Ethical Analysis Essay
Name of Student
Institution
Ethical Analysis
Introduction
Most businesses have been involved in unethical practices most of which include unfair competition, false product information, unclear terms of the agreement, and unethical accounting. Research by Sternberg (2000) shows that most businesses often target customers with the hope that customers will not notice the trickery. A report done by Philadelphia Business Journal (Silverman, 2020) shows that the unethical business practice of false accounting has increased in the recent past with companies such as Wells Fargo & Co. mismanaging customer accounts in a bid to increase their profit margins. This behavior often hurts customers who tend to purchase company shares only to register losses in the long run. Investigating this unethical practice is of the essence in that it shows how the desire to increase profits has provided companies with the need to engage in unethical practices. In a bid to uncover the unethical practice of false accounting, this task will analyze a report on Wells Fargo & Co. published on the 3rd of February 2020 by the Philadelphia Business Journal. The analysis will begin with the introduction of the company and inherent unethical practices, as well as the consequent effect on customers.
Wells Fargo Unethical Accounting Practices
The contemporary business environment is characterized by high pressure to meet targets owing to high expectations by the senior management. This facilitated poor employee decision-making owing to the fear of job loss that led to growth in unethical practices in the company (Silverman, 2020). Wells Fargo & Co. was involved in improper practices that entailed opening of 3.5 million counterfeit credit and bank credit accounts in the names of customers. The bank was also involved in the charge of mortgage fees when the loan approvals exceeded beyond the stipulated days even the bank was at fault. In a bid to meet the management’s unreasonable targets, the employees set approximately 528,000 online bill-paying services that were unauthorized and forced at least 800,000 borrowers to unnecessary auto insurance (Workplace Ethics advice, 2019). This pushed approximately 274,000 customers in the bank into delinquency while 25,000 underwent wrongful repossessions of their vehicles. This unethical practice was coupled with falsified records, changing loan terms, and stealing cash from mortgage-bond investors.
Wells Fargo & Co. organization failed in its top priority of promoting trust, integrity, and ethics although these elements are the main determinants of success in every organization. The company encouraged unethical behavior by allowing unethical and illegal practices to occur, which was facilitated by relentless pressure from the top management to achieve unrealistic sales targets. This led to increased staff turnover by ethical employers who were not ready to engage in unethical behavior (Workplace Ethics advice, 2019). The unethical employees boosted the sales figures by opening fake accounts and funding them through the transfer of funds from the customer’s authorized accounts without their consent while racking up charges to cover up their unethical practices.
Ethical Standards
Wells Fargo & Co. failed to promote the ethical standard of professional behavior, integrity, and objectivity. According to the ethical standards of accounting, banking firms should adhere to the principles of objectivity, integrity, confidentiality, professional competence, and professional behavior with due care (Silverman, 2020). Professional accountants should establish a standard of behavior that reflects the institution’s recognition of their interest to act responsibly. A professional accountant is expected to be honest and straightforward of all the professional relationships and undertake professional behaviours without allowing the undue influence of other people or the management to override business judgments or professional requirements. However, this was not the case at Wells Fargo in that the employees and the management violated the ethical standards of integrity, objectivity, and professional competence by opening fake accounts and charging the customer’s interests in order to fulfill the bank’s profit margins. However, despite the pressure from the management, the employees should not violate professional ethics, an action that has caused the institution to incur financial losses coupled with fines and the loss of company reputation.
Arguing from a deontological ethical perspective, the workers at Wells Fargo should have made their decisions in line with the existent laws instead of pursuing their personal perceptions. Deontology requires individuals to uphold ethical standards in every situation to ensure that other people are able to benefit from their actions. However, the involvement of employees in this practice and their failure to uphold ethical standards was facilitated by the need to secure their jobs by sufficing their daily performances (De George, 2011). Additionally, it was unethical to charge the additional fees on fake accounts which were an indication of fraudulent behavior without their knowledge. However, although the employees’ actions were justified, they should have acted according to the ethical standards of integrity, the duty of care, objectivity, and professional competence.
Wells Fargo behavior is unacceptable and unethical in that it is a violation of the professional code of accounting that integrity, objectivity, and professional care should be prioritized. However, Wells Fargo ignored these requirements and the fact that professional accountants should comply with ethical standards, relevant laws and regulations in order to avoid any actions that are likely to discredit the profession.
Conclusion
In order to comply with the ethical standards of professional behavior, Wells Fargo should have complied with the profession’s relevant laws and regulations while avoiding involvement in fraudulent actions that may discredit the authenticity of the profession. As such, the institution should have reported true profit to avoid unreasonable profit margins that pushed the employees to participate in unethical practices. Additionally, the employees should have worked to promote the ethical principles of integrity, objectivity, due care, and professional competence in order to avoid participating in fraudulent behaviours in accounting.
References
Workplace Ethics advice (2019). Has Wells Fargo learned its lesson? Retrieved from https://www.workplaceethicsadvice.com/2019/04/has-wells-fargo-learned-its-lesson.html
De George, R. T. (2011). Business ethics. Pearson Education India. Sternberg, E. (2000). Just business: Business ethics in action. https://philpapers.org/rec/STEJBB
Silverman, S., (2020, February 6). Silverman: Why didn’t Wells Fargo’s leadership recognize the importance of trust? Retrieved from https://www.bizjournals.com/philadelphia/news/2020/02/03/silverman-why-didn-t-wells-fargo-leadership.html