Principal-Agent Relationship

Principal-Agent Relationship

The Wells Fargo Incentive system prompted the employees to practice unethical malpractices. It encouraged employees to open up fake accounts as a strategy to hit the unrealistic targets that had been set for them by the management. The employees were pressured to goals that were beyond their limits. In 2016, the company had tried to deal with this unethical behavior by firing employees who had created fake accounts without the customers’ go ahead. He referred to them simply as a couple of bad apples. However, the issue continued to escalate further after the bank made it to the wall Street greedy scandal-ridden banks. This continued to tarnish the name of the bank naming its less credible. Decentralization of the bank with its department chiefs who were encouraged to run the bank like they owned it. They ended up distorting the sales model and performance management system and encouraged poor quality sales and improper behavior.

The senior chides failed to accept that the goals were too high and unrealistic. Tolstedt challenged scrutiny from within and outside the bank and failed to control the escalation. Employees were no given information on the ethical procedures they had to follow in their work but were only given information on the goals they needed to hit. They should have been given the full disclosure of ethical considerations and appropriate policies that would have guided the employees to do the right thing.

The bank can still be restoring the reputation of Wells Frago. The first step would be to show remorse to customers and acknowledging the intense damage the incident had on customers with extreme regret. The company then has to offer a payback of what was taken away from the customers. The company has to portray a new way of operations to customers. It has to show them that it has indeed discovered new means to make profits without being greedy. Then, it has to win its customers back by asking for forgiveness.

 

References

Goulaton, M. (2017). 4Hs and 4Rs: How Well Fargo can regain its reputation. Retrieved from https://www.bizjournals.com/bizjournals/how-to/growth-strategies/2017/07/4-hs-and-4-rs-how-wells-fargo-can-regain-its.html

Levin, B. (2017). 6 Ways Well Fargo Made is Employees’ Lives A Living Hell. Retrieved from https://www.vanityfair.com/news/2017/04/wells-fargo-john-stumpf-carrie-tolstedt