Ethics and Business Conduct

serves to guide the actions and decisions of our team members, including executive

officers, and directors consistent with our company vision, values, and goals.

Right managerial decision is important for the performance of an organization.

The intention of management information system is to improve the quality of such

decisions by analyzing strategic questions. Access to information system should be open

to all- including managers to be effective. However, there might be a director of

information system to control the input, output of information. Input data should be about

both internal affairs like marketing, finance, production, and external matters like social,

cultural, demographic, economic, political etc. To get appropriate strategic information,

data must be updated regularly. An effective information system collects, categorizes,

and fills data to be used by managers from all functional areas. There are a variety of

strategic planning computer applications. However, the program should be easy-to-use so

that everyone in the organization can participate. CheckMATE is such software that

features state-of-the-art strategic planning technique. It is a database where the user is

asked to input answers of particular questions and the responses are recorded, analyzed,

and the results are printed.

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Wells Fargo’s Organizational Chart

Key Officers

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Board and Advisors

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 Functional Areas

Production

It can be intimidating to entrust a banking institution to store, grow and invest

your money. Many of these banks have been around forever, offer countless wide-

ranging services and can be found in the headlines for questionable practices, to say the

least. Wells Fargo is one such bank that’s been helping its customers and businesses

through banking accounts, lines of credit, investing services for more than 160 years.

Serving more communities than any other US bank, Wells Fargo is a banking

institution known for its classic stagecoach logo. It’s the largest mortgage and auto lender

in the United States, and an estimated 10% of all small businesses use this bank’s

financial services.

Banking. Wells Fargo makes growing your savings easy with a full range of

banking services.Like Checking accounts, Savings accounts and CDs, Credit cards, Debit

and prepaid cards, Foreign exchange services, and Global remittances

Loans and credit. Finance your new home or car, your education, your small

business and everyday needs with flexibility and ease. Like Mortgages, Home equity

lines, Personal lines of credit and loans, Student loans and Auto loans.

Insurance. Since 1903, Wells Fargo has helped protect the things you love. Like

Auto insurance, Specialty vehicle insurance, Homeowners insurance and Umbrella

liability insurance.

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 Investing and retirement. Wells Fargo’s investing solutions can help you prioritize

for your short- and long-term goals, IRAs and rollovers, Investment services and

Investing for education

Wealth management. Let Wells Fargo’s expert advice empower better investment

decisions for a stronger financial future.

Business services. Customized financial services and products get your business

up and running with convenience. Like Business checking, Business savings and CDs,

Business credit and debit cards, Business lines of credit, Business loans, Merchant

services, Insurance and Payroll services.

Commercial services. Work with a Wells Fargo relationship manager or banker to

keep your business moving forward like the Commercial financing, Commercial

insurance and Institutional investing and savings.

Despite of the services provided by the company there are many complaints about

their services. Wells Fargo is not accredited with the Better Business Bureau (BBB), and

currently has a letter grade of NR (No Rating) as it responds to previously closed

customer complaints. Of the 357 total customer reviews on the BBB site, 96% of them

are Negative. Most reviews focus on dissatisfaction around customer service and

products.

Marketing

Marketing Mix of Wells Fargo analyses the brand/company which covers 4Ps

(Product, Price, Place, Promotion) and explains the Wells Fargo marketing strategy. This

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part of the case study will elaborate the pricing, advertising & distribution strategies used

by the company.

Wells Fargo provides a wide range of financial services and products for personal,

small scale and large business. Wells Fargo provide banking, Insurance, loan and credit,

Investing and Retirement, Wealth Management, Rewards and Benefit, Merchant

Services, Payroll, and Industry expertise to government, auto industry etc. in their

marketing mix product strategy. Community Banking deals with financial products and

services for individuals and small-scale business include auto and student loans, debit and

credit cards, saving accounts and small loans. Wholesale Banking provides solution to

business by offering business banking, corporate banking, treasury management,

insurance, and real estate services is also provided by Wells Fargo.

The company focuses on their customer by using customer value-based pricing in

their marketing mix. They offer services which are convenient, highly secure and

flexible. In addition to this company’s services are Federal Deposit Insurance

Corporation (FDIC) approved which benefit customer to succeed financially. Wells

Fargo also offers some very competitive pricing for different products and services.

