Select from the following list of business ethical dilemma topics to research:
Toshiba Accounting Scandal
Apple FoxConn Labor Scandal
Nike Sweatshop and Child Labor Scandal
Starbucks Family Farmer Outsourcing and Environmental
Dannon False Advertising Claims Regarding Activia
Volkswagen Emissions Scandal
Turing Pharmaceuticals price increase for Daraprim
Wells Fargo Fraudulent Accounts Scandal
Mylan’s Epipen Price Scandal
Samsung Battery Recall
Another business ethical dilemma from the news or headlines that you pick and submit to the professor for approval.
- Introduction including factual background and thesis statement.
- Identification and discussion of ethical, legal and industry related business issues at controversy in the case at hand.
- Application of research, course terminology and themes to analyze the case study.
- Discussion of how the case and issues at hand were resolved.
- Personal opinions with researched support and justification for your insights on the relevancy, sustainability, social, environmental, financial, or other applicable value of the resolution.
- Conclusion including discussion of the implications and personal evaluation of the case for the future of domestic and international business ethics, regulatory/legal standards, corporate social responsibility, and corporate leadership issues within the context of 21st century precedents.
Toshiba Accounting Scandal
Wells Fargo and Company is a USA based multinational financial services firm headquartered in San Francisco, California. It is the fourth largest bank in the USA. Wells Fargo delineates 3 different consumer segments which are wholesale banking, retirement, wealth and brokerage and community banking. There are a number of cases for apparent fraudulent activities of Wells Fargo. This includes improper incentives, poor leadership, questionable organizational plan, inadequate auditing and human traits as well. Wells Fargo fraud scandal is a continuing controversial state which is brought by the creation of millions of checking accounts without the consent of account holders. There are ample of regulatory bodies which includes the Customer Protection Bureau has fined the company with one hundred and eighty five million dollars as a consequence of the illegal trading accounts and the company had to face the criminal and civil suits. The customers of Wells Fargo had been charged with the unanticipated fees on debit cards and credit cards. According to the initial reports, the blame was on branch managers and workers. Later on, it was recognized the blame was shifted to sales associated who were linked to selling the financial products or multiple solutions. The bank had taken fewer risks until the financial crisis of 2008 and this led to the image of high level management to open saving accounts as many as possible through the help of cross selling.
The Wells Fargo bank has decided to undergo for cross-selling of products and services. Cross-selling implies consumers who are using one service can be motivated to use other services like credit cards and savings. A specific strategy was established for encouraging cross-selling. Well Fargo was engaged with time honored tactic of providing the incentives to employees who get successful in cross-selling (Smith Jr. & Reiners, 2017). Employee’s response to this cross-selling resulted in creation of fake accounts in the names of present customers. The problem was big and the company had to fire five thousand and three hundred employees and also lost the CEO-John Stumpf (Moore, 2005).
Business-Industry Related Issues-Cross-selling is an attempt to sell the multiple products to bank customers. This can be explained with the help of an example-A bank customer has been encouraged to open an online bank account or avail credit card facilities or take the mortgage. The success stories of retail banks have been measured by the average of products which are held by the customers and Wells Fargo was the successful cross-seller. The strategy was to link the bank saving accounts with credit cards and mortgages to the typical customers and it was revealed branch employees were considered as the salespeople and encouraged to sell the eight products (Watson, 2008).
Apple FoxConn Labor Scandal
Ethical Issues-The cross selling strategy and sales culture and its effect on ultimate bank customers had been documented through the Wall Street Journal. Bank managers had to undergo intense pressure and individual bankers had to produce the sales against the impossible quotas (Watson, 2008).
Legal Issues-Employees had been encouraged to place the order for credit cards for all the pre-approved customers without any consent. Employees used the contact information for filling the request form and therefore preventing the customers from discovering the fraud. The Employees had made the creation of fraudulent savings and checking accounts. This is a process through which movement of money is possible through the legitimate accounts. The formation of additional products had been made possible through the process of Pinning. This implies that client pin is set to the “0000” and bankers had the complete control of client accounts and employees can enroll in the online banking programs easily (Wilkinson, 2010). The bank had created approximately 1,534,279 unauthorized saving accounts and 5,65,000 credit card accounts. There were reports of unreachable goals and inappropriate conduct through employees to supervisors (Schmitz, 2012).
The Wells Fargo case has been using the strategy of pay for performance. The negative outcome is to pay for performance on the wrong results. The performance systems in most of the organizations are completely guarded through the HR. People who are in running effective and ethical organizations need to understand the HR practices (Aasland, 2004). The company can be in a better position of avoiding the legal and ethical crisis, if its employees understand the reward system. The company cannot leave organizational theories and practices to be adopted and followed due to the organizational bureaucracy initiated by the employees (Manvelyan, 2018).
