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Wells Fargo's fake accounts scandal and its legal and ethical implications for management.

Taking a comprehensive view of the 2016 Wells Fargo "fake accounts" scandal, the authors detail the bank's legal, ethical, management, and social responsibility transgressions. Civil and criminal charges are explored--some of which have been settled. Ethical and immoral aspects are examined in light of four theories: ethical egoism, ethical relativism. Utilitarianism, and Kantian ethics. Other lapses are analyzed in terms of corporate social responsibility and sustainability. Numerous recommendations to management may help the bank overhaul the corporate culture, restore customer trust, repair the breach with employees, and improve its social and environmental profile. Above all, leadership must make sound business decisions that are also legal, moral, and socially responsible.

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In the last few years, the world has witnessed major business scandals involving giant companies that perpetrated massive fraud and deceit against their customers and other stakeholders. First, in 2015, was the Volkswagen deceptive diesel emissions scandal (Cavico and Mujtaba, 2016B); and now, in 2016, the Wells Fargo fake accounts scandal has emerged. Accordingly, this article is a legal, ethical, social responsibility and sustainability, and leadership analysis of the Wells Fargo fake accounts scandal. The authors examine the actions of the bank based on the aforementioned criteria, and provide appropriate recommendations to management.

After this introduction we provide the key facts and the current status (as of the time of this writing) of the Wells Fargo fake accounts scandal. Next, there is a legal analysis of all the laws and regulations--federal, state, civil, and criminal--that so far have been, and potentially could be, violated by the bank, to wit: breach of contract, negligence, common law fraud, invasion of privacy, conversion, regulatory as well as criminal law, such as theft, identity theft, "hacking," and securities fraud. After this legal analysis the authors discuss the morality of the bank's action pursuant to four major Western, secular-based, ethical theories, to wit: ethical egoism, ethical relativism. Utilitarianism, and Kantian ethics. The concept of whistleblowing is examined from legal and ethical perspectives, and a principle of morally required whistleblowing is presented. Then, the notion of social responsibility is discussed in its traditional "corporate social responsibility" meaning as well as its more modern conception of "sustainability." These are discussed in relationship to business generally and to Wells Fargo specifically. These values of legality, ethics, morality, social responsibility, and sustainability are then addressed in the context of leadership in business.

Based on the facts of the case, legal and ethical analyses are provided, and in the discussion of social responsibility, sustainability, and leadership the authors make several suggestions to help the bank regain its reputation and be a legal, moral, ethical, socially responsible, and sustainable banking entity. Finally, the article ends with a brief summary.

Facts of the Scandal at Wells Fargo

In September 2016 the gigantic bank, Wells Fargo, headquartered in San Francisco, California, was engulfed in a massive scandal. It was accused of extensive fraudulent sales practices. The bank's employees, in order to meet aggressive, and perhaps wildly unrealistic, sales targets, fraudulently opened bank and credit card accounts, transferred money between those accounts, and created fake e-mail addresses for online banking accounts to sign up customers for the bank's accounts. All this so-called "cross-selling" activity was done without the customers' knowledge and consent; and therefore was unauthorized, fraudulent, deceptive, abusive, and illegal. Moreover, debit cards were issued and activated, and PIN numbers created, again without the customers' authorization (Sweet, 2016). Millions of fake accounts were opened for customers over a five-year period (Kelly, 2016). Multiple accounts are profitable in of themselves, of course, for the fees they generate; but banks also have discovered that the more accounts a customer has the less likely the customer is to move to another bank (Egan, 2016). One flagrant illustration of the fraudulent sales practices occurred in Arizona, where the Wall Street Journal (Glazer, November 7, 2016) pointed to a letter by an employee to top management that stated that not only were managers pressuring employees to open multiple accounts for customers to satisfy aggressive sales goals, but also that managers encouraged the employees to open up the accounts without the customers' knowledge. Moreover, other employees indicated that there were training programs regarding the questionable sales practices, including distribution of a flier for employees in Arizona suggesting that if a customer did not give a bank sales employee an email address, which was necessary to open an account, the employee should create a fake address using the customer's cell phone number and carrier. The Arizona region moved from last place in Wells Fargo's 35 regions in sales to number one in about two years (Glazer, November 7, 2016).

The legal consequences of this scandal have been many and various. The U.S. Consumer Financial Protection Bureau called the bank's sales tactics a "widespread illegal practice" (Andriotis and Glazer, 2016). As of this writing, the federal government and the State of California have settled with Wells Fargo, with the bank paying a $185 million fine because of the bank's sales practices (Sweet, 2016), which the Wall Street Journal (Heard on the Street, 2016) deemed "quite small for a bank with a $1.9 trillion balance sheet." The bank also refunded $2.6 million to customers. Nevertheless, despite the payment of the fine and refunds as well as all the resulting remedial and public relations measures, "with so much uncertainty around in its future, Wells Fargo's stock looks expensive" (Wall Street Journal, Heard on the Street, 2016).

The Department of Justice has opened an investigation with subpoenas to the bank and bank employees (Kelly, 2016). No civil or criminal charges have been filed as of this writing. Senator Elizabeth Warren (Dem.-Massachusetts) was quoted in Time (Calabresi, 2016) declaring that "the only way that Wall Street will change is if executives face jail time when they preside over massive frauds." The Financial Services Committee of the U.S. House of Representatives said it will launch an investigation and hold a hearing in which former CEO Stumpf and other bank executives will testify (Glazer, October 14, 2016; Kelly, 2016). So far, Florida, Georgia, Illinois, and Connecticut have opened investigations of the bank (Glazer, October 14, 2016). The Occupational Safety and Health Administration (OSHA) is also conducting an investigation since, according to Reuters (Lynch, 2016), five "whistleblowers" contacted the agency between 2009 and 2014 about the opening of unauthorized accounts and credit cards and were allegedly discharged by the bank for their actions. The OSHA investigation is seeking to determine what the agency did or did not do with these whistleblower reports. The Office of the Comptroller of the Currency is now investigating several other banks to ascertain whether they employed high-pressure or fraudulent sales tactics to open accounts (Egan, 2016). Moreover, that agency will examine bank controls that are supposed to catch illegal behavior to see if the controls are adequate, and, if so, whether they were properly utilized (Egan, 2016). Glazer (November 3, 2016) reported that the Securities and Exchange Commission is also investigating the bank, principally to determine if Wells Fargo misled investors regarding the fake accounts in violation of federal securities laws, particularly the Securities and Exchange Act of 1934 which prohibits fraud and deceit in the purchase and sale of securities, as well as if the bank's executives violated the internal-controls provisions of the Sarbanes-Oxley Act of 2002 by "signing-off' on inaccurate financial reporting.