Pricing strategy is the same in the United States as it is globally.

Wells Fargo is a US based financial holding company which serves more than 70

million customers globally. The company serves worldwide clients by offering products

and services like retail services, treasury services, foreign exchange, commercial loans,

wealth and retire. Wells Fargo has a global presence across 35 countries. It has a wide

network of 8700 retail branches and 13000 ATMs. Wells Fargo’s registered office is

located at San Francisco, United States. The company’s website has all details about the

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service offerings given by the bank. The offices, ATM machines, cheque deposit boxes

etc. are all a part of the physical evidence of Wells Fargo. This concludes the marketing

mix of Wells Fargo. Wells Fargo functions and deliver its product and services with a

vision to satisfy customers financial needs and help them succeed financially. 2,00,000+

employees work for the company.

They use social media platforms like Facebook, Twitter, Websites. Other than

these, the company uses Television ads, Billboards and print media to reach the potential

customer. Recently, company has using integrated marketing campaigns featuring stories

which resonates with customer by connecting at an emotional level. Wells Fargo invited

social media fans by using hashtags #WhyIWork to share their motivational drive. Wells

Fargo is building a customer experience through technology to make customer life easy

with smooth processes.

Finance

A veteran of the banking sector for nearly two decades, John Shrewsberry, senior

executive vice president and CFO of Wells Fargo & Company since 2014, has helped

steer the bank’s growth. In addition to overseeing Wells Fargo’s financial management

functions, he is responsible for corporate development, IT, corporate strategy, and

corporate properties and security.He discusses how the finance department works with,

and supports, business units with an emphasis on strategy, the impact of regulation on

Wells Fargo’s approach to risk management and how finance talent needs are changing.

In an interview, he revealed that one of the biggest areas of investments at Wells

Fargo is in the technology. The company and the CFO himself believes that it is an

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advantage, especially for them, for a firm or company to put an investment in technology

because this industry is proved to have a big impact in every one’s life. With technology,

everything can be made possible. He said that they’ve made major investments in product

capability and customer experience by investing in technologies that smaller banks might

have a harder time keeping up with. Technology can be a big help for security purposes

so Shrewsberry also brags about their plan to have using eye prints or eye scanner to

verify security for our corporate clients.

Wells Fargo also is flexible to cope up well in changes of regulations and

standards for large and international banks. When he was asked about how those changes

influenced their strategy-setting and competitive views of their company, he answered

that the company are careful to focus on growth, complexity and other things that keeps

them within the bands of where they are currently operating from a capital surcharge

perspective. That turns out to be a huge benefit in their relative return compared to the

other G-SIBs because they are at the lower end of the capital surcharge spectrum.

Aside from investing in technology, Wells Fargo is also engaged in other different

investments, like investing on a gun industry, pipelines, and even private prisons where

they faced several issues. But this fact is an evidence that the company is doing

everything, may it be legal or illegal, to maximize their company’s wealth.

To assure their shareholders with regards to their investment in the company,

Wells Fargo have brought on board members with specific expertise, including a former

Federal Reserve governor and an expert in cybersecurity from the Air Force. Everyone

brings different perspectives and experience, so it is very useful to engage with the board

about their strategy. And to enhance board communications, the company are revamping

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their board materials to pull to the top key takeaways and action items that they are

expecting from the committee or from the full board from each interaction.

John Shrewsberry also emphasized that Wells Fargo are using the centralization

of finance as a development tool, which entails combining workstreams that belong

together and then reimagining how a large organization can most efficiently execute on

that work, whether through automation, technology or people. By centralizing the finance

organization, his sense is there will be a lot more possibilities to help people move around

seamlessly, get a range of experiences, learn the different businesses that they are

supporting, and see how the whole bank works as it has been changing. That is a real

opportunity that was harder for people to get at previously.

Financial Performance of Wells Fargo & Company for the past 10 years

Human Resource Management

In recent years, more attention has been paid to corporate culture and “tone at the

top,” and the impact that these have on organizational outcomes. While corporate leaders

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and outside observers contend that culture is a critical contributor to employee

engagement, motivation, and performance, the nature of this relationship and the

mechanisms for instilling the desired values in employee conduct is not well understood.