- Corporate Image and Corporate Leadership System-The corporate damage was swift and extensive. According to the public opinion in the USA, the position of Wells Fargo had fallen from seventy to ninety-nine place in the year 2017. Wells Fargo has been viewed by observers as bankrupt. Some of the leading causes are-
- There has been a misalignment between the actual and stated organizational values and mission(Gupta, 2018).
- The employees had to undergo cut-throat sales pressure that was created through the aggressive sales mismanagement and unattainable sales mechanisms.
- Corporate structure has been decentralized which led towards accountability of the issues and leadership was in denial, minimizing the nature of the problem(Schmitz, Lee & Lilien, 2014).
- PerformanceManagement-Some of the causes of ethical breaches and incentive programs were the performance management measures. The identification was on the motivator reports, sales campaigns, retail scorecards and individual gaming system which led ethical misconduct and fraud. The company had created the competitive atmosphere by frequent ranking performance between regions, branches and individuals. Rankings had been circulated bank wide and this has created significant pressure for outperforming the peers. However, goal setting has been recognized over the number of years through researchers for employee motivation (Mittal, Singh, Aggarwal, Kumari & Yadav, 2014).
The bank has shown commitment towards regaining its corporate image. Some of the remedial measures include
- Reorganization and replacement of corporate leadership.
- Centralizing the control functions.
- The complete removal of sales goals and objectives.
- To work on improving the performance management systems and incentive programs(Periatt, LeMay & Chakrabarty, 2004)
- New code of conduct and integrity.
In order to make the goal setting a successful plan, the organization will be required to closely monitor the implementation and supervise the goals programs. The setting up of unattainable goals has been linked with the compensation and employees’ needs to engage themselves in risky behavior and take advantage through the financial rewards and job security (Hansen, Singh, Weilbaker & Guesalaga, 2011).
Wells Fargo had to undergo testimony before the congressional committee. The committee suggested to get rid from informers and avoid allegations of reprisal. Another strategy involved the close monitoring of working employees who were reporting the mishaps in the sales department (Sharma, 2016). Wells Fargo had been planning to alleviate this issue. The largest company of America was at stake and therefore the correct address of issues has been evident and this was the chief concern. Wells Fargo attempted to solve the fraudulent issues from different fronts.
- The first front had been to inform the stakeholders and the public. The company had to make it clear about the informational objective of the well Fargo campaign. The objective will include the attempts made through the company from spreading the incorrect information regarding the scandal(Ciarrapico & Cosci, 2011).
- The next objective had been to address the restructuring of the company’s management and policies. The goal of restructuring policy will be preventing the similar issues to this present fraud from occurring ever again. This lead to a change in the business practices of Wells Fargo and resolving the accounts that were affected.
- The last objective had been addressing the change in perception and public relations campaign towards the crisis fallout. Dealing with these objectives has been more difficult for the company. The crisis need to restructure the policies and programs of Wells Fargo as a lot of negative image has been created and the company needed to come back very carefully. Wells Fargo needed to show to its customers that it had the capability to change its operations.
- Another objective was the time taken by the company to resolve the negative virtual media coverage over the scandal received. The Wells Fargo company had the strong PR department, which was ready to fight for such an event.
Nike Sweatshop and Child Labor Scandal
The strategy of Wells Fargo was to resolve the fraudulent savings account crisis had been titled as the Commitment campaign. ‘This program comprises of different campaigns on the organization’s social media outlet, especially Facebook and Twitter and press release and television advertisements. Well Fargo had adopted the strategy of controlled media and specific advertisement towards the magazines and television. However, the specific commentary and comments on the social media page will be regarded as the uncontrolled media. The goals of these campaigns were to help the affected saving account customers through verifications, refunds and notifications. The public was informed in a buried way regarding the crisis and sparing the concrete statistical details (Lu & Zhao, 2013).
The significance of the Wells Fargo lesson goes beyond ethics. The suggestions are taken from business consultants on how to get more of the employees? The company needs to adopt another reward strategy instead of opting to pay for performance. The complete idea is to pay for performance, using another strategy which will reward the complete person and not only the paycheck. When an individual and organization are responsible for themselves, this phenomenon is termed as holacracy. This involves an absolute tangle of cross cutting outcomes and enforced peer group thinking. A strict enforcement as well as high pressure due to unfeasible goals has destabilized the consumer Centricity. The role of a bank has become distorted as that of the product retailer. Employees were being rewarded by reaching towards the sales targets and no consideration on how these objectives met. The company has formulated the revenue based compensation mechanism that had motivated employees for seeking returns. The suggestion for Wells Fargo has been able to devise the systems that can reward profits when customers’ needs are being met in the ethical way. For instance-Wells Fargo would have quantified the needs of the customer. This was possible through the financial goals and other specific indicators like compliance and ethical goals. The employees must be rewarded who had the customer focused consequences. The motivation is to offer the employees with financial rewards and develop strategies to counteract. The prioritization of financial measures had to find the evaluations and financial bias in bonus decisions.