A class action suit was filed in U.S. District Court in Utah by bank customers, alleging fraud, negligence, invasion of privacy, and breach of contract. The plaintiffs are asking for damages for these legal wrongs, including identity theft, as well as for anxiety and emotional distress, and legal fees (Kelly, 2016). Glazer (October 14, 2016) reported that "class-action lawyers have been recruiting both employees and investors who say they were wronged."

The "boiler room atmosphere" and "excruciating high pressure" on employees to increase their numbers and open more accounts apparently drove employees to break the law and open so many unauthorized accounts (Calabresi, 2016). Consequently, more than 5,300 bank employees have been fired, but almost all were lower-level employees. These employees opened over two million of these illegal accounts to meet and exceed sales quotas and earn the extra fees from the unwitting customers (Kelly, 2016). Bank employees also pushed customers into buying expensive overdraft protection that they did not need (Andriotis and Glazer, 2016). As a result, the head of the bank's retail sales division, Carrie Toldstedt, resigned in 2016 forfeiting $19 million in stock rewards, but leaving with a compensation package of about $125 million (Sweet, 2016).

The scandal plainly has harmed the bank's customer base. The Wall Street Journal (Heard on the Street, 2016) reported that consumer checking account openings were down 25% from a year from September 2016, and applications for credit cards were down 20%. The scandal, moreover, has caused the bank's stock to fall about 9% since the $185 million settlement was announced as of October 11, 2016 (Andriotis and Glazer, 2016). Moreover, the bank has lost its position as the largest U.S. bank by market value (J.P. Morgan Chase is now number one) (Andriotis and Glazer, 2016).

In October 2016, the CEO of Wells Fargo since 2007, John Stumpf, "retired" as a result of the scandal over the bank's fraudulent sales practices. He had been known as a proponent of a business strategy called "cross-selling," where account holders were pressured to open new accounts. This was, in the short term at least, a successful strategy as the bank's stock rose 30% during his tenure (Calabresi, 2016). Nevertheless, as one consequence of the scandal much pressure was placed on Stumpf to resign and give back the money he earned while the misconduct was ongoing. Senator Elizabeth Warren was especially critical of Stumpf at a Senate hearing. Stumpf, who had been with the bank for 34 years, gave up his role as chairman of the board. Stumpf, who earned $19.3 million in 2015, also forfeited $41 million in stock awards. However, his retirement compensation package totaled $134 million (including salary, stock options, and other forms of compensation) (Sweet, 2016).

Wells Fargo's chief operating officer, Tim Sloan, 50 years old, who has been with the bank for 29 years, will succeed Stumpf as CEO and also join the board as a member (Sweet, 2016). Sloan was named chief financial officer in 2011 and head of wholesale banking in 2014. The bank's lead director, Stephen Sanger, will serve as the board's chairman. The Wall Street Journal (Glazer, October 14, 2016) reported that Sloan, who was a principal actor in the Wachovia merger, intends to improve the bank's reputation by focusing on addressing customers' needs and concerns. Sloan, of course, will have to deal with all the government investigations and legal actions as well as consumer lawsuits.

According to the Wall Street Journal (Glazer, October 14, 2016), Sloan has a reputation as "an analytical, numbers person whose advice was valued on deals." The Wall Street Journal also related that the bank is conducting a "massive damage-control operation, which includes internal investigations, hiring new compliance personnel, reaching out to angry customers, and redoing the bank's compensation plan." Another troubling issue (Green, Keller, and Mehrotra, 2016) that the bank may have to deal with is whether the bank employees singled-out Hispanic customers, particularly those without Social Security numbers or who lacked a strong command of the English language. The City Attorney's Office in Los Angeles, which is Wells Fargo's biggest market, is now investigating whether Hispanics, especially Mexican nationals, were targeted for the illegal sales practices (Green, Keller, and Mehrotra, 2016).

Wells Fargo (2016) also initiated an advertising campaign, called "Moving forward to make things right." The bank stated in its promotional materials that it will put its customers' interests and financial needs first by eliminating sales goals for retail banking, it will communicate with customers when new accounts are opened, it will enable customers to fully see all their accounts by means of online banking, and it will provide full refunds to customers for any fees or costs associated with the opening of unauthorized accounts. The bank also established a hotline for customer concerns and complaints (Wells Fargo, 2016). On October 25, 2016, newly appointed CEO Tim Sloan formally apologized to the employees, admitting that the bank did not respond adequately to the problems with sales tactics in the branches. He also admitted that upper management not only avoided responsibility for the misconduct but also wrongly blamed branch employees. Sloan said that he was "sorry for the pain" caused, and was "committed to rectifying" the problem (Associated Press, 2016). In January 2017 (Glazer, January 7-8, 2017), the bank announced its intent to restructure its pay plan by eliminating sales goals and substituting payment incentives based on the number of accounts opened under a new service-oriented model with incentives for employees now to be based on how and how often customers use their accounts. However, the Wall Street Journal (Glazer, January 7-8, 2017) also reported that the bank's internal investigation by its board of directors, including a promised report to shareholders and investors, was delayed since the investigation "... has proved to be more complicated and slower moving than initially imagined because there was no exhaustive investigation specific to bank executives and employees before the board's current inquiry."

Legal Analysis

The Wells Fargo fake account scandal has engendered a host of legal difficulties for the bank. Pursuant to the common law, civil lawsuits could encompass breach of contract, negligence, fraud, invasion of privacy, and conversion (that is, civil theft). Note too that the latter three are intentional torts for which, in addition to compensatory damages, additional damages at the discretion of the jury in the form of punitive damages can be imposed to punish the bank and serve as a deterrent to other potential malefactors. All the aforementioned civil law lawsuits would be conducted at the state level. Moreover, on the federal level penalties could be imposed by government banking agencies for violations of banking regulations and by the Securities and Exchange Commission if securities fraud occurred by the making of any misrepresentations of material fact to the shareholders or the investing public. Finally, there could be criminal sanctions imposed on the bank and bank personnel at the state level for theft and at the federal level for regulatory and securities law violations as well as the "hacking" into customers' accounts and the subsequent identity theft.

Breach of contract

Based on English common law, a contract is an agreement or set of promises that is enforceable by the law. Not all promises and agreements are binding and enforceable, just those that rise to the level of a legal contract. And if the agreement or promises in a contract are not fulfilled, the aggrieved party can sue for damages for breach of contract (Cavico and Mujtaba, 2014). Although it is beyond the purposes of this article to explain the requirements of a contract, one can safely say that the Wells Fargo customers had a contractual relationship with their bank. The contractual relationship certainly did not include the improper opening of accounts without the knowledge and consent of the customers. The bank, therefore, would be liable for breach of contract, for which the damages would be compensatory (that is, the amount of money that would be necessary to make the victimized customers whole) as well as consequential damages (that is, any additional damages that were likely foreseeable from the breach) (Cavico and Mujtaba, 2014). Damages for emotional distress as well as punitive damages are rare in breach of contract cases, but this situation may be exceptional due to the bad faith and intentional wrongdoing involved.