Wells Fargo value and support their employee as a competitive advantage. They

strive to attract, develop, engage, and retain the best team members and collaborate

across businesses and functions to serve their customers. They regard their employees as

team members. The company provides all eligible regular and part-time team members

with a comprehensive set of benefits designed to protect their physical and financial

health and to help them make the most of their financial culture. Their team members

may also participate in a stock purchase plan and take advantage of discounts on financial

products, home mortgages and more.

The researchers cited some employee benefits that Wells Fargo offers. First is

their health plans and paid leaves and time off, where they offer comprehensive and

competitive medical, dental, and vision benefits. Their medical plans offer preventive

care services covered at 100%, prescription drug benefits, mental health and substance

abuse coverage and a network of doctors and hospitals to help their employees maintain

their health. The company also provides up to 16 weeks of paid parental leave for a

primary caregiver and up to 4 weeks for a parent who’s not the primary caregiver to care

for a new child following birth or adoption. They also understand that their team

members have busy lives and diverse needs and when they had opportunity, they will

take time relax an rejuvenate their selves. As a full-time team member, they are given 18

days of paid time off in their first year, and they can also expect that the period will

increase as time goes by. They also observe 12 paid holidays, including personal holidays

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that can be used for religious, family, cultural, patriotic, community, or diversity

observances.

Wells Fargo also offers educational benefits where they are willing to reimburse

up to $5,000 annually their team member’s tuition to support and encourage the

professional development of their people and to give scholarships, every year, for their

team member’s children. The children can apply to receive awards ranging from $1,000

to $3,000.

Problems of the Company

Wells Fargo has a fiduciary duty to treat its customers fairly. The company’s

vision is to “satisfy our customers’ needs and help them succeed financially.” The

bank offered many different services to its customers. But the bank’s management set

unrealistically high sales goals for its employees, encouraging many employees to game

the system. If a customer bought one service, employees were urged to “cross-sell”

several more. “Eight is great” was the company mantra. The only way that Wells Fargo

employees could meet their unrealistic sales targets, and thereby keep their jobs, was to

make up accounts that customers had not requested and often didn’t even know they were

being charged for. Employees fabricated millions of fraudulent accounts in order to keep

their bosses happy and remain employed. It was a classic conflict of interest.

Many former employees reported that company sales goals were impossible to

meet, and incentives for compensation and ongoing employment encouraged gaming the

system. Wells Fargo pressured employees to cross-sell, offering customers with one type

of product, such as checking or savings accounts, to also buy other types of products,

such as credit cards and loans. One former employee described it as a “grind-house,” with

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co-workers “cracking under pressure.” Another former employee reported, “If you don’t

meet your solutions you’re not a team player. If you’re bringing down the team then you

will be fired, and it will be on your permanent record.”

One former employee described his brief time at Wells Fargo as “the lowest point

of my life.” He encouraged an elderly woman to sign up for a credit card she did not want

by telling her “it was confirmation that she stopped by to update her address.” This made

him sick to his stomach. He reported, “But it was a tough economy, and I was worried, if

I lost this job, I would be in a tough financial situation.” Deceptive practices such as this

were widespread across the company, and many former employees reported that their

managers knew about them. Jonathan Delshad, a lawyer working on behalf of former

employees, said, “The better they did at sales, the more they advanced, so it got spread

across the company. An entire generation of managers thrived in the culture, got

rewarded for it, and are now in positions of power.” One former employee said she could

not meet sales goals in any ethical way and called the Wells Fargo’s ethics hotline. She

was eventually fired.

Wells Fargo had multiple controls in place to prevent abuse. Employee handbooks

explicitly stated that “splitting a customer deposit and opening multiple accounts for the

purpose of increasing potential incentive compensation is considered a sales integrity

violation.” The company maintained an ethics program to instruct bank employees on

spotting and addressing conflicts of interest. It also maintained a whistleblower

hotline to notify senior management of violations. But these protections were not

sufficient to stem a problem that proved to be more systemic and intractable than senior

management realized.

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 The bank announced a number of actions and remedies, several of which had been

put in place in preceding years. The company hired an independent consulting firm to

review all account openings since 2011 to identify potentially unauthorized accounts.

