question archive Harvard case Max Bazerman and Ann Tenbruunsel, "Ethical Breakdowns: Good People Let Bad Things Happen
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Harvard case Max Bazerman and Ann Tenbruunsel, "Ethical Breakdowns: Good People Let Bad Things Happen. Why?" HBR April 2011
Of the 5 barriers to an ethical organization, which were present at Wells Fargo?
Answer:
Good People Let Bad Things Happen. Why?
Companies are expending a huge deals of investing in time and money to install codes of ethics, ethics training mostly on behavior and compliance programs. If these efforts worked, the money would be well spent. But unethical behavior is always on the led to be broken especially where leaders are not strict with there employees, and where rules made are not followed to the latter . The authors observe that even the best willful executives sometimes are unaware of their own or their employees' unethical behavior.From extensive research on cognitive biases and perception of input of codes of conduct they offer reasons for this blindness and suggest what to do about them:
Of the 5 barriers to an ethical organization, which were present at Wells Fargo?
Employees too were part of the unethical activities too , where Wells Fargo employees say they have been under too much pressure from the top management to grasp extra money out of customers and the employees have been bending the rules to meet ambitious performance goals and objectives set.
No much evidence was found to link it specifically to them but some evidences showed that the employees were secretly opening accounts in customers' names, as they did in the past, but employees have reportedly been pressured by Wells Fargo to sell financial products customers can't afford, collect credit card debt at breakneck speeds, and send incorrect interest rates and fee calculations on mortgages. A financial adviser interviewed noted the company pushed employees to lure clients toward generating back door investments including an instance in which it was not in the client's best interest.
2.Leadership blind-spots at Wells Fargo.
The post scandal at Wells Fargo, about the employees creating fake accounts led to the bank to be investigated by Federal prosecutors and Congressional overseers.Despite five years of explicit and many warnings, the executive team and the board of directors were exceptionally slow to see the beam and gravity of this fraud, and to address it effectively. Executive team members, most who have spent decades at the company, concluded this fraud had to be minor isolated incidents as a way of covering the story so that they can avoid loosing clients.
-Deterrents to speaking up
The leadership blind spot led to misguided estimation for their culture and its ability to inject the bank from methodical problems. It represents a governance breakdown for executives and board members. But it appears that some warnings and various red flags never even reached them. Seemed like the bank had ignored, discouraged, and even fired employees who tried to voice concerns about the intimidating culture and unethical practices.
Worst scenarios, whistle blowers were fired after reporting concerns and violations to the bank's ethics hotline or trying to alert supervisors to illegal behavior. Concerns raised by other employees were ignored, including an alleged email sent to Stumpf directly, and a petition, signed by 5,000 colleagues etc.
But the damage goes beyond the employees who were fired just because of raising concerns , it sends a signal to everyone else that they should keep quiet. At best, problem-raisers will be ignored; at worst, they will lose their jobs.