Negligence

Negligence is a common law legal wrong established far back in English history but is a viable cause of action today. Negligence is a tort, that is, a civil wrong, for which a variety of damages can be recovered, such as compensatory damages, emotional distress damages, and punitive damages in the case of gross negligence. Negligence is predicated on a duty imposed by the law, which is to act, when one acts, in a reasonable, careful, and prudent manner. Conduct must conform to the conduct of this mythical person, called the "reasonable person." If actions fall below this standard, as determined typically by a jury, then an individual is liable for negligence, assuming that the careless conduct was the cause of the eventual harm or injury (Cavico and Mujtaba, 2014). The tort of negligence certainly can encompass negligent supervision and retention of employees (Cavico and Mujtaba, 2016A).

The bank's executives and managers can be said to be liable for negligence. They first failed to exercise reasonable care in creating a system of impossible sales goals and then by encouraging and perhaps pressuring employees to meet these unrealistic goals. Second, they did not act as reasonably prudent supervisors of the employees who were opening large numbers of fake accounts. Therefore, a jury may rule that the executives and managers are liable for negligent supervision and retention. Furthermore, as employees of the bank acting within the scope of their authority, the bank could be deemed vicariously liable for the negligence (that is, the negligence of the bank employees will be imputed to bank). Moreover, damages for emotional distress are a typical component of a negligence lawsuit, as determined by the jury, as well as punitive damages for gross negligence, again as determined by a jury.

Fraud

Fraud, also called "deceit" under English common law, is an intentional legal wrong. It is a tort for which a wide variety of damages can be recovered, including punitive damages. Fraud, though, in the sense of deceit, is a difficult legal wrong to prove. There must not only be an intentionally false statement or purposeful concealment of facts by the wrongdoer, but also evidence that these false statements or actions were made knowingly and purposefully to induce the victim to enter into a contract or take some other action. In addition, a breach of a fiduciary duty is construed as fraud under common law. A fiduciary relationship is one of trust and confidence that requires accurate and full disclosure. The omission of material facts by a fiduciary is viewed as fraud, thereby subjecting the wrongdoer to civil liability for compensatory and punitive damages (Cavico and Mujtaba, 2014). A major hurdle to sustaining a fraud lawsuit is that obtaining evidence of the requisite "'bad intent" (technically called "scienter") is hard, though juries are allowed to make certain inferences. Moreover, the aggrieved party must have reasonably relied on the falsehoods and suffered injury or harm thereby. Finally, to further emphasize the "high hurdle" to proving fraud, the burden of proof is not the usual civil one of a "preponderance of the evidence" but rather the more demanding standard of "clear and convincing" evidence (Cavico and Mujtaba, 2014). Nevertheless, the facts adduced so far suggests that the harmed bank customers would have viable lawsuits for fraud since it is likely that false statements were made regarding their account status, the fake accounts were concealed from them, the customers were harmed, and the bank through its account managers stands in a fiduciary relationship to its customers.

Invasion of privacy

Invasion of privacy is another common law legal wrong dating from Old English days; yet it is a viable cause of action today, too. Moreover, it is also an intentional tort, and redress for a violation can encompass a variety of damages, including punitive damages. The essence of this legal wrong is that a defendant wrongdoer has purposefully invaded a person's private sphere or area of seclusion or infringed on a private concern in an unreasonable and offensive manner (Cavico and Mujtaba, 2016). The customers of Wells Fargo could argue that they had a legitimate and reasonable expectation of privacy in their confidential information provided to the bank for proper banking purposes only; and that bank employees' accessing and using the information for fraudulent purposes was an invasion of their privacy.

Conversion

Conversion is a civil wrong--an intentional tort --that occurs when one person purposefully and wrongfully takes dominion and control over or wrongfully acquires the property of another, for example, by theft or embezzlement. The bank customers again could argue that the bank employees "stole" (civilly here) their confidential information provided to the bank in trust (Cavico and Mujtaba, 2014).

Regulatory Law

The principal regulatory law applicable to the Wells Fargo scandal is the Dodd-Frank Wall Street Reform and Consumer Protection Act that punishes financial institutions for violating consumer protection laws, including engaging in unfair, deceptive, or abusive acts or practices (Consumer Finance Protection Bureau, 2016). The law is enforced by the Consumer Finance Protection Bureau (CFPB). The agency found that these aforementioned wrongful practices by the bank included: 1) opening deposit accounts and transferring funds without authorization; 2) applying for credit card accounts without authorization; 3) issuing and activating debit cards without authorization; and 4) creating phony e-mail addresses to enroll customers in online banking services.

Pursuant to its legal authority the CFPB so far has done the following: 1) ordered full refunds to customers ($2.5 million so far); 2) ensured proper sales practices, including the hiring of an independent consultant to thoroughly review sales procedures; and 3) ordered the bank to pay a $100 million fine to the federal government (Consumer Finance Protection Bureau, 2016).

Criminal Law

Theft--state law

The crime of theft, which can be a felony or a misdemeanor depending on the amount stolen, can occur in a variety of ways. Two methods of theft that would apply in the Wells Fargo case are larceny and forgery. Larceny is the wrongful, intentional, and fraudulent taking of a person's personal property, including intangible as well as tangible property. Forgery is intentionally and fraudulently creating a fake document or altering a document with the intent of adversely affecting the legal rights or liability of another person. Based on the facts adduced in the case to date one can see that both types of theft were committed by the bank employees by the opening up of the fake accounts in the customer's name and by personally benefitting from the deceit.

Identity Theft

Identity theft is a crime on federal and state levels that occurs when a person steals another person's identification and financial information in order to access and steal the victim's financial resources. Bloomberg Business News (Mehrotra, 2016) reported that the attorney general of the state of California is investigating Wells Fargo and certain personnel for the crime of identity theft, which, under that state's penal code, is the impersonation and unauthorized use of personal information for checking and savings accounts as well as credit cards, lines of credit, and other financial accounts and products. A violation can be a misdemeanor or felony, and sanctions include fines and imprisonment (Mehrotra, 2016). As part of the investigation the attorney general served Wells Fargo with a search warrant based on "probable cause" of identity theft. The search warrant seeks the names of affected customers as well as employees who opened accounts and also their branch managers, area managers, and regional managers (Egan, October 19, 2016).