$2.6 million was refunded to customers for fees associated with those accounts and they

were fined a combined total $185 million. 5,300 employees were terminated over a five-

year period. Carrie Tolstedt, who led the retail banking division, retired and the CEO,

John Stumpf, resigned. Wells Fargo eliminated product sales goals and reconfigured

branch-level incentives to emphasize customer service rather than cross-sell metrics. The

company also developed new procedures for verifying account openings and introduced

additional training and control mechanisms to prevent violations.

Following the discovery of this fraudulent activity, another anomaly was

discovered relating to auto-insurance issue. Wells Fargo & Co will pay customers at least

$386 million to settle class-action claims that the bank signed them up for auto insurance

they did not want or need when they took out car loans.The proposed settlement was

disclosed in filings on with the U.S. District Court in Santa Ana, California, and requires

a judge's approval.

National General Insurance Co, an underwriter, will pay an additional $7.5

million, making the total customer payout at least $393.5 million, according to the

filings.Wells Fargo denied wrongdoing but said it settled to avoid the risks, cost and

distraction of litigation, and has set aside enough money for the payout. The defendants

will also pay up to $36.5 million for the customers' legal costs, court papers showed.In an

email, Wells Fargo called the settlement "an important step in making things right for

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customers.""We will continue sending individualized letters to customers that clearly set

out the remediation amount due to them, as well as a check for that amount," they added.

In April 2018, Wells Fargo agreed to pay $1 billion to the Consumer Financial

Protection Bureau and Office of the Comptroller of the Currency to settle U.S. probes of

the San Francisco-based bank's auto insurance and mortgage practices.Wells Fargo

remains unable to expand under restrictions imposed in February 2018 by the Federal

Reserve until the bank, the nation's fourth-largest by assets, cleans up its culture and

oversight.The complaint said Wells Fargo's wrongful practices caused nearly 275,000

customers to become delinquent and nearly 25,000 vehicles to be illegally repossessed.

Plans of company

Wells Fargo revealed its new plan for compensating branch employees, the latest

step in the San Francisco company’s efforts to overhaul its practices in the wake of a

sales scandal. Under the new incentive-pay system affecting tellers, branch managers and

other branch employees, compensation will be based on customer growth, service and

usage of products, according to a description Wells provided the Observer. The revamped

program comes after Wells Fargo in October threw out product sales goals for retail

bankers amid growing fallout from the scandal.

“It’s not the answer to everything that Wells Fargo is doing to restore trust,” Mary

Mack, Charlotte-based head of community banking for Wells, told the Observer on

Tuesday. But it’s a “really important step,” Mack said, “as we begin to chart this path

around restoring trust.”

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 The new plan affects 70,000 employees nationwide, including more than 1,000

branch employees in Charlotte, according to the bank. It adds to efforts by Wells to fix its

culture after agreeing in September to $185 million in fines, to settle claims that

employees opened millions of accounts potentially without customer approval in order to

meet high-pressure sales targets and avoid being fired.

Wells also said that under its prior incentive system, primary oversight of

incentive plans fell to local management. The new approach will rely on local, regional

and corporate oversight, as well as mystery shopping and other means to monitor bad

behavior. Wells’ new plan comes before the bank reports its fourth-quarter earnings

Friday, which will give investors their first view of the scandal’s impact over a full

quarter.

SWOT Analysis

Strengths in the SWOT analysis of Wells Fargo

 Segment-specific offerings: The company caters to three key segments namely

personal, commercial, and small industries and has specific services to offer to

each of them. For their retail customers falling under a personal category, the

Company list of services includes banking, loans and credit, insurance, investing

and retirement, wealth management, and rewards and benefits. Under the

commercial segment, Wells Fargo offers loans, insurance for the owner as well as

assets, credit facilities, merchant services, Online banking services, round the

clock customer service etc. Under the small industries segment, their line of

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 services includes banking, loans and credit, merchant services, insurance, and

payroll and other services.

 Business Philosophy: The business philosophy of the company Wells Fargo is

centered around five core values which are the basis for everything that the

financial services company does. These values are string customer focus,

consideration of people is the biggest source of competitive advantage, highest

standards of ethics and transparency, diversity and inclusion and leadership.