Organizational values must be integrated with the employee evaluations and play the huge role in how to assess the mixed result like tension from social responsibility and financial performance. This emphasizes the significance of developing the awareness of the interaction of organizational values and personal values. Competition is one of the elements which is inescapable from employee and organizational dynamics, this may create promotional incentives, bonuses and recognition. This emphasizes the significance of developing the awareness among employees and the interaction of personal beliefs, organizational values and professional ideologies has an impact over the decision making. Competition has physical impacts on the banking individuals. Research shows how competition can form the divergent results. This is based on the cultural context and sometimes led towards the creativity. The perception of employees is that promotion of sales employees at retail banks had been based on the financial performance.
Starbucks Family Farmer Outsourcing and Environmental Sustainability Issues
The company Wells Fargo has taught the big lesson that people will get only what they are paying for. Employees must know what is expected out of them and working instead of a manager is a crucial aspect. Wells Fargo has always represented the fiduciary duty and treat all the customers fairly. The bank is offering different services to all its customers. The management had set unrealistic high sale goals and employees encouraged to game the accounts system.
Employees have been urged to bring cross sell services more to the company. Wells Fargo had a conflict of interest and needs to launch the compensation program for the retail banking. This has an emphasis over the product sales and this is required for the compensation. A corporate social responsibility step must be taken in the right direction. The company’s PR policy must be directed at designing incentive plans and motivating the employees with rewards who are thinking of the long term benefits of the company. The company’s compensation program must be aligned with the code of ethics and tap the employee motivation for providing the superior customer output and create long term associations with the client.
Aasland, D. (2004). On the Ethics Behind “Business Ethics”. Journal Of Business Ethics, 53(1/2), 3-8.
Ciarrapico, A., & Cosci, S. (2011). European banks and cross-selling. Applied Economics Letters, 18(6), 555-559.
Gupta, N. (2018). Influence of demographic variables: customers' perception about cross-selling and up-selling for eBanking. International Journal Of Electronic Customer Relationship Management, 11(2), 126.
Hansen, J., Singh, T., Weilbaker, D., & Guesalaga, R. (2011). Cultural Intelligence in Cross-Cultural Selling: Propositions and Directions for Future Research. Journal Of Personal Selling & Sales Management, 31(3), 243-254.
Johnson, J., & Friend, S. (2014). Contingent cross-selling and up-selling relationships with performance and job satisfaction: an MOA-theoretic examination. Journal Of Personal Selling & Sales Management, 35(1), 51-71.
Lu, X., & Zhao, X. (2013). Keywords Selection in Search Engine Advertising With Cross Selling Effect. SSRN Electronic Journal.
Manvelyan, V. (2018). Megatrends and air transport: Legal, ethical and economic issuesMegatrends and air transport: Legal, ethical and economic issues By Ruwantissa Abeyrante. Foresight, 20(3), 334-335.
Mittal, M., Singh, J., Aggarwal, A., Kumari, K., & Yadav, M. (2014). Ordering Policy for Imperfect Quality Itemsets Using Cross Selling Effects. International Journal Of Modeling And Optimization, 4(1), 25-30.
Moore, G. (2005). The Institute of Business Ethics/European Business Ethics Network-UK Student Competition in Business Ethics. Business Ethics: A European Review, 14(1), 76-76.
Periatt, J., LeMay, S., & Chakrabarty, S. (2004). The Selling Orientation–Customer Orientation (Soco) Scale: Cross-Validation of the Revised Version. Journal Of Personal Selling & Sales Management, 24(1), 49-54.
Schmitz, C. (2012). Group influences of selling teams on industrial salespeople’s cross-selling behavior. Journal Of The Academy Of Marketing Science, 41(1), 55-72.
Schmitz, C., Lee, Y., & Lilien, G. (2014). Cross-Selling Performance in Complex Selling Contexts: An Examination of Supervisory- and Compensation-Based Controls. Journal Of Marketing, 78(3), 1-19.
Sharma, S. (2016). Building Social Media Collections: Legal and Ethical Issues. SSRN Electronic Journal.
Smith Jr., J., & Reiners, L. (2017). Wells Fargo Unauthorized Account Openings: A Case Study for Bank Board Directors. SSRN Electronic Journal.
Watson, S. (2008). FEATURE: The business of customer experience. Interactions, 15(1), 38.
Wilkinson, J. (2010). Cross-functional selling teams - The loss of control of the selling function. Marketing Review St. Gallen, 27(1), 20-25.
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