Hacking

Hacking is the breaking into a computer or computer system without authorization usually for the purposes of theft and is a crime under federal and state laws. Although the research for this article did not discover any explicit hacking-based lawsuits, the investigation of the bank and its personnel is ongoing. Yet the reason for the lack of such lawsuits may be that hacking is typically identified by an outside party illegally accessing or breaking into a computer system for theft or other malicious purpose and not the accessing by an organization's customers by its own employees. Nonetheless, hacking laws are sufficiently broad-based to encompass the Wells Fargo's fraudulent sales practices.

Securities Fraud

Two major federal securities statutes are applicable to the Wells Fargo account scandal: the Securities Act of 1933, which is essentially a disclosure statute, and the Securities Exchange Act of 1934, which is mainly an anti-fraud statute (Cavico and Mujtaba, 2014). First, pursuant to the 1933 Act a covered entity such as the bank that issues securities must file a written registration statement with the Securities and Exchange Commission. The statement must contain sufficient information about the company, its principals, and its business, including compensation of employees, as well as any risk factors, for the investing public to make an informed decision as to whether to purchase shares of stock. The registration statement must include a financial statement certified by a certified public accountant. Moreover, a prospectus, which in essence is a marketing instrument of the issuing company to be given to potential investors, must be included with the registration. There is criminal liability for any person who willfully violates the 1933 Act. In addition, there is civil liability for damages if the registration statement misstates or omits a material fact and if there is evidence of a purposeful intent to defraud or evidence that a person was negligent in not discovering the fraud. However, all defendants except the issuing company can utilize the "due diligence defense" by demonstrating that they undertook a reasonable investigation and had reasonable grounds to believe that the statements in the registration statement were true and there were no material omissions (Cavico and Mujtaba, 2014). Accordingly, Wells Fargo and its senior management could run afoul of the 1933 Act and be prosecuted by the government and sued by private investors if there were intentional or negligent statements or omissions in the registration statement and accompanying prospectus that related to compensation, such as the incentive pay system based on opening new accounts, and thus any concomitant risk of investing.

Second, pursuant to the Securities Exchange Act of 1934 any knowing and purposeful misrepresentation of a material fact regarding the purchase and sale of securities is a civil violation of the Act, which lies within the jurisdiction of the Securities and Exchange Commission. This agency can fine the wrongdoer and order restitution. Moreover, a violation is also a criminal wrong, a felony, which is within the jurisdiction of the Department of Justice to prosecute. The Department can criminally fine as well as seek imprisonment for a felony conviction (Cavico and Mujtaba, 2014). Furthermore, pursuant to the 2002 Sarbanes-Oxley Act criminal fines have been increased as well as the potential prison sentence, which can now be up to 20 years (Cavico and Mujtaba, 2014). For any criminal sanctions, however, the government will have to persuade a unanimous federal jury of 12 citizens "beyond a reasonable doubt" (that is, to a moral certainty) that any misrepresentations regarding the financial health of the bank and its purported sales success in opening new accounts were knowingly and intentionally made by bank personnel, involved matters of fact (that is, objective, historical facts as opposed to mere opinions or predictions), and were material (that is, likely to affect the price of a share of stock up or down) (Cavico and Mujtaba, 2016C). It is important to point out that "silence," that is, not disclosing material facts, regarding the purchase and sale of securities is, as opposed to the common law, a violation of securities laws, civil and criminal. However, the "silence" must be "knowing" and purposefully deceitful (Cavico and Mujtaba, 2016). These requirements make a successful criminal prosecution a challenging legal and practical effort. Nevertheless, as of this writing, already one securities fraud lawsuit has been filed by investors who claim that they were misinformed or "kept in the dark" about the bank's sales practices, and, consequently, the shareholders were financially harmed when the scandal "came to light" and the bank's stock plummeted (Koren, 2016).

Arbitration

One legal hurdle currently confronting deceived bank customers in bringing the aforementioned legal actions is that Wells Fargo typically includes arbitration clauses in its contracts with customers. In these clauses the customers agree to resolve disputes by mandatory third-party arbitration as opposed to traditional judicial proceedings (Barlyn, 2016; Hiltzik, 2016). Moreover, the bank's arbitration clause is very broad, stating that claims based on "broken promises or contracts or torts, or other wrongful actions" are subject to arbitration (Hiltzik, 2016). The remedies that an arbitrator can award are considerably more limited than tradition contract and tort causes of action; and, moreover, arbitration awards are difficult to appeal to the courts unless there is some evidence of fraud, bad faith, or prejudice (Cavico and Mujtaba, 2014). However, help could be on the way for the deceived bank customers because a bill will be introduced in Congress by Senator Sherrod Brown (D-Ohio) to override the arbitration clauses and, thus, allow the bank customers to bring traditional lawsuits against the bank for the opening of the unauthorized accounts (Puzzanghera and Koren, 2016).

Overall, a great many serious legal consequences have already arisen, or could yet arise, from the Wells Fargo fake account scandal. How they will be resolved remains to be seen; but one point is perfectly clear: the bank certainly has "bought" itself a "bunch" of lawsuits with some very serious potential sanctions (as well as attorneys' fees and other legal expenses). Making legal redress and then ensuring complete legal compliance are the bank's first-order-of -business. Yet, in addition to acting legally, any business today must also be concerned that it is acting in a moral and ethical manner, particularly so in the case of Wells Fargo. As such, the next part of this article is an ethical treatment of Wells Fargo in the fake account context.

Ethical Analysis

Today, more than ever, there is a societal expectation that business will act not merely legally but also morally. While the American government and political leaders face a continuing list of challenges and opportunities to provide an inclusive country for all their citizens and workers (Mujtaba, Cavico, and Seanatip, 2016), business leaders must take personal responsibility for their firm's perception of morality and ethical standards. Morals and morality are based on ethics, a branch of philosophy containing the theories and principles used to reach moral decisions. At the philosophical level ethics is primarily an intellectual exercise in reasoning. That is, the emphasis is on "right thinking" (the knowledge of traditional ethical theories) as opposed to "right answers," since, based on ethical analysis, there may not be a "right" answer; and there even may be two "right" but contradictory moral answers (due to the application of different ethical theories) (Cavico and Mujtaba, 2013). Nevertheless, ethics is used to try to ensure that business is acting morally as well as legally. There are four main ethical theories in Western Civilization; they are secular-based and reason-centered. They are ethical egoism, ethical relativism. Utilitarianism, and Kant's categorical imperative.