 Acquisitions: One of the core strengths of Wells Fargo is the series of regional

acquisitions that it has made. Some of these include the 1998 merger between

Wells Fargo and the Norwest Corp., headquartered in Minneapolis, the buyout of

East Coast giant Wachovia in 2008 etc. These acquisitions increased their

customer base in the US to almost 70 million.

 Customers across income groups: Wells Fargo has customers from all income

groups. While the economy customers avail services such as credit cards, bank

accounts, loans etc. the higher income segment looks at services such as wealth,

brokerage, and retirement services. Wells Fargo also offers services such as

financial support services, taxation services, and underwriting services.

 Wholesale and retail banking: The financial services provider Wells Frago takes

up wholesale banking services like equipment financing, crop insurance, energy

syndicated loans, commercial real estate etc. The company also takes care of retail

banking function like bank loans, credit, and debit cards,

 Community Banking Services: Wells Fargo has community banking services like

credit cards, bank accounts, debit cards, account management, loans etc. Though

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 it may seem regular community banking constitutes one of the most profitable

divisions of the bank.

Weaknesses in the SWOT analysis of Wells Fargo

 Customer Relationships: There have been allegations that Wells Fargo though

claims to be customer-centric, treats higher income customers differently from

lower incomes customers.The lower income group often suffers because of this

reason.

 Bank Scandal: Wells Fargo is still facing the aftermath of the scandal of fake

accounts and fraudulent transactions. Following the scandal, many long-standing

customers shifted to other banks and the bank suffers the loss of face primarily

because of loss of trust.

 Higher costs: Wells Fargo had expanded a lot in the last decade and this

expansion was a costly affair. The bank also faced a lot of costs in its operations

across various financial domains. In addition to this, there was also a lot of legal

charges and other related costs related to the scandal and its management.

Opportunities in the SWOT analysis of Wells Fargo

 Growth in smaller towns: Wells Fargo is primarily in cities and most of its

operations are in the USA especially in banking. The company should look at a

market outside the US like China or India which are registering steep economic

growth as well as taking huge strides in financial reforms.

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Threats in the SWOT analysis of Wells Fargo

 Competition: The main competitors of Wells Fargo are Citibank, Novo Scotia

Bank and Bank of America

 Financial unrest: The world over is facing critical financial crunch and there has

been major ups and downs in the financial services market. This will affect the

operations of the bank in the long run.

Summary

The Wells Fargo fraudulent account case arose on September 8th of 2016. The

company was accused by the Consumer Financial Protection Bureau, the Office of the

Comptroller of the Currency and the Los Angeles City Attorney. The organizations

claimed that Wells Fargo, between 2011 and mid-2016, created additional fraudulent

bank accounts for pre-existing customers. Signing up over 2 million customers for new

credit cards and fees that they were unaware of. Wells Fargo was fined an initial $185

million and the bank in response fired 5,300 involved employees (Blake 2016). The fraud

allegedly resulted from the company’s sales program created by CEO John Stumpf. With

the mantra “eight is great” Stumpf’s program set strict sales goals for Wells Fargo

employees. Sales associates and managers were urged to “get eight Wells Fargo products

into the hands of each customer” (McGrath 2017). These demanding quotas resulted in

employees being urged to cut corners, opening new deposit accounts without consent

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from customers and targeting minorities who spoke little English.These events along with

consistent pressure from the media, The House of Representatives and The Senate lead to

the resignation of their CEO, John Stumpf in mid-October.

Conclusion

The researchers have already discussed about the scandal andancillary issues of

Wells Fargoand how the organization responded and solved those scandals to which the

Bank responded by professing a commitment to regaining the lost trust with the

implementation of remedial measures.

However, Wells Fargo continues to deal with new revelations of misconduct, as

recently as July 2017 an issue about unauthorized auto insurance policies issued to Bank

customers was revealed. This brings into question whether Wells Fargo is addressing the

systemic issues at the Bank. It is critical that the Bank avoid a transactional approach to

the crisis with merely a checklist of corrective actions — it should instead focus on

making ethical integrity ubiquitously salient throughout the organization, top to bottom,

through a cultural and leadership shift.

