Paper Example on Ethical Scandal In Wells Fargo

Introduction

Firms encounter ethical issues that are linked to their consumers and marketing processes which can affect their reputation in the market. Some of the ethical issues facing firms include bribery, conflict of interest, price overcharges and invasion of customer's privacy. One of the firms with a recent ethical scandal is Wells Fargo. This section will focus on describing the ethical issue in the firm and how it has affected the consumers. It will also focus on a specific recommendation that the firm should implement to improve its reputation with consumers. On the other hand, it will focus on the ethical issue would have been prevented.

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Ethical Issue and Impact on Consumers

Wells Fargo is a company that is experiencing an ethical problem currently that is related to its consumers. The company offered a high number of clients, products they did not need. Recently, the firm admitted that it had created different accounts in clients' names without their consent (Egan, 2018). Despite the scandal occurring in 2016, it is still present as its impact has affected the company's performance greatly. The firm's 5300 employees had been creating about 1.5 million unauthorized credit card and bank accounts since 2011 (Egan, 2016). The firm used the accounts to charge unwarranted fees on the consumers thus enabling the employees to increase their sales figures and make more money. The employees also used the accounts to receive bonuses for their performance. Apart from the accounts, the employees also created fake email addresses and PIN numbers to sign up clients into the bank's online services (Egan, 2018). The issue is an ethical issue because it involves using customers' information without their consent. On the other hand, it has made Wells Fargo's customers to incur costs on products they were not informed about and which most of them were not willing to purchase.

The firm's employees made applications for 565,443 credit cards and 14,000 of the accounts accrued more than $400,000 in interest charges, annual fees, and overdraft protection fees (Egan, 2016). The clients had to pay additional amounts for the fees imposed on them from the fake accounts. The firm also charged clients for mortgage fees, car insurance, and pet insurance without the clients' consent. The clients felt that the fees were a form of extortion as some of them had their cars repossessed for loan payments they had not applied for (Wattles, 2018). When clients asked about the new accounts that were made in their names, the bank closed them without offering clear information to the clients on why they had the accounts. As a result, Wells Fargo lost a huge number of clients as many clients lost trust in the bank handling their personal information (Egan, 2018). On the other hand, they warned their friends and families to avoid using the bank thus making Wells Fargo lose potential clients. The scandal has also led to the reduction of the stock price in the firm which has hurt the shareholder value. Investors in the firm are therefore earning less interest from their shareholdings due to the poor performance of the bank.

Recommendation to Improve Reputation

Wells Fargo needs to build its reputation in the market to recover its clients as well as increase its shareholder value. There are some measures that Wells Fargo has taken to improve the reputation such as stating that it has fired the employees linked to the scandal and closing accounts of the victims. However, there is still a poor image of the company in the market and the firm needs to undertake a better idea on solving the issue (Wattles, 2018). One of the ways the company can improve its reputation is inviting all victims to the nearest Wells Fargo branches near them to confirm any issues with their accounts and ensuring that each client is refunded all the money charged on him or her unrightfully. The clients are the backbone of a company as they enable the firm to gain profits through their purchases and the profits enable the company to grow as well as support its operations. Therefore, a recommendation which focuses on rebuilding trust among customers can improve the reputation of a firm in the market and thus improve its profits afterward. The recommendation will prove to the customers that the unethical acts in the firm were not intentional and the company values its customers.

Wells Fargo needs to send text messages through phones or e-mails to their customers to ask them to visit their nearest Wells Fargo branches to resolve the issue on the unwarranted accounts. The clients should have their accounts' details when visiting the branches to ease the closure and refund processes. On arriving at the Wells Fargo bank, a customer should approach the customer care assistant on duty and make a claim on all the charges they paid on services they did not apply for. The customer care employee should then compare the information with the records in the firm's database and if the amount is correct, the customer should receive a refund to his or her account. People who had their cars repossessed on unfair terms should also receive compensation on the losses they made due to the firm's unethical acts.

Challenges

There are challenges that Wells Fargo may encounter when making refunds on customers as well as closing all unwanted accounts. There may be clients who may fake the value of the money that was unrightfully charged to them to acquire more money refunded to them. It may lead to financial losses of the customer service employees fail to countercheck the money indicated for refund by the clients. On the other hand, it can be time-consuming to countercheck hundreds of thousands of accounts thus making the whole process interfere with the normal operations of the firm and also make some clients lose trust in the firm's efforts to refund them.

The firm will lose a high amount of its finances due to the refund process. The issue affects thousands of clients and most of them had their accounts charged over years thus Wells Fargo will have to incur a high amount to compensate the clients. The financial loss can make the firm lack enough funds to run its daily operations. Additionally, the firm will have minimal profits during the year due to the compensation hence lowering the stock value of its shares in the market. As a result, the situation can make its shareholders sell their shares due to low profits thus making Wells Fargo has a low number of shareholders. There is also a possibility of customers demanding to know the actual people behind the scandal and suing them. It can be time-consuming to start investigations into the matter as the charges refunds and accounts' closure processes go on and could delay the efforts.

Overcoming Challenges

Communication is important in addressing challenges in firms. Wells Fargo can overcome the challenges by informing the customers what they are expected to do during the refund process. It will limit any customers intending to interfere with the efforts from causing any delays in service delivery to all the affected customers. The firm should have a financial firm funding the initiative to reduce the amount of finances it will use on the process. External funding will enable the firm to have adequate funds to run its operations until it regains its profits (Omar, Nawawi and Puteh Salin, 2016). The firm should also have a prepared list of all affected customers and the charges made on each since their accounts were created. If any client has issues on the total charges indicated in the prepared list from their accounts, he or she should be referred to another employee to resolve the issue to ensure that the customer service personnel handle the issue efficiently and with minimal workload.

Prevention

Scandals in a firm start small however as they progress they become worse. Therefore, firms should focus on identifying scandals as they arise and handling them before they destroy their reputation in the market. One of the prevention strategies that Wells Fargo would undertake is having frequent performance reviews on the employees. If the firm had reviewed how the employees were performing as sought explanations of the increased number of accounts in the firm, the issue would have been identified early (Pendse, 2012). Employees are also keen on avoiding unethical practices when they know that their supervisors or managers are monitoring their actions hence performance reviews would have helped Wells Fargo to track the scandal early. Wells Fargo should have leaders who lead by example and be keen on implementing the codes of conduct in the firm. There are some employees who tried to report the scandal and the managers did not support them. If the managers took the matter seriously when the reports had been made at first and suspended any employees linked to the scandal, employees would have been stopped creating the accounts to avoid losing their jobs (Omar, Nawawi and Puteh Salin, 2016).

Wells Fargo is a firm that needs to change its entire management team to stop the unethical scandals it is facing. Employees should also understand the consequences of their actions in the firm and any person found engaging in unethical issues should be suspended from their jobs.