Ethical egoism

Ethical egoism is a theory first propounded by the ancient Greeks, originally attributed to the philosophic school of the Sophists in the 5th century B.C. The modern, proponent of this theory was the 18th century English economist Adam Smith. The basic tenet of ethical egoism maintains that it is moral to advance one's self-interest, and, therefore in a business context it is moral to make money. That is, an action that advances one's self-interest is a moral one, and, conversely, an action that is detrimental to one's self-interest is an immoral one. As per Adam Smith's rationale, if everyone seeks to advance their self-interest not only will they benefit but society and the general welfare will benefit from the more efficient and effective production and distribution of goods and services. There are some constraints on the doctrine. First is the need to take a long-term perspective as to maximizing one's self-interest, being willing to undergo some short-term sacrifice, expense, and effort in order to maximize one's own long-term, greater good. Second, it is generally preferable to treat people well, to make them part of one's team, in essence, to co-op them. Why? Because it is in one's long-term self-interest to have friends and allies as opposed to enemies. So, Adam Smith said, by all means, be selfish in the egoistic sense, but do so in a smart, prudent, and rational manner. That is, be an enlightened ethical egoist, but advance oneself, learn useful knowledge and skills, and become wealthy and powerful. In the case of Wells Fargo, it does not take a doctoral degree in moral philosophy to see that the setting of unrealistic sales goals and attendant creation of the fake accounts, though benefitting the bank, shareholders, and certain employees in the short-term, was and is harmful to the bank and shareholders as well as all employees in the long-term. The firings, fines, lawsuits, potential criminal law sanctions, the expense and effort to redress the scandal and the harm to the bank's reputation obviously outweighed the short-term financial gain.

Ethical relativism

Ethical relativism is a theory that also harkens back to the ancient Greeks, but is more popularly associated with the Romans (as in "When in Rome, do as the Romans do."). It is a relativistic ethical theory in which moral norms are not based on universal principles but rather societal norms and mores. That is, what a society believes is moral is moral for that society; and consequently all one has to do is to discern the societal norms, conform and adopt, and one will be acting morally (at least in that society). But societies differ as to moral norms and there is no arbitrating mechanism in this theory to say which society's moral norm is the "right" one. Another problem is to figure out just what a "society" is. This may be a bit easier in a homogeneous society but exceedingly difficult in a very heterogeneous society. And what about a minority group within a society? Is it a society too? Finally, under the law of the U.S. as well as other legal jurisdictions, complying with societal norms (the excuse that "everyone is doing it") is not a legal defense (e.g., bribery under the U.S. Foreign Corrupt Practices Act).

If the banking system at Wells Fargo can be construed as a society, there is evidence that the moral norm of that society excused or even promoted fraud and deceit for monetary gains. In the larger society, including the larger banking society, most people would assume that these dishonest tactics would be construed as immoral. So, it is disturbing to see day-after-day in the media how the corporate culture of Wells Fargo degenerated into a societal norm of fraud and deceit. As Rushkoff (2016) explains: "So what's the harm of opening a few new unauthorized accounts? Particularly if everyone is doing it. That's what we call a company culture." But a key question remains: Is the practice common to a banking culture?

Utilitarianism

Utilitarianism is an ethical theory created by the 18th English philosophers and social reformers Jeremy Bentham and John Stuart Mill. It is a consequentialist ethical theory, that is, morality is determined by focusing on all the stakeholders (also called "constituent groups) affected by the action. There is a predictive element to this ethical theory, that one must predict consequences as they affect each discrete stakeholder group, including society as a whole. Ethical egoism is, of course, a consequentialist ethical theory, too, but plainly with Utilitarianism the scope of analysis is much broader than merely oneself. Predicting the consequences of an action is obviously a challenging task, but the Utilitarian's say, first, use one's "common storehouse of knowledge" and "history as a guide." Second, one needs to look for probabilities of occurrences as well as the reasonably foreseeable consequences of putting an action into effect. Finally, one must attempt to measure and weight consequences, first, for each stakeholder group, and then among all the stakeholders. Accordingly, if there are predominantly good consequences, the action is moral, and conversely, if there are predominantly negative consequences, the action is immoral. The goal of the Utilitarians was to seek to promote happiness, satisfaction, and pleasure, but note that since the "ends justify the means" there can be some painful consequences. But overall since there are more good consequences, an action can be deemed moral.

For a Utilitarian analysis of Wells Fargo, consider the many stakeholders or constituent groups affected by the fake accounts scandal. The bank, Wells Fargo though it made some money in the short term, in the long term it made restitution, was subject to fines and possible civil lawsuits as well as criminal prosecution; and suffered a severely damaged reputation. There will be extensive monetary settlements with customers. All the foregoing will involve large attorneys' fees. The bank also is undergoing an expensive media campaign seeking to allay the concerns of its customer and potential customers and to try to rebuild its reputation. Several states and cities, including Massachusetts, California, Ohio, and Illinois, as well as Chicago and Seattle, have barred the bank from selling their state and local government bonds (Mehrotra, 2016). The shareholders may have seen some short-term gain now with the loss in share price, the lawsuits, fines, and the odium of investing in an illegal and unethical entity shareholders will experience pain in the long-run.

Managers may have received raises and bonuses for setting unrealistic sales goals and then over-influencing, coercing, and perhaps even training their employees to meet those goals by any means. Yet now these managers have lost their jobs and their reputations, and some now may lose their freedom. These managers as well as the executives supposedly supervising them created this culture of fraud, deception, and abuse of customers. They are primarily responsible with the board of directors, for this scandal. And now some of them will pay the price. To illustrate, pursuant to basic corporate law the board of directors of a company have a fiduciary duty to the shareholders; and the breach of this fiduciary duty is construed as fraud. The reputations of the CEO and top executives were tarnished, too, and they were forced to resign in disgrace, but their pain was lessened by their retirement compensation packages (the morality of which is grounds for another ethical scholarly treatment). The wrongdoing employees may have temporarily gained by the fraudulent sales tactics and the opening of the fake account, but thousands lost their jobs, reputations, and otherwise were made miserable, and now many face criminal prosecution. Other more ethical employees have nonetheless been tarnished ethically. The customers were obviously victimized, harmed, angered, and are now distrustful of the bank and maybe the banking system generally. (Monetary redress was made to them pursuant to federal government order so their pain was lessened to some degree.) Local communities were harmed by the firing of so many bank employees and the loss of good jobs. The government and legal system were also affected. The positive consequences for the government are that federal and state governments and regulatory agencies are being seen now as aggressively investigating the bank and beginning to enforce the laws against the bank's fraudulent sales practices. Negative consequences may arise if there is evidence that whistleblowers made disclosures to government agencies and personnel about the bank's wrongdoing, and also about retaliation against whistleblowing employees, but the agencies and personnel were lax, inept, or otherwise ineffective in responding to the disclosures.