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 The longer a company’s operations are misaligned with its ethos, the higher the

chances of an even larger ethical breach. Hence, Wells Fargo’s remedial measures need

to be integrated into the bank’s culture and viewed through a systems lens, addressing the

alignment of formal and informal systems. Otherwise, any short-term fix will likely lead

to further long-term repercussions.

The advocacy of the bank is not in line with their actual application. The bank

was once recognized as one of the top corporations, but it was revealed that a lot of

irregularities was happening inside the company. This only proves that not everything

that we see is real and should be trusted. The company must stick with its mission and

vision and exercise a good corporate governance and social responsibility.

Recommendation

In today’s society, the scandals about businesses and large corporations are

discovered and easily spread to the public by the help of social media. How the company

will respond and resolve the issues are very critical in protecting the reputation of the

company.

Wells Fargo and company became prone to issues and scandals throughout the

past years to the point that if you are going to search its company name in online search

engines, its involvement from different scandals and unethical practices would first come

up in the recommendations list. Few minor issues were mentioned in the research but

only the major ones that created a big effect to the company were emphasized and further

discussed by the researchers which is about the incentives given to the employees if they

reach a certain quota. The quotas mandated by the corporation were too high to attain that

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led to the employees’ misconduct and falsification of customer records. It is normal for a

company to set several standards to reach its goals and objectives; but no matter how

high those standards are, the organization must still follow the proper business ethics.

Giving incentives but not monitoring the employees’ actions is like providing them an

opportunity to engage in unethical business practices.

Wells Fargo should have established a stronger internal control in the company.

An organization will never be a successful one or will not maintain its position on the top

if it failed to properly manage its employees and subordinates. The success a company

depends on its well-established roots.

References

Blake, P. (n.d.). (February 2017). Timeline of the Wells Fargo Accounts Scandal.

Retrieved from abcnews.go.com/Business/timeline-wells-fargo-accounts-

scandal/story?id=42231128

Brian Tayan. (January 2018). The Wells Fargo cross-selling scandal

Deon Roberts. (January 2017). Wells Fargo unveils new pay plan for branch bankers

in wake of scandal. Retrieved from

https://amp.charlotteobserver.com/news/business/banking/bank-watch-

blog/article125692619.html

Ethics unwrapped wells frago fraud ethical insights. Retrieved from

https://ethicsunwrapped.utexas.edu/video/wells-fargo-fraud

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Jonathan Stempel. Wells Fargo will pay customers $386 million over unwanted auto

insurance. Retrieved from https://www.reuters.com/article/us-wells-fargo-settlement-

idUSKCN1T81RM

Kimberly Amadeo. (May 2019). Banking and how it works Kimberly Amadeo.

Retrieved from https://www.thebalance.com/what-is-banking-3305812

Lumen. Boundless Business Business Ethics and Social Responsibility. Retrieved

from https://courses.lumenlearning.com/boundless-business/chapter/business-ethics/

McGrath, M. (January 2017). Two Million Phony Accounts - pg.3. Retrieved from

https://www.forbes.com/pictures/fkmm45eegei/two-million-

phonyaccoun/#4f0ddb87102d

Robert Chandler. Wells Fargo American corporation. Retrieved from

https://www.britannica.com/topic/Wells-Fargo-American-corporation

The Balance. (May 2019). The Hostory of Wells Fargo Bank. Retrieved from

https://www.thebalance.com/wells-fargo-from-stage-coaches-to-modern-banking-

315117

Wells Fargo Marketing Mix (4Ps) Strategy. Retrieved from

https://www.mbaskool.com/marketing-mix/services/16899-wells-fargo.html

Wells Fargo CFO John Shrewsberry: Finance with an Enterprise View of Strategy

Retrieved from https://deloitte.wsj.com/riskandcompliance/2016/07/11/wells-fargo-

cfo-john-shrewsberry-finance-with-an-enterprise-view-of-strategy/

WellsFargo Fraud Retrieved from https://ethicsunwrapped.utexas.edu/video/wells-

fargo-fraud

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Wells Fargo Employee Benefits. Retrieved

fromhttps://www.wellsfargo.com/about/careers/benefits/

https://www.finder.com/wells-fargo-bank

https://theorg.com/org/wells-fargo

https://www.wellsfargo.com/about/corporate/governance/

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