As for the legal system, it will certainly be kept busy adjudicating all these lawsuits, though the lawyers will be well paid. Society is also affected by the scandal due to its size and scope. The practice of engaging in fraudulent sales tactics and opening fake accounts is certainly deleterious to society due to the massive size and scope of the bank and the number of customers and employees affected. Yet the situation could be even more harmful to society if these deceitful practices emerge as a standard banking industry practice. Rushkoff (2016) condemns the bank's practices as an illustration of "extreme capitalism" wherein growth and profit are not obtained by creating positive value for society but rather by "extraordinary measures," such as "extracting funds" from anyone the banks come into contact with, particularly their unsuspecting and overly trustful customers. Rushkoff (2016), moreover, adds: "By seeking to extract a higher percentage of our economic activity to pay for their financial services, they don't help anyone. Rather than promoting business, they serve as a drag." The economy and society are harmed.

Therefore, the overall moral conclusion pursuant to the Utilitarian ethical theory is that plainly much more "bad" was produced than "good" by the Wells Fargo fake accounts scandal. There was much more dissatisfaction and unhappiness than satisfaction and happiness; and there was considerably more "pain" than "pleasure." Therefore, the bank acted in an immoral manner pursuant to Utilitarian ethics.

Kantian ethics

Kantian ethical theory is based on the moral philosophy of the 18th century German philosopher and teacher, Immanuel Kant. Disregard consequences in determining morality, said Kant, and focus on the application of a formal test that Kant called the Categorical Imperative. "Categorical," declared Kant, because this is the supreme and absolute ethical principle, and "Imperative" because one must at times command oneself, despite contrary self-interest, to do what the Categorical Imperative impels one to do, that is, to do the moral action regardless of consequences, even to oneself. By ethical reasoning from the Categorical Imperative an individual will logically be able to ascertain the moral course of action (Cavico and Mujtaba, 2013).

Of course, the major conflict in secular-based ethics in Western Civilization is clear, since the Utilitarian's focus on the consequences of an action in determining morality, whereas Kant says to disregard consequences and instead apply the Categorical Imperative. For the Utilitarians, the "ends justify the means"; but for Kant the means itself must be moral as per the Categorical Imperative. There are two main tests to the Categorical Imperative. One is called the "kingdom of ends" test. Pursuant to this test, an action is moral if it treats people with dignity and respect and as a worthwhile means. As such, if an action is demeaning and disrespectful to people and if it treats them like a tool, instrument, or means, even to a greater good, the action is immoral. The other test is the "agent-receiver" test. In essence, it is the Golden Rule (do unto others as you would have them do unto you) made secular by Kant. Pursuant to this test, an action is moral if a person is as a rational being and did not know that he or she would be the giver, that is, the agent, of the action, and did not know if the receiver would be willing to have the action done. If the person (agent) would not want to be on the receiving end of the action, then it is immoral.

The bank customers were clearly treated in an immoral manner based on Kantian ethics as they were unwitting "tools" used by the bank employees to meet their sales quotas. They were deceived, disrespected, and victimized. A particularly disturbing aspect of the bank's fraudulent sales tactics is that they may have been aimed at particularly vulnerable customers, especially Mexican nationals with consular ID cards. This would make adding services easier but makes the fraudulent sales scheme even more demeaning and reprehensible (Mehrotra, 2016). Moreover, the bank demeaned its own employees by setting the unrealistic sales goals and then pressuring them to somehow achieve them. As Rushkoff (2016) explains: "Employees know that if they don't meet the quotas on new accounts set by their managers, they may be next on the chopping block of layoffs."

A focus on the very lucrative retirement compensation packages paid to the top two executives suggests that this action was demeaning and disrespectful to the employees, customers, and government regulators. Moreover, if individuals did not know whether they would be recipients of lucrative compensation packages or instead would be defrauded customers, then they would not be willing as rational persons to have the action done. Therefore, the payment of the compensation was an immoral action.

Morally required whistleblowing

When is whistleblowing morally required? To answer this question reference must be made to the ethical whistleblowing principle proposed by Professor Richard T. DeGeorge (2006). This principle has four components that must be satisfied. If they are, a person has a moral obligation to disclose wrongdoing, and if not then, the person can be deemed an immoral person. The parts are as follows: 1) The corporation or its human components are doing some activity that is seriously or considerably harming the public or other parties; 2) The employee has made a good faith attempt to stop the wrongdoing by reporting it to his or her immediate supervisor and then through the internal chain-of-command and these efforts have failed; 3) The employee must secure reasonably clear and comprehensive evidence to substantiate and document the wrongdoing; and 4) The employee must possess a reasonably good belief that blowing the whistle externally will stop or prevent the wrong (DeGeorge, 2006).

Potential whistleblowers, even those with strong moral character, may be concerned with potentially adverse consequences to whistleblowing, the main one being, of course, loss of employment. Yet, many states now have whistleblower protection statutes that may protect the whistleblowing employee if he or she disclosures illegal wrongdoing in good faith to an appropriate government agency. Many federal agencies also have non-retaliation regulations protecting employees who report wrongdoing within the agency's jurisdiction (Cavico and Mujtaba, 2014; Cavico and Mujaba, 2013). Although any comparative examination of these protective regulations is beyond the scope of this article, it certainly seems that given the size, scope, and multi-jurisdictional nature of the bank that some Wells Fargo employees could safely and legally, regarding employment tenure at least, blow the whistle. Indeed, in the Wells Fargo case, based on the facts adduced when writing this article, it appears that several employees may have fulfilled their moral duties pursuant to the DeGeorge (2006) ethical whistleblowing principle by attempting to resolve the fraudulent activity internally, and, having failed, then blew the whistle to federal government agencies. Glazer (November 11, 2016) reported that CEO Timothy Sloan admitted that in "some instances" reports of misconduct by whistleblowing employees were not handled appropriately. Worse, there are allegations that some employees faced retaliation for whistle-blowing which the Department of Labor is now investigating. Moreover, Belfuss (2016) reported that in response to a letter from Senator Bob Casey (D.-Pa.) to the Financial Industry Regulatory Authority, that agency will commence an investigation of the bank's firing of over 600 employees during the five-year period encompassing the scandal to ascertain if any were discharged in retaliation for attempting to disclose wrongdoing or not cooperating with the fraudulent sales tactics.

In summary, the ethical challenge for a leader today is to achieve actions that advance self-interest (ethical egoism), are culturally competent (ethical relativism), and achieve greater good (Utilitarianism) (strive for "win-win" scenarios for all stakeholders), but do not demean or disrespect stakeholders (Kantian ethics) (Cavico, Mujtaba, Nonet, Rimanoczy, and Samuel, 2015). The rationale for acting morally is ethical egoism, that is, it is in the long-term self-interest of a person, company, or organization to act morally. Companies and organizations led by principled leaders who possess integrity and fulfill their legal and moral responsibilities will establish firms with a deserved reputation of good character and, as a result, their firms should do better financially.

However, the role of a leader may be to educate people as to their own self-interest, that is, to show top management, the board of directors, and shareholders that acting morally will benefit the organization in the long run. The role of a leader, moreover, is to create a culture of ethics that fosters and supports moral behavior, and the objective is to establish a personal and organizational reputation for integrity and trust, because, as Wells Fargo is learning and as Volkswagen has learned, once a reputation for trust is lost, it is very difficult to get it back. The role of the leaders at these companies will be to try to change the corporate cultures to ones of honesty, integrity, and ethics. Furthermore, the role of a leader is to object if an action is illegal and if legal but immoral. That is, a true leader must stand his or her ground: disagree on principle and have the strength of character, courage, and conviction to do the right thing and not the wrong thing. The leader of a company or organization must not only set an example of virtue, integrity, honesty, ethics, and morality but also must seek to impart these values to the employees by ethics orientations, coursework, seminars, and training, as well as by establishing ethics officers, hot-lines, ombudsmen, and other channels for whistleblowing. In addition to acting legally and morally another responsibility of a business leader today is to ensure that his or her firm is not only legal and moral but also socially responsible and sustainable.

Social Responsibility and Sustainability Analysis

Another challenge for business leaders is to deal with the notion of social responsibility. There is a societal expectation that business must act above and beyond the law and morality and ethics. As such, business must be socially responsible, though there may be no legal obligation to do so. A problem that immediately arises is that the definition of "social responsibility" is very broad. The term can have the following components:

1. Charitable and philanthropic activities; civic and community activities. This may be called the "old school" or traditional model of social responsibility.

2. Sustainability as a means in the form of environmental conservation and protection as well as energy production via solar and wind, also known as "going green," and the 3 Ps: people, planet, profits, and the "triple bottom line" (economic prosperity, environmental stewardship, and social responsibility).

3. Social entrepreneurship, for example, selling solar panels and batteries to poor people on easy credit terms to help save the world as well as make some money.

4. Social responsibility and sustainability investing; that is, mutual funds and other investments in sustainable products and services, including solar and wind power; desalinization plants; anti-pollution devices.

5. Green bonds, which are debt securities issued by government agencies and banks in developing countries to finance infrastructure projects, e.g., water and sewerage treatment plants, affordable housing, hospitals, and alternative energy.

6. Social responsibility and sustainability auditing as per the Accounting Standards Board (Cavico, et al., 2015).

Social responsibility and sustainability are emerging as major topics for the business community and society. Accordingly, business leaders must be aware of these issues and able to respond in an effective manner within every organization (Ivancevich, Konopaske, and Matteson, 2014; Huang, Ryan, and Mujtaba, 2015; Kaifi, 2012; Mujtaba, 2014; Mujtaba. 2008; Natemeyer and Hersey, 2011; Wren and Bedeian, 2009).

Specific social responsibility challenges to the business leader include the following questions: 1) How much social responsibility is appropriate? The authors submit that a moderate and prudent amount of social responsibility be engaged in to create a balance between profits and social responsibility. 2) What type of social responsibility should be conducted? The authors believe that the activities should be tied to the company's image, brand, mission, products, and services--in essence, a marketing and consumer-oriented approach. The optimal result is smart, shrewd, strategic social responsibility. The beneficial result will be a good reputation for the company for being a socially responsible and sustainable firm (along with being a legal and moral one). Moreover, the company will achieve a reputation for efficiency and effectiveness by being environmentally responsible. This good green reputation will benefit the company with customers, clients, shareholders, the business and financial community, local community, and government.

The final question is why should a firm be socially responsible? The rationale, pure and simple, is ethical egoism. There is an instrumental worth, to wit: the advancement of the long-term self-interest of the individuals in the company and the company itself, plus benefits to community and society. Of course, the business leader may have to convince other officers, the board of directors, and shareholders that it is in the long-term self-interest of the company to be socially responsible and sustainable. The business leader must have the intelligence, courage, and trustworthiness to show the way to a better and sustainable future. Sustainability, therefore, emerges as an environmental means, as previously mentioned, but now also as an end because if a business is based on sound decision-making and acts in a legal, moral, socially and environmentally responsible manner, the end result, the authors submit, will be sustainable success for the business, and all its stakeholders, society as a whole, and the planet (Cavico, et al., 2015; Cavico and Mujtaba, 2013).

So, Wells Fargo: What has the bank done, and what is the bank doing, to be a socially responsible and sustainable giant banking entity? To answer this question, go to the bank's social responsibility web site (Wells Fargo, Corporate Social Responsibility, 2016). There one will find that the bank posits itself as a very socially responsible and environmentally sustainable corporate entity. The bank aligns its corporate social responsibility (CSR) with a principal purpose of "Creating solutions for stronger communities." The bank's corporate social responsibility actions are divided into four main categories, which it calls its "priorities," to wit: 1) diversity and social inclusion; 2) economic empowerment; 3) environmental sustainability; and 4) philanthropy and volunteerism. Diversity and inclusion seek to ensure that everyone is treated with respect at the company and all have equal access to resources, services, and opportunities to succeed. Economic empowerment entails strengthening the "financial self-sufficiency and economic opportunities in underserved communities." Environment sustainability consists of transitioning to a lower carbon economy, thus helping to reduce any effects of climate change. Philanthropy and volunteerism includes "community giving" and working with nonprofits "to create solutions to social, economic, and environmental challenges and strengthen communities for current and future generations." Links are provided for more detailed information on all these CSR priorities and components. There also are "Wells Fargo Stories" that "explore real stories about how we're helping our communities thrive, as well as an "awards and recognition" component that stresses the "culture of caring" at the bank and delineates the awards the company and its team members have received. There are links for these CSR components, too. There is also a Wells Fargo Social Responsibility Report, which details past and current bank CSR and sustainability efforts, as well as a commitment to CSR goals and a promise of future reporting for the company's CSR activities. Accordingly, based on the information provided (assuming it is truthful and accurate), one can say that the Wells Fargo bank appears to be a socially responsible, environmentally responsible, and sustainable company. But, is it? Perhaps the company forgot the old maxim "charity begins at home." That is, other core values may take precedence over CSR. For instance, the sad and tragic story of British Petroleum (BP) comes to mind--the company that was once the exemplar of CSR (recall BP as "Beyond Petroleum"). BP may have spent too much time, effort, money, and publicity on social responsibility but not enough time on pipeline, plant, and oil platform maintenance and safety. Wells Fargo must be commended for its extensive CSR and sustainability efforts. But CSR values must be built on a solid foundation of legality, morality, and ethics; and the leadership of the bank must ensure that it is first a legal, moral, and ethical entity before it is a socially responsible one.

Leadership

Leadership is an important value in the business world today. In addition to the points previously made by the authors regarding the duties of a leader, another responsibility of a leader is to be aware of his or her organization's blind spots (Turnbull, 2013); that is, to know the weaknesses as well as strengths of the entity and its policies, procedures, and personnel. These blind spots must be identified along with opportunities. The astute and agile leader should not be blind-sided by any weaknesses or improprieties in the company or organization, such as, in the case of Wells Fargo, employees acting in an illegal and immoral manner to meet the unrealistic sales goals set by the bank.

The true leader, as emphasized, must make sound business decisions that are also legal, moral, and socially responsible (Alexander, Havercome, and Mujtaba, 2015; Begum and Mujtaba, 2014; Akhtar, Khan, and Mujtaba, 2013; Aimkij, Mujtaba, and Kaweevisultrakul, 2013; Benjamin, 2003). Moreover, the leader must be proactive, not a mere reactor, which, sadly, appears to be the case with Wells Fargo. The true leader must anticipate problems and challenges and show the way to solving and overcoming them (Huang, Ryan, and Mujtaba, 2015; Zareen, Razzaq, and Mujtaba, 2015; Mujtaba, 2014; Dunne and Mujtaba, 2013; Pelletier and Mujtaba, 2015; Zareen, Razzaq, and Muj taba, 2013; Ping, Mujtaba and Jieqiong, 2012; Tajaddini and Mujtaba, 2011; Yooyen, Pirani, and Mujtaba, 2011; Ochoa and Mujtaba, 2009; Wright.'and Bonett, 2007).

Yet no one is going to follow a leader, at least not for long, if he or she is not an ethical, honest, and trustworthy person. Therefore, it is critical for the leader to embrace and demonstrate moral behavior and establish a corporate culture of morality and ethics (These ethical actions appear to be what the new CEO and top executives of Wells Fargo are embarking on). In addition, the leader must be keenly aware of another societal expectation especially for large businesses: in a socially responsible and sustainable manner. Business today is expected to have a positive impact on society as a whole and the environment. As indicated in the previous analyses, the bank apparently has a very good social responsibility and sustainability record (perhaps too good), but now the leadership of the bank must work to ensure compliance with the law and standards of morality and ethics.

Recommendations for Wells Fargo Management

As a starting point, we recommend that the bank managers should "come clean." be fully transparent, accept responsibility as a company (and not merely blame lower-level "engineers"), apologize profusely, be humble, be sympathetic and empathetic, and provide sufficient redress to the injured parties. However, it should be understood that there is no simple and straightforward solution to this bad fake accounts scandal, which is an ongoing legal matter. Nonetheless, the authors recommend that the bank do the following:

* Set forth in cooperation with government banking regulators a credible plan to redress the adversely affected bank customers.

* Change the incentives and lower the sales goals to reasonable levels so the employees are not tempted, influenced, or coerced into utilizing illegal and immoral actions to achieve unrealistic sales objectives.

* Review the bank's performance measurements and sales objectives to ensure they are consistent with preventing illegal and unethical sales practices (Consumer Financial Protection Board, 2016).

* Invest in an enhanced customer service department based on the values of legality and morality as well as efficiency and effectiveness of service.

* Develop a "culture of compliance and ethics" but realize that doing so, may be an arduous task "in some organizations, as the practice of flouting laws may be deeply ingrained, rendering codes of conduct ineffective" (Smith, 2016).

* Establish stronger accountability structures, practices, and standards.

* Hire an independent consultant to review the bank's sales procedures and practices and make recommendations (Consumer Financial Protection Bureau, 2016).

* Require employees to undergo ethical sales training (Consumer Financial Protection Bureau, 2016).

* Become completely transparent--internally among employees and between employees and management and externally between the bank, its personnel, and customers, and government regulators.

* Establish a positive corporate culture by committing the top leadership to integrity, promulgating of corporate governance policies, codes of ethics, codes of conduct, and educating and training employees.

* Communicate this new value system and corporate culture to all its stakeholders, including the communities and societies where the company does business (Cavico and Mujtaba, 2013).

* Institute structures, practices, and channels to ensure the disclosure of any wrongdoing, as well as responsibility for redress and accountability for corporate actions. For example, establish effective ethics officers, hot-lines, ombudsmen, and other avenues and personnel for whistleblowing by employees (Cavico and Mujtaba, 2016B).

* Strongly communicate to employees that they have a legal and moral duty to report any wrongdoing on the part of the company or co-workers; assure employees that absolutely no reprisals or retaliation will be taken for whistleblowing, and state that requests for anonymity during the reporting process will be respected to the fullest extent possible.

* Rebuild trust with the employees by focusing on employee satisfaction.

Summary

This analysis has indicated that Wells Fargo by its fraudulent accounts practices committed widespread violations of banking laws, consumer protection laws, and other civil and criminal laws. The bank violated the trust of its customers and deceived and abused them. Consequently, the bank and its affected personnel are paying, and will continue to pay, the legal price for such flagrant wrongdoing, including perhaps imprisonment of certain personnel. One lesson to be learned from this scandal is that if an organization sets unrealistic sales goals and then ties the employees' compensation and their jobs to meeting these goals, then unethical and illegal behavior is likely to occur, harming the organization and its stakeholders.

The authors have emphasized that businesses today are expected to act in a legal, moral, and socially and environmentally responsible manner. The business leader today must be prepared for these real-world challenges. The rationales for so acting are to succeed and to gain a sustainable competitive advantage. By making good decisions the business leader will be able to succeed and sustain that success. So, what is the formula for success? Simply to make sound decisions, and to be the leader of a legal, ethical, socially responsible and sustainable enterprise. Always ask and answer three questions: Is it legal, moral, and a socially and environmentally responsible? That must now be the "drill" for Wells Fargo.

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Frank J. Cavico, Nova Southeastern University

Bahaudin G. Mujtaba, Nova Southeastern University

Professor Cavico, with degrees in law and political science, teaches business law and ethics primarily to graduate students. He has published several books and numerous articles in law reviews and management journals. Professor Mujtaba teaches human resources management and has worked with managers and HR professionals in the U.S. and several other countries. He is the author or coauthor of books on diversity, ethics, and business management.
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Author:Cavico, Frank J.; Mujtaba, Bahaudin G.
Publication:SAM Advanced Management Journal
Date:Mar 22, 